Warren Buffett Unplugged
When Warren Buffett speaks (which is rare outside his annual Berkshire Hathaway shareholders meeting), people should listen. Among all the TV pundits, hedge fund traders, economists, journalists and cocktail party guests, not one has as good an investment record.
He may need no introduction, but Buffett is the most successful investor the world has ever known, having amassed a fortune as the world's richest man (or neck in neck with Bill Gates depending on where the Microsoft and Berkshire stock trade on any given day) by buying stocks and holding them for the long-term. He has never been a market timer, trader or a speculator. His biggest talent is knowing the inherent limitations of such a strategy. He has always eschewed short-selling, punting on derivatives, market guesses and chartist strategies, believing them to be inherently dangerous and unsustainable. Even when he was not a wealthy man, he always chose to hold equities through thick and very thin, avoiding the temptation to sell when things appeared difficult, knowing that was the time prices were by definition lowest. His talent was never in timing markets, which he believes is impossible, but in good security selection -- that is, buying good companies for good prices. He only sells when things appear overpriced and too rosy, not when things look bleak and prices are low. He is also the world's greatest philanthropist, having assigned nearly all his Berkshire holdings to the Bill & Melinda Gates Charity.
Many of you know that we try to follow his investment principles. Our fund and investment accounts attempt his brand of long-term investment. If this all sounds like hero-worship, it is. Buffett is not an aberration. His legion of disciples and followers are a group of the most successful investors of all time, many of them billionaires themselves despite their lower profile: Munger, Davis, Miller, Lynch, Brandes, Klarman, Tepper, Gottesman, Whitman, Torray, Templeton, Dreman, Price, Mobius, Owens, Gayner, Berkowitz all of whom (and many more) have generated spectacular long-term returns -- despite very volatile and often disappointing short-term results -- by following Buffett's methods. Most remarkable, all of them have purchased stocks of different types, geography and sector, but have all done extremely well by following the Buffett cardinal rule: avoiding market timing, and buying good companies selling at good prices.
This doesn't mean to never sell stocks -- but only to sell them when the market is offering you too high a price, not too low a price.
But enough of my words. Please click on the link below to read Buffett's op-ed, which explains with more credibility than I or anyone else ever could, the case for stocks in this difficult and frightening environment:
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Buffet is out for his own good. Berkshire has written some $40 billion in put options. If the market goes low enough for the holders to exercize those put options, it will cost Warren a ton of dough. He's out in front trying to build confidence in the market long enough to keep it from crashing too far before the put options expire. He doesn't need a permanent fix. He just needs enough time to pass to make those put options worthless.
He's got more than just stock price to lose if the market goes down too far too fast.
Unfortunately many cannot follow Buffet's advice because their economic horizon cannot be, 5 months, or 5 years. He advice although sound, offers nothing to this group that are the majority.
Many can follow his advice in their 401K's, if they have one.
Buffett may be a good investor but people should be aware that does not mean that his ideas are best for this country. People should not confuse being a good investor with being a good economic leader. The sad thing is that everyone has swallowed the lucky charm and think that just because a guy knows how to game Wall St. he is an economic messiah. Do not be fooled. Think about it!
If a man who can afford to lose ten billion dollars because he will still be the second or third richest man in the world after such a loss tells me to buy into an erratic market, why in the world should I listen?
If I loose just one millionth of what he can afford, I will have to work for several more years before I can retire.
James, you are giving really poor advice here.
Strategy matters.
Magnitude helps, but, not as much as strategy.
While it is true that Buffett did start with more than most, it is his consistent strategy to which he owes his success.
Warren buffet appears to being trying to make more money since he is apparently long with the market. MSM eats it up. He needs people to buy buy buy. Do so if you want to make money for him.
100% correct analysis. Warren Buffet is a great market manipulator.
You do not seem to know much about how he made his money.
Just about $0.00 is due to market manipulation.
So Warren Buffet is buying stocks of American companies. Sounds to me like he is in 100% agreement with John McCain that the fundementals of our economy are still strong. But then again I wouldn't expect most liberals to be willing or able to make that connection.
Ummmm... wait.. what parallel universe do you live in? Warren Buffet is a huge Obama supporter-- speaking as a "liberal" and a capitalist, i'm in huge agreement with Warren Buffet- Obama's tax plans are much more rational, are fair, and are a way out of the morass we're in as a result of 8 years of irresponsible deficit spending, tax cuts disproportionately benefiting high wage earners, and the kleptocratic cronies installed by Bush as his cabinet members. So how you draw a line between Buffet and McCain escapes me. McCain offers nothing but more of the failed policies, THat is why Buffet is a very public supporter of Obama
Buffett made his money buying very strong American companies when they were doing poorly in the short-term. Anyone can google up the companies he owns. AmEx. Coke. Wells Fargo. Note that Wells Fargo is one of the banking companies that did not go deep into sub-prime, which is why they are not going under. Credit Buffett with at least part of that.
Right now lots of American Companies are being punished with low prices, even if they did not have anything to do with any kind of mortgages. Buffett suggests they are the companies he would buy. Even if he is buying GE and Goldman Sachs, each of which has at least some exposure to Credit Default Swaps. Don't like those? Johnson and Johnson, and Proctor and Gamble both are selling at multi year lows.
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