Buffetting Warren Buffett
Karen DeCoster is criticizing Warren Buffett’s recent suggestion to buy American as was recently published in the The New York Times.
Karen’s most specific critcism stems from this comment of Warren Buffett’s.
“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.”
This spurs Karen to state,
He’s careful, here, to not “give out” strict advice because it makes him uneasy. So he’s telling us that the profits will be there in “5, 10, or 20 years.” Is it 5 or is it 20? Or anything in between? Or more than 20 years? Of course, no one knows, but to middle class Joes it makes a heck of a difference whether it’s 5, 10, or 20 years, or at all, because we don’t have the cushion to be wrong (and 20 years off the mark), as does Warren Buffett. Twenty years can be almost a half of one’s working life in the middle class, and that kind of time is not available to most folks to find out whether or not they won or lost the roll of the dice.
The supermajority of the population cannot ever have an investment strategy like that of Warren Buffett. We can take much (and I do) from his business conduct, value investing blueprint, and sensible roadmap for avoiding speculative pitfalls while engaging serious investment analysis. But Joe the Plumber and his friends cannot afford to gamble away their financial futures on the hunch that the market “can never go anywhere but up.” On BubbleVision the other day - CNBC, that is - two desk jockeys also questioned Buffett’s BUY advice - amazing! - and they noted that since he’s working on a much bigger scale than the rest of us, how does his simpleton recipe for success apply broadly to a populace of terrified people who are about to lose big on a lifetime accumulation of wealth?
How can unsophisticated “investors” (they are really speculators) apply his big-picture advice knowing that every person he speaks to about the “long term” has a unique age, time to retirement, ability to save, and capability to bear risk?
Karen’s question about when profits will gained, at least from a sound stock investment strategy for the Joe Plumber’s of the world, is a bit juvenile, as it perpetuates the false assumption that getting rich quick while dabbling around in the stock market is a common everyday occurence, and it is not. In fact the profitability of any investment, in most instances, is a long term endeavor, and not without risk.
When Karen asks the question, “How can unsophisticated “investors” (they are really speculators) apply his big-picture advice knowing that every person he speaks to about the “long term” has a unique age, time to retirement, ability to save, and capability to bear risk?,” these “speculators,” as she calls them, can weigh these matters and then make decisions regarding possible investment in the stock market based on their age, their time to retirement, their ability to save and their capability to bear risk.
Take myself, for instance. I’m 48 years old and I’ve been investing in the stock market since 1994, not to get rich quick, but to build a portfolio of stocks which will, over time, garner me profits. Even at the age of 48, the time frames Buffett speculates on in regards to profitability, 5, 10, 15, or even 20 years, allows for a long term view of investing more in stocks NOW, while stock prices are beaten down, so I can profit additionally in the future. Should I be investing dollars in stocks of companies today that are unsound? No. I should be investing dollars in stocks of “the nation’s many sound companies,” and they are out there, today.
Karen then ends her piece with the statement,
Warren Buffett is just wrong this time.
I disagree. Now is a good time to invest in sound company stocks, especially if you are between the ages of 20 and 55 years old, as the 5, 10, 15, or 20 year wait for the profits is hardly a burden, and getting rich quick is realistically not going to happen.
Like you, I agree with Buffett also. In reality, most investments one makes are more likely to see a loss in the first couple of years, that was as true last year as it is today…all one needs to to is review a prospectus to find this out.
Another reason Buffet is spot on in his assessment to buy now, is that the market is at a significant low point, and if you purchase prudently and wisely at todays lows, you can, again with proper due diligence, realize some good gains in the timeframe he has set forth.
I like the fact that Buffet advocates buying US as opposed to foreign investment and I find it very unlikely that Buffett would bend to the will of Washington and be a propaganda tool for them…I think Washington would, however, be more likely to listen toany advice Buffet may give to them.
Now if we could only get Buffet to tell us what to buy.Posted by Peter on 10/21 at 11:37 AM