Not quite a week ago, I wrote about Warren Buffett’s bullish stance when it comes to the stock market. Sure, the economy is currently in a tailspin, but Buffett sees a lot of value in the stock market right now. But guess what? Not everyone agree with the Oracle of Omaha.
In a recent article in Barron’s, Alan Abelson took exception to Buffett’s rosy outlook. Here’s how Abelson sees it:
As always, Buffett was folksy in his explanation of what prompts his bullishness… He sprinkled his advice with some obvious caveats and cautioned that he hasn’t any idea what the market will do in the short term — a month or even a year from now — but he’s confident that it will turn up before sentiment or the economy does. In any case, most major companies “will be setting new profit records five, 10 and 20 years from now.”
And he’s quite emphatic that the investor who has been sitting with cash and calmly watching the carnage should lose no time in piling into stocks. “If you wait for the robins, ” he warns “spring will be over.”
In contrast to Buffet’s view, Abelson when on to argue that:
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.
And he closed with:
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.
So… What do you think?
Is Buffett off base? Or is Abelson being needlessly risk averse? I think a big part of the divergence in views has to do with the timeline. While Abelson argues that Buffett can afford long-term patience, Buffett clearly states that he’s looking ahead 5/10/20 years, which is exactly what one should be doing when investing in the stock market.
Abelson sums up their difference of opinion quite nicely at the end, when he states that Buffett has an “early bird gets the worm” outlook vs. his own “second mouse gets the cheese” stance.