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Financial Happenings Blog
Sunday, October 19 2008

The first few blogs for this week will unashamedly be referring to articles written by a number of commentators and investors.  I am very open in saying that there are many others out there who are much wiser than I.


I kick off with an item penned by none other than the sage of Omaha Warren Buffett.  Buffett has been widely quoted throughout media circles saying that he is buying into equities at present, not selling out.  In this piece he simply and coherently explains why he is buying American stocks for his own personal account.  The article can be found on the New York Times website - Buy American.  I Am.


For certain Warren Buffett is not the fountain of all wisdom but I would sure rather "bet" on him compared to some of the market commentators who get bandied around.  In terms of a great old Australian saying - he has runs on the board.


Buffett is moving from a position of holding only US government bonds into holding 100% US equities within his personal account.  His argument goes like this:


Rule: Be fearful when others are greedy, and be greedy when others are fearful


Comment: Most certainly fear is now widespread but fears regarding the long-term prosperity of the nation's many sound companies make no sense.


Rule: He can not predict the short-term movements of the stock market.


Comment: 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 you may miss out.


Buffett then goes on to provide a brief history lesson of the last 100 years particularly mentioning the depression, World War II and the inflation raged 1980's.  All saw the stock market bottom well before good news arrived with the conclusion being that bad news is an investor's best friend letting you buy a slice of America's future at marked-down prices.


Finally Buffett comments on holding only cash in a portfolio and refers to it as a "terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."  Equities will almost certainly outperform cash over the next decade.


In conclusion he provides two great quotes:


"I skate to where the puck is going to be, not to where it has been." - Wayne Gretzky - probably the most famous ice hockey player of all time.


"Put your mouth where your money was.  Today my money and my mouth both say equities." - Warren Buffett

Posted by: Scott Keefer AT 11:48 pm   |  Permalink   |  Email
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