Friday, 17th October 2008

Buffett says buy

James Forsyth 3:07pm

The Sage of Omaha takes to the New York Times to explain why he is moving his personal investments from US government bonds to shares, a move that is the opposite of what most people are up to:

“The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.
…
I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — 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.”

Buffett is one of the few people whose words can move the sentiments of investors. But it remains to be seen whether anyone’s words can persuade people to get into the market amidst the current volatitlity, the VIX volatility index hit an all-time high on Thursday.

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Ian C

October 17th, 2008 4:00pm Report this comment

This is one man whose patience and credit-worthiness can outlast most market panics. If my situation were similar I would do the same - the market is incredibly cheap, at a 1997 value of the FTSE 100. America even more so and a dollar that is not going south for a while at least.

Jean

October 17th, 2008 4:37pm Report this comment

The trouble is that Mr Buffet's best tactics are kept to himself.

I can see how he might hope the words of someone like him might calm people, but I've never taken a public pronouncement from the Sage at face value.

I'm with The Telegraph that yesterday said it's still far too risky.

If we look for a parallel we can look at Japan. It's stock exchange was about 39,000 before the crash over a decade ago and has never really recovered.

Sorry but I'll not be betting anything on the stock market for a long time.