Video: Buffett: Time to buy U.S. stocks

msnbc.com news services
updated 10/17/2008 2:18:11 PM ET 2008-10-17T18:18:11

Warren Buffett has been moving his personal investments from safe Treasury securities into U.S. stocks, according to an opinion piece he wrote in Friday’s New York Times.

If prices continue to look attractive, the legendary investor says he expects his personal account to be 100 percent invested in U.S. equities, the legendary investor wrote in the article.

The piece, titled “Buy American. I am,” reiterated one of the legendary investor’s favorite maxims: "Be fearful when others are greedy, and be greedy when others are fearful."

“Most certainly, fear is now widespread, gripping even seasoned investors,” said the so-called Oracle of Omaha.

“To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions,” Buffett said. “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.”

Not everyone was immediately convinced that Buffett's strategy is for them.

“His position is probably the opposite of what someone close to his age should be doing: keep more of their money in Treasuries,” said Charles Geisst, a finance professor at Manhattan College and the author of “Wall Street: A History.”

“I understand the sentiment, but this situation is unlike anything we’ve seen since 1932,” he added. “In downturns such as 1987 and early this decade, we never had a real clear view of what caused markets to go down. In this case, we have much too clear a view. This is the first time we’ve seen systemic problems affect the markets since the Great Depression.”

Since stocks began to tumble in September, Buffett and his investment company, Berkshire Hathaway Inc., have made large bets on U.S. companies, exacting rich dividend payments in the process.

Berkshire Hathaway agreed on Oct. 1 to invest $3 billion in General Electric Co.’s preferred shares, which carry a hefty 10 percent dividend. In late September, Berkshire Hathaway also bought $5 billion in preferred shares of Goldman Sachs Group Inc., which also pay a 10 percent dividend. He bought warrants to purchase another $5 billion in common shares at about $115 each.

In the New York Times article, Buffett stressed he was discussing his personal investments outside of his Berkshire Hathaway holdings, which are pledged to charity. In 2006 Buffett pledged most of his fortune to the Bill and Melinda Gates Foundation and four Buffett family foundations.

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Despite annual donations to the foundations in fulfillment of the pledge, Buffett is ranked as the nation's richest individual with a net worth of $58 billion, according to a recent calculation by Forbes magazine. Because of recent market turmoil he has surpassed his friend and Microsoft co-founder Bill Gates, according to the Forbes calculation.

(Msnbc.com is a joint venture of Microsoft and GE's NBC Universal unit.)

“Let me be clear on one point: I can’t predict the short-term movements of the stock market,” he wrote. “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.”

Buffett said buying stocks now is better than trying to time markets and guess when a turnaround will happen.

Referring to arguably the greatest hockey player ever, he wrote: “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 been.”’

The Associated Press, Reuters and CNBC contributed to this report.

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