The financial world is a mess . . . . 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 . . . . .
A 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. . . . . But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. . . . . 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. .. . What is likely, however, is that the market will move higher . . .
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.
I like the guy, but I think he’s off in left field. After the crash of 1929 and the fall to July 1932 the market didn’t come back for 25 years. That’s not much comfort if you are 60 years old already. Your retirement vacation plans could become just dreams. What happens to your portfolio of investments presently, will determine your lifestyle for the rest of your life. Retirement is not a time to invest in the future.
Warren mentioned the fact that the Dow advanced 30 percent by the time FDR took office, that’s about 12 points (a real barn burner). The market dropped from 381.17 September 3, 1929 to 41 on July 8, 1932. The Dow dropped 90 percent never to get back to that 1929 high until 1954.----25 years to break even, gee whiz I'll be 87 hoping that I don't need day care!
What's everyone is saying? “Don’t panic!” I emphasize, there has been no panic--- YET! People have figured out that things will get worse and are willing to settle for far less that the full amount. The panic starts after the first 20% in line get their money (80-50% less than anticipated). At that point you have 80% of the remaining investors fighting over the 20% that is left; now that's a panic.
The government angle, if everyone stays in the game, the game can continue. But the question arises “Who lost all of this money?” If you can take your funds out and put it in a shoe box, you can answer “Not me.” Step one, get a shoe box.
John D. Rockefeller, after the market crash in 1929, announced that stocks were undervalued and he was buying more. It was joked that, he was the only one that had any money left to buy stocks.
Buffett is suggesting that we invest in America. It sounds nice. But when a government starts "investing" in banks, it's time to realize that the game is almost over. To get to where we are today, took a lot of "common sense" and the desire to get rich. The normal reward for stupidity, greed and incompetence in business is bankruptcy. Paulson and Bernanke are trying to keep that from becoming a financial reality.
Warren's right, the market will recover (after it tanks)--just not in my lifetime.
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