I know I keep banging on about the markets and the need to ignore the press and the negative noise etc and I keep saying to sit tight and stay true to the longer term strategy. Here is some recent comment from US billionaire investor Warren Buffett which backs up our views….
Warren Buffett used an opinion piece in the New York Times newspaper to tell readers to follow his lead and start snapping up shares. The chief executive of Berkshire Hathaway has been buying US stocks for his personal account, saying the market is likely to move higher before the outlook or the economy changes.
Mr Buffett wrote: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.
“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.” If you wait for the robins, spring will be over.
Mr Buffett admitted he had no idea what the markets would do in the short-term, but drew on the experience of previous market lows to illustrate his long-term faith. In the Great Depression and during the Second World War, the market hit rock bottom long before fortunes were reversed and people started to think more positively. In the recession of the early 1980s, the best time to buy shares was when inflation was raging and the economy was not growing. “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,” Mr Buffett concluded. And he had a word of warning for those seeking the comfort of cash and happy headlines.
Buying shares when the news is good means buying high, while off-loading them when the gloom sets in means selling low. And cash is “a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value”. All in all, Mr Buffett subscribes to the forward-thinking philosophy of ice hockey great Wayne Gretzky: “I skate to where the puck is going to be, not to where it has been.”
The global economy may be on thin ice, but Mr Buffet appears to believe there is an open goal for anyone brave enough to go for it.