October 18: The US stock market continues to remain volatile, and even a call by Warren Buffet, the second richest American, was not enough to give investors any degree of confidence. Buffet, also one of the most respected investors urged investors to buy, telling them that American business was not down in the dumps.
In normal times, such a call would have possibly led to frenzied buying. However, these are not normal times for the economy, and it seems it will take much more than just Buffet’s plea, made through a piece in the Friday issue of the New York Times titled ‘Buy American. I Am’, to boost the confidence of investors.
Following his standard practice, the 78-year old Buffet did not identify in his article what stocks he was buying, and went on to say, “A simple rule dictates my buying: Be fearful when others are greedy and be greedy when others are fearful. Most certainly, fear is now widespread.”
Confirming that he was buying U.S. stocks, Buffet said should the prices continue to remain the way they are right now, soon he might have all his personal investments in American equities. That would, of course, exclude his stake in Berkshire Hathaway Inc.
Buffet said it was ‘foolish’ to be worried about the long-term good health of American companies that were financially secure. According to him, the possibility of the market recovering from the current crisis even before the economy or the general feeling among investors did was strong. He also added, "if you wait for the robins, spring will be over."
Buffet cited as an example the scenario during the Depression in the 1930s. Reminding readers of the day the Dow Jones Industrial Average hit rock-bottom – July 8, 1932, he said while the economy continued to falter back then till Roosevelt’s ascension to the presidency in 1933, the markets had already bounced back up by 30 percent by that time.
An investor’s best pal was an unlikely candidate – bad news – according to Buffet, as that is what gives potential buyers to acquire a piece of ‘America’s future at a marked-down price.’
However, despite Buffet’s reputation as an investor and businessman, his attempts to boost the confidence of investors and do his bit to stabilize the market did not seem to affect investors positively too much, as the stock market closed for the day on another low. Worries of the recession, not just being something that would blow over in a few days, seemed to be getting concretized.
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