The media seems to take delight in selling all this fear to the public. Take for instance this article aptly titled, Soft Patch Delusion Is Dashed: Roubini where Influential economist Nouriel Roubini has warned hopes that the recent slowdown was temporary have been dashed and predicted the U.S. and other advanced economies will have a second “severe recession.”But, let’s turn to our beloved legendary investor, Mr. Buffet for insights. See Buffett Bet $3.6 billion on Stocks in Quarter Before Rout
Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), whose top three shareholdings declined by about $1.6 billion last week, disclosed its biggest quarterly purchase of equities in almost three years.
Berkshire bought $3.62 billion of stock in the three months ended June 30, the most since it spent $3.94 billion in the third quarter of 2008, the Omaha, Nebraska-based company said late August 5 in a filing. Equity purchases exceeded acquisitions of fixed-maturity securities for the first time since 2009.
“He’s gotta put the cash to work somewhere,” said Tom Lewandowski, an analyst with Edward Jones & Co. “We’ve seen the market pull back, and this is the environment he likes to make investments in.”
Buffett said August 6 that while the market slump may hurt confidence, the U.S. will probably avoid a recession.
“Financial markets create their own dynamics, but I don’t think we’re facing a double-dip recession,” Buffett told Bloomberg Television’s Betty Liu. “Clearly what stock markets do have is an effect on confidence, and this sell-off can create a lack of confidence.”
Berkshire increased its stockholdings this year in firms it labeled “commercial, industrial and other.” That portfolio was $10.7 billion on June 30 on a cost basis, compared with $6.5 billion on December 31. The “consumer products” portfolio was down 2.4 percent by that measure while holdings of “banks, insurance and finance” were up less than 1 percent. "
“That is basically a recovery bet,” Glenn Tongue, a partner at Berkshire shareholder T2 Partners LLC, said of the increase in the commercial and industrial portfolio. “Equities are available today at prices where he’s almost certain to generate an adequate rate of return.”
I sure hope Mr Buffet is right. After all his purchase of Burlington Northern Santa Fe was met with skepticism yet, Berkshire Profit Rises 43% to $4.38 Billion on Railroad
Value investors should take a cue from Buffet to exercise patience and restraint.
Note: (Italics copied in verbatim)
