Warren Buffett must know what he's doing, since he launched and runs a $200 billion investment fund. Right now, as everyone's jumping off the wagon, he's jumping on, big time:
Billionaire investor Warren Buffett is buying U.S. stocks, he wrote in an opinion column in the New York Times. "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," Buffett wrote in the paper.
What I don't get is why the market keeps dropping. We've known recession was on the way for a year or more now (while the market kept rising irrationally). We now know recession is here. But companies are cutting jobs (getting lean and mean), oil is selling for less than half its summer record highs, and interest rates are low and heading lower. Credit is still tight, but help is demonstrably on the way.
What does all this mean? Conditions are rife for a recovery. Not to be too Pollyanna-ish about it, but an economic slowdown could serve to lower consumer prices. We need lower prices because expensive oil and gas have driven consumer goods and food prices to ridiculous highs. A contraction will surely bring those prices back down from the heavens and place them squarely back on earth where they belong.
Of course a recession is not a good thing for workers. I'm feeling the impact of job losses in my own family, and it's not fun. But all these economic indicators combined should be good news for the stock market. Legend has it the market precedes the economy by about six months. The big boys (and girls) jump in when the little guys flee. Take a hint from Warren Buffett, not from that freaked-out expression in the mirror.
By Bonnie Erbe