Words of Wisdom from Warren Buffett

For this month's blog I am going to copy and paste an article from the New York Times that was written by Mr. Warren Buffett himself. I hope his words of wisdom lead you down the path toward smart investing.

New York Times Article by: Brad Holland
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.


Thanks to all for reading...Happy Investing!

Motivation for 09'

Welcome to the December post of Personal Finance.

I would like to leave everyone with two quotes today. I also want everyone to take these two quotes to heart, as they have helped me dramatically through the last quarter of this volatile and fear filled year.

The first quote comes from a famous French chemist and microbiologist Louis Pasteur. You may or may not recognize his name, as he is most famously known for his discovery of the pasteurization process, which makes milk safe to drink.

Anyway, his famous quote that I would like to leave with you is:

"Chance favours only the prepared mind" - Louis Pasteur

What I took from this simple line is that there is no such thing as luck. The only way you will be successful in life is if you work hard (prepare) for it. Good things come to good people right? Depending on your belief system, this can be interpreted in different ways. I believe that you get what you desereve, and what you deserve is equal to the effort in which put forth.

The second quote I would like to leave you with portrays a very different message, however, they can be linked together in many ways. I took this quote from a gentleman in my company, and although these are his words, I don't believe he meant to be quoted on them. However, I took them to be quite motivating and important in my day to day business attitude.

"Take care of your clients like they have never been taken care of before, and they will take care of you and your family for the rest of your life"

What a powerful message...it doesn't get much more direct than that.

I would like to leave you all with one last piece of advice. This is something that I use on a daily basis, and although it hasn't been quoted from anyone who is historically important, I believe it to be a very valuable message that will hopefully help you as well.

"Be the person who your clients get excited to refer their friends to, and soon your business will be full of friends you never knew were clients, and clients you never knew were friends."

Thanks again all, and happy investing.