Friday, October 17, 2008
Warren Buffett gives us a lecture in courage under fire
Warren E. Buffett has a hard-hitting column, “Buy American: I Am” on the opinion page of the Oct. 17 New York Times, today. The link is here.
With words that remind me of Barry Goldwater (“extremism in the defense of liberty is no vice” and “you don’t have to be straight to shoot straight”) Buffett writes:
“Be fearful when others are greedy, and be greedy when others are fearful.”
He gives examples from history, where the Dow hit its low (in 1932) some months before the economy bottomed during the Great Depression Even during early World War II, the Dow bottomed before Midway and the improvement of Allied actions.
He says people who sell to hold cash assets to feel comfortable shouldn’t. Of course, the problem is that some people are caught in squeezes, and have no choice (except at the end of life) but to start over.
Note, however, that today CNN is reporting an unprecedented (compared to other recessions and bear markets) outflow from equity mutual funds ($57 billion for the first half of October). My Blackrock funds seem to have deteriorated since the big drop a week ago Thursday much more than justified by the market, whereas before it had been relatively stable. Is this because of the Lehman settlement and the credit default swaps? See my posting Sunday Oct. 12.
The New York Times site has a lot of blog material ("high and low finance") by financial columnist Floyd Norris every day. A typical entry is "Banks Fail, and So Can Bailouts." It seems that so far, banks are holding on to the money that Unclde Sugar has injected. It's a bit like promycin on "The 4400."
Picture: some "strip mining" in the New Jersey Meadowlands, from an Amtrak train, Oct. 2004.