The NY Times just ran an interesting Op-Ed piece from Warren Buffett. In it, he talked about his current view of the market, and how he’s been handling his personal investments:
Iâ€™ve been buying American stocks. This is my personal account Iâ€™m talking about, in which I previously owned nothing but United States government bonds… If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
So… Why is he wading into stocks given the current market turmoil?
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 nationâ€™s many sound companies make no sense.
He goes on to argue that:
I canâ€™t predict the short-term movements of the stock market. I havenâ€™t the faintest idea as to whether stocks will be higher or lower a month â€” or a year â€” from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.
What about holding cash for safety?
Today people who hold cash equivalents feel comfortable. They shouldnâ€™t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Interesting thoughts from a guy who knows. I tend to agree with him on all accounts, though I admittedly didn’t have the foresight to move into a 100% bond position like he did. Anyway, I highly recommend clicking through and reading the full article.