Buy American. I Am.
By WARREN E. BUFFETT
Published: October 16, 2008
THE financial world is a mess, both in the United States and abroad.
Its problems, moreover, have been leaking into the general economy, and
the leaks are now turning into a gusher. In the near term, unemployment
will rise, business activity will falter and headlines will continue to
So … I’ve been buying American stocks. This is my personal account
I’m talking about, in which I previously owned nothing but United
States government bonds. (This description leaves aside my Berkshire
Hathaway holdings, which are all committed to philanthropy.) If prices
keep looking attractive, my non-Berkshire net worth will soon be 100
percent in United States equities.
A simple rule dictates my buying: Be fearful when others are greedy,
and be greedy when others are fearful. And most certainly, fear is now
widespread, gripping even seasoned investors. 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
Let me be clear on one point: I can’t predict the short-term
movements of the stock market. I haven’t the faintest idea as to
whether stocks will be higher or lower a month — or a year — from now.
What is likely, however, is that 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.
A little history here: During the Depression, the Dow hit its low,
41, on July 8, 1932. Economic conditions, though, kept deteriorating
until Franklin D. Roosevelt took office in March 1933. By that time,
the market had already advanced 30 percent. Or think back to the early
days of World War II, when things were going badly for the United
States in Europe and the Pacific. The market hit bottom in April 1942,
well before Allied fortunes turned. Again, in the early 1980s, the time
to buy stocks was when inflation raged and the economy was in the tank.
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.
Over the long term, the stock market news will be good. In the 20th
century, the United States endured two world wars and other traumatic
and expensive military conflicts; the Depression; a dozen or so
recessions and financial panics; oil shocks; a flu epidemic; and the
resignation of a disgraced president. Yet the Dow rose from 66 to
You might think it would have been impossible for an investor to
lose money during a century marked by such an extraordinary gain. But
some investors did. The hapless ones bought stocks only when they felt
comfort in doing so and then proceeded to sell when the headlines made
Today people who hold cash equivalents feel comfortable. They
shouldn’t. They have opted for a terrible long-term asset, one that
pays virtually nothing and is certain to depreciate in value. Indeed,
the policies that government will follow in its efforts to alleviate
the current crisis will probably prove inflationary and therefore
accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade,
probably by a substantial degree. Those investors who cling now to cash
are betting they can efficiently time their move away from it later. In
waiting for the comfort of good news, they are ignoring Wayne Gretzky’s
advice: “I skate to where the puck is going to be, not to where it has
I don’t like to opine on the stock market, and again I emphasize
that I have no idea what the market will do in the short term.
Nevertheless, I’ll follow the lead of a restaurant that opened in an
empty bank building and then advertised: “Put your mouth where your
money was.” Today my money and my mouth both say equities. Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.