What Warren Buffett Didn't Say

[metapunditedgy]

In the New York Times, Warren Buffett says he's buying American stocks, and he urges others to do the same. His argument for this recommendation is rather vague, saying that over time, stocks will go up, and the time to buy is when everyone is afraid. (Frankly, I think everyone has been afraid for some time now.) Buffett's statement doesn't sit well with some folks, who point out that he has much to gain from improved investor confidence. He's already heavily invested in stocks, and therefore some of his fortunes depend on whether Americans decide to invest themselves and boost (or rescue!) Buffett's investments.

Buffett's editorial is particularly misleading because he fails to mention that his stock investments are often different from those that ordinary people would make. When Buffett buys billions of dollars of stocks, you can bet that he gets a better deal than you or I would.

For his $5 billion investment in Goldman Sachs, Buffett receives preferred shares, which means that if Goldman ever goes bankrupt, he stands ahead of ordinary stockholders in the line to pick up the pieces (assets). Buffett also gets a 10% annual dividend on his shares. (Wouldn't that be nice?) Furthermore, he has the option to buy more stock at a fixed price in the next few years; a no-lose situation for him. Finally, Buffett knows that Goldman has a lot of connections in the US Treasury department, and Obama has mentioned that Buffett is one of his financial advisors. It therefore seems likely that Goldman will be on the inside track to get any further government assistance it may need.

I have nothing against Buffett; in fact he seems to be a rational, no-nonsense investor. I do have a problem with the New York Times editorial he published. I have no idea whether the market is about to rise from its lows, but I am certain that my monthly paycheck won't be able to buy stocks on the same favorable terms that Warren Buffett receives.

<http://metapunditedgytheanticlown.blogspot.com/2008/10/what-warren-buffett-didnt-say.html>

[shraby]

1. Most people know this already, the main

message Buffet is trying to convey is to trust the market again. Every bit of upbeat talk may hopefully help bring us out of this downward spiral.

[metapunditedgy]

3. Not sure "most people know this."

While the favorable terms Buffett receives for his GE and GS purchases are (at least in part) _public_ knowledge, I doubt that they are _common_ knowledge, or at least that they are well-understood. I think it's fair to say that Buffett's editorial ignores that important information. And since Buffett uses "I'm buying!" as part of his argument for why we should buy, I think it's misleading.

Again, nothing in particular against Buffett or the market, I just think the editorial is misleading.

[Dover]

13. People ARE listening to Buffet, and many don't recognize the difference

between his situation and that of the regular stock investor.
How do I know this? I heard it from a very reliable local source....my hairdresser.
She explained to me that she and many who sat in her chair think they should just follow Buffet's lead. He never seems to lose. That and other economic talk has been the popular topic for the last two or three weeks at the hair salon.

And that's about as far as they go in their thinking, apparently.

I think you can take that source to the bank...as good or better than a poll.

[theoldman]

2. You are correct that the average person cannot buy stocks

at the same price as Warren Buffett. However, you can follow his philosophy and buy when the market is down and sell when it is up. Buffett was sitting on a lot of cash and was ready to buy. I think he bought too soon but he will still make out in the long run. No one buys exactly at the bottom or sells exactly at the top.

[Celebration]

4. It's just an opinion............

Really, he could be right or wrong. He has a pretty decent record on long term timing. That does not mean he will be right this time. But everyone has the right to express their opinion.

Oh, and by the way, he was cautious before the tech bomm went bust. Again, doesn't mean at all that he will be right this time.

[Common Sense Party]

5. Understatement of the year.

"He has a pretty decent record on long term timing."

I'll take Warren Buffett's track record over Jim Cramer's ANY day, or any other Chicken Little.

Now is a FANTASTIC time to buy good companies at great values and hold them for the long run.

[Warpy]

7. Know what you're buying

Most equities were so overpriced that they have a long way to go before they're priced well.

Find the bargains by looking at P/E ratios against the historical norms.

[Warpy]

6. Chances are very good that the real bottom won't be reached

for a couple of years or so at the minimum, although I still think the actual floor is around 7000. Equities were hugely overvalued, but the massive inflation under Stupid's administration has caught up to some of that.

[AnneD]

10. Buffett is a buy and hold person.....

He takes the long view and if you do have a long time horizon-stocks are generally a good thing. He looks for a good sound company. I'l take his hunch over Cramer's facts any day.

[Warpy]

11. So would I in ordinary times

but these times are far from ordinary.

When I look for a stock, I look for one that pays a dividend. Looking at stocks that rely on increases in paper value to build wealth is a loser's game because that paper value rarely equals inflation.

[AnneD]

12. I am not at that point in my life yet....

All dividends are plowed back into my account at the moment. As I get closer to retirement-I'll be looking for a dividend 0r a mature bond.

[EmeraldCityGrl]

8. Several months ago Buffet was much less optimistic...

Buffett: "Don't bank on big returns
He chides investors who expect their portfolios to see double-digit growth, and says Berkshire's success has been so great that it is unlikely to see "outsized gains" in the future."

http://money.cnn.com/2008/02/29/news/companies/berkshire_annual_report.fortune/index.htm?postversion=2008030112

I'm a huge admirer of The Oracle of Omaha, but we have a way to go before the stock market is safe to invest in.IMHO

[upi402]

9. like buying war bonds i guess

:patriot: