Tuesday, November 18, 2008

Follow the Smart Money

Most of what Warren Buffett writes is a must-read for any long term investor. His op-ed piece in the October 17 New York Times is no exception.

The focus of his article is that American companies are cheap and not only is he buying, but if things continue his personal (non-Berkshire) net worth will soon be invested 100% in US equities. It is significant to note that he states that previously he owned nothing but US government bonds in his personal portfolio.

I printed a copy of the article for my library and highlighted several statements, including a restatement of one of my favorite Buffett-isms: "Be fearful when others are greedy, and be greedy when others are fearful."

Some other pearls: In referencing the historic upturn of the stock market well before either public sentiment or the economy - "So if you wait for the robins, spring will be over." On his outlook for the next year - "Let me be clear on one point: I can't predict the short-term movement 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." On being out of the market right now - "Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

This article's ten paragraphs are worthwhile reading to provide balance to the daily see-saw of the recent market.

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