In the midst of the financial crisis in October 2008, Buffett published this editorial in the New York Times. I keep saying this won't be a Buffett fan site or anything like that, but I do think this is an important editorial that applies today too and I thought I would post it here, 'for the record'.
BUY AMERICAN, I AM
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.
simple rule dictates my buying: Be fearful when others are greedy, and be
greedy when others are fearful. And most certainly, fear is now widespread,
gripping even seasoned investors. To be sure, investors are right to be wary
of highly leveraged entities or businesses in weak competitive positions. But
fears regarding the long-term prosperity of the nation's many sound companies
make no sense. These businesses will indeed suffer earnings hiccups, as
they always have. But most major companies will be setting new
profit records 5, 10 and 20 years from now.
Let me be clear on one
point: 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
A little history here: During the Depression, the Dow hit its
low, 41, on July 8, 1932. Economic conditions, though, kept
deteriorating until Franklin D. Roosevelt took office in March 1933. By that
time, the market had already advanced 30 percent. Or think back to
the early days of World War II, when things were going badly for
the United States in Europe and the Pacific. The market hit bottom
in April 1942, well before Allied fortunes turned. Again, in the
early 1980s, the time to buy stocks was when inflation raged and
the economy was in the tank. In short, bad news is an investor's
friend. It lets you buy a slice of America's future at a
Over the long term, the stock market news will be
good. In the 20th century, the United States endured two world wars and other
traumatic and expensive military conflicts; the Depression; a dozen or
so recessions and financial panics; oil shocks; a flu epidemic; and
the resignation of a disgraced president. Yet the Dow rose from 66
You might think it would have been impossible for an
investor to lose money during a century marked by such an extraordinary gain.
But some investors did. The hapless ones bought stocks only when they
felt comfort in doing so and then proceeded to sell when the
made them queasy.
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.
the policies that government will follow in its efforts to
alleviate the current crisis will probably prove inflationary and
therefore accelerate declines in the real value of cash
Equities will almost certainly outperform cash over the next
decade, probably by a substantial degree. Those investors who cling now
to cash are betting they can efficiently time their move away from
it later. In waiting for the comfort of good news, they are ignoring Wayne
Gretzky's advice: "I skate to where the puck is going to be, not to where it
I don't like to opine on the stock market, and again I
emphasize that I have no idea what the market will do in the short
term. Nevertheless, I'll follow the lead of a restaurant that opened in
empty bank building and then advertised: "Put your mouth where
your money was." Today my money and my mouth both say equities.
E. Buffett is the chief executive of Berkshire Hathaway, a diversified