Buy American. I am.

new_york_times:http://www.nytimes.com/2008/10/17/opinion/17buffett.html

By WARREN E. BUFFETT
Published: October 16, 2008
Omaha

Times Topics: Warren E. Buffett
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 be scary.

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.

Why?

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 now.

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 11,497.

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 them queasy.

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 been.”

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.

Extracted from The New York Times

Shall I buy AIG now?

A newbie ask this question.

My answer:

From market perspective
Financial market worldwide is experincing hugh gygation. Stock price can fluctuate up and down 500 to 1000 points in a day in US market. It show the investors are extremely weak confident. Remember, US market is the most liquid and very difficult to be manipulated (Not like HK bource or other SEA market).

From stock perpective
From Business perangle
From individual perspective

Exceptional Case

Pioneer Team

Yesterday, 15 Oct 2008, 3.30pm, I dropped by investment bank office. To my surprise, I found out there are "mini crowd" gathered in front of the stock price machines.

Isn't it a market crisis? Credit crunch? Once in 100 years financial tsunami? Why there are still a decent number of retail investors (or rather speculator??) show interest in stock market? isn't it the crowd've got their hand burnt? This really impact me. It triggered me to have a thought on this scenario. Below is my 2 cents worth findings:

I believe we are in the mid or end of bear 2 phase now. In bear 2, the stock market may fluctuate violently. The crowd in the investent bank' office means that the buying power is not exhaustive yet. The crowd is still confident to bet with hope that the stock will rebound to make some ultra short term money. To me, this mean the stock market most probably will adjust downward within the next half year to settle at a lower level.

When market volatility died off. The confidence of the last buyer vanished. The stock market turnover at its low end compare with the past few years. Speculators no long interested to speculate. There are only few long term investors pick fundamental stocks. Then, we basically enter bear 3 phase or bull 1 phase. This is the best time to greedily buy up the market.

As for now, the worst is yet to come!!

A Financial Blog

This blog will be position as a financial blog. I will post all my stuff related to financial issues. This is really a great time to do so. We are in a serious global crisis now!!

Financial market just went thru its most turbulent period (15th Sept - 15th Oct 2008)for the past one bear year. May be we already passed the worst according to G. Soro, P.Krugmen and a number of other financial figures. Yet, for stock investor like me, the worst is yet to come. I am going to report to you, how the impact of this sub-prime --> credit crunch/financial crisis --> global market crisis --> real economic crisis --> real business/consumption slump that eventually affect our financial assets, step by step, bit by bit.

Another Chain reaction happened geographically, i.e. US Financial down --> Japan/EU/Korea/Middle East/Australia Financial down --> China/SEA Financial hold with negative bias. Can Asia stand the financial tsunami and it subsequent financial ais age?

What about decoupling theory? To date, I advocate that the world of economic strength is experiencing a fundamental structural change from monopolar-lead to multipolar-lead( US-lead to multi-economic entities-lead). The world economy is moving away (decouple) from US-Only-Engine to multination-engine (US, BRIC, EU). The world financial market is still not moving away (not decouple) from US. Reasons 1) US super fund a lot and 2) Other nations own investment fund very little

I do hope people who follow this blog will be greatly benefited with the sharing. Meanswhile, I can record my investment research here permanently.

This blog is dedicated to Joe and Teng. Especially Teng who has (and continue does) sacrified to take care of me and Joe.