Buy American. I Am  By Warren E. Buffett

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. 

Why? 

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. 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 over. 

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 best friend. It lets you buy a slice of 
America's future at a marked-down price. 

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 to
11,497. 

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 headlines 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. Indeed, 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 accounts. 

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 has  been." 

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 an empty bank building and then advertised: 
"Put your mouth where your money was."
Today my money and my mouth both say equities.

 
A version of this article appeared in print on October 17, 2008, on page A33 of 
the New York edition.
 

Regards
Rita
http://www.IndonesianCompany.com 



      

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