The Zoomer Report: Warren Buffet

Zoomer | October 31st, 2008

With all the turmoil in the markets, you may find it useful to know what one of the world’s best financial minds is doing.

Warren Buffet, The Wizard of Omaha and the richest man on the planet, says he’s been buying American stocks. Not with his Berkshire Hathaway Holdings, but in a personal account that used to contain nothing but United States government bonds.

Why? A simple rule dictates his buying: Be fearful when others are greedy, and be greedy when others are fearful.

He says investors are right to be wary of highly leveraged businesses in weak competitive positions. But Buffet believes fears regarding the long-term prosperity of many sound companies make no sense. He predicts these businesses will indeed suffer earnings hiccups over the next while, but that they will be setting new profit records five, ten and 20 years from now.

While Buffet acknowledges that he can’t predict the short-term movements of the stock market, he thinks 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.

Buffet believes over the long term, the stock market news will be good, while the real value of cash accounts will decline because of low interest and inflation. It’s something to think about, but remember, the richest man in the world doesn’t have to worry about having enough cash to pay the bills.