Lots of Talk About Buffett’s Latest Editorial

If you haven’t had a chance to read it yet, you need to read Warren Buffett’s editorial, Buy American. I Am. that was in last week’s New York Times (thanks to AFM reader, Tom, for sending this to me). It’s a short read. In the editorial Buffett makes the following comment:

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Of course, not everybody agrees. Alan Abelson in this week’s Barron’s had this to say (sorry to paste so much but I had to in order to get the point across):

We needn’t go through the obligatory obeisance to Buffett’s investment prowess and peerless common sense. We think he’s great. And sure, we believe the country will survive and prosper in the future. No argument most stock prices are down sharply. But we don’t agree this is the time to dive headlong into the market.

For one thing, Buffett can afford to be patient as long as he chooses. Most investors don’t have that luxury. For another, the economy is in the early stage of unraveling and we don’t think the market decline has discounted the havoc this unraveling may wreak by a long shot.

As to the shining prospects he summons up for the long term, they’re not apt to help us all that much if tomorrow’s troubles prove as harsh as we suspect they will. Then, too, as another wise man, John Maynard Keynes, famously observed, in the long run we’re all dead.

Most of all, Buffett despite his long experience and savvy hasn’t run into a crisis quite like this one because, pure and simple, it has no true precedent. That alone anyone should give anyone with fewer resources than Buffett, intellectually and otherwise, pause. Contrary to what he’s saying, we can’t remember anything that deserves to be called a bull market that had to be caught early and it certainly wasn’t true of the last two we’ve enjoyed.

As to his allusion to robins in the spring — a nice play on it’s the early bird that catches the worm — as someone has noted, it’s the second mouse that gets the cheese.

I’m not quite sure who Abelson is talking about when he says “we” because later on in the issue of Barron’s comes a rather bullish cover story ($) by Gene Epstein.

Also, I would like to compare Abelson’s net worth to Warren Buffett’s. LOL! I think it’s funny whenever Buffett says anything, there’s all these so-called experts to tell us how wrong he (Buffett) is. No he’s not always right but he’s been a lot more right than most people.

2 thoughts on “Lots of Talk About Buffett’s Latest Editorial”

  1. The main thing I took from the Abelson quote above is this: “For one thing, Buffett can afford to be patient as long as he chooses. Most investors don’t have that luxury”

    I think it bears repeating that asset allocation is crucial to investment decisions and people need to be cognizant of that fact the closer they are to retirement. Sadly, it appears that many forgot.

  2. One thing to remember is that Buffett was correct in the past:
    1. In 1979 when everyone was fearful, he told he was buying. He was correct. Not immediately, but he himself said he cannot predict short-term movement.
    2. At another time – I believe early 90s, he predicted the next bull market.
    3. In 1999 he let it know the market was too high. When everyone was buying internet stocks, he mentioned Cinderella and the ball, and how you have to leave by midnight or you’ll be left with pumkin and mice. Commentators told Buffet was old and couldn’t understand “new economy”. Buffet was correct, and most of the rest of us were indeed left with pumpkin and mice.
    4. In 2004, Buffett told he cannot find anything of value in the market. He told he was under-invested, and that it was not pleasant but it was better than to feel like a fool later. He also called derivatives the “financial weapons of mass destruction”. Again, he didn’t predict the top, but it was better not to buy at 2004 and sell later.

    At every one of these times, listening to Buffet would’ve saved us money or helped us make it. Not short-term, but then unless you are a trader, short-term movements aren’t as important. The money you need within next 5 years shouldn’t be in the market anyway.

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