Even Buffett Is Down 25%
According to regulatory papers filed with the SEC, Berkshire Hathaway’s (BRK.A) investment portfolio was down by 25% in the 4th quarter of 2008, according to CNN Money. I’m not entirely sure, and correct me if I’m wrong, but I believe this is by far the worst quarter Berkshire Hathaway has ever had with respect to its investment portfolio. As of December 31st, Berkshire Hathaway’s equity portfolio was valued at $51.87 billion. That’s a hefty chunk of change to be sure, but just three months earlier at the end of September, Berkshire’s equity portfolio was worth $69.89 billion. That’s an $18 billion loss in just 90 days!
If Buffett Can’t Win, What Hope Do The Rest Of Us Have?
The majority of these losses stems from Buffett’s large stake in the financial sector, which, if you haven’t been paying attention, hasn’t been faring too well of late. Buffett isn’t selling, however. He has maintained his stakes in troubled Bank of America (BAC) and bond rating agency Moody’s (MCO) in the face of significant losses.
So what gives? Many investors are surely thinking that if the great Warren Buffett can’t even escape the crisis unscathed, they surely haven’t a chance and might be tempted to move to cash. As many readers can probably guess, I would strongly advise against that. Buffett agrees. His now-infamous NY Times Op-Ed “Buy American, I Am” may have come at an inconvenient time, but the wisdom of his advice remains sound.
Be Greedy When Others Are Fearful
Buffett’s quip “Be greedy when others are fearful and fearful when others are greedy” applies now more than ever. In his own words,
“…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…”
If you’re in the market for the long haul, as most investors should be, what happens today or even next year is of little consequence compared to what will happen 20 years from now. While the economy is having a rough go of things now, this crisis can’t last forever. Eventually, things will return to normal and those who’ve bought stocks at today’s prices will be richly rewarded.
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Those that worship buffett are bitting their teeth. US stocks are headed a lot lower over the next 6-months. Invest in gold while its still cheap.
I think the principle is right – buy when others are fearful – but there are certain segments of the market I am staying out of right now. I have a long term horizon for my retirement accounts, so I am plugging away on my 401k and IRAs. But I’m on the sidelines when it comes to taxable investments. I think there is room to go lower, but I also don’t want to try and time the market…
As a guru for the average investors, I’ve always believed that Buffet receives more credit than he deserved. With his enormous wealth, he can take risks and use leverage in ways that we cannot even imagine. That always him to use strategies and tactics that are not suitable for the rest of us. Sometimes he loses but it never affects his lifestyle or future.
I doubt Buffett thinks he’s down, particularly – he doesn’t measure results on a six month view, as you know…
@Mr GoTo – I’ve long admired Buffett, but used to have my doubts like you did. It’s worth reading/borrowing his book The Snowball and seeing how much he got done when he was young and buying stocks like anyone else.
A young Buffett would LOVE this market.
Actually the CNN article is not correct, as it doesn’t take into account the fact that he sells positions and buys other positions.
Example: If I owned $1000 worth of stocks and then I sold $200 worth of shares throughout the year. Let’s say the market was unchanged throughout the year and I end up with $800.
Does that mean that I actually lost 20%?