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Warren Buffett: Buy Stocks! Cash Is Trash!

Posted Oct 17, 2008 10:42am EDT by Aaron Task in Investing, Newsmakers, Recession, Banking

"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."

Or so declared Warren Buffett Friday in an extraordinary op-ed piece in The New York Times. Buffett's call to stocks amid an ongoing financial crisis could help restore investor confidence, a crucial ingredient so far missing from the government's turnaround effort.

Buffett's message is akin to then-Merrill chairman William Schreyer buying TV time right after the 1987 crash to declare Merrill as being "bullish on America," recalls Dan Colarusso, managing editor of Portfolio.com.

The op-ed also recalls Buffett's own famous "buy stocks and get rich" comment to Forbes in 1974.

Buffett's optimism is based primarily on the following:

  • "Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."
  • Cash is trash. "Today people who hold cash equivalents feel comfortable," he writes. "They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

A few caveats to Buffett's dramatic call:

  • By his own admission, Buffett is making a long-term call. "I can't predict the short-term movements of the stock market," he writes. "I haven't the faintest idea as to whether stocks will be higher or lower a month -- or a year -- from now.
  • In the short- to intermediate-term, there's still the issue of reviving the banking sector, and key bank CEOs like JPMorgan's Jamie Dimon have expressed little optimism for the Treasury's program of capital injection.
  • Nobody, not even Warren Buffett, is always right.

373 Comments

- Friday October 17, 2008 10:55AM EDT

get it rite...AMERICAN stocks.....dipstick!

Yahoo! Finance User
Yahoo! Finance User - Friday October 17, 2008 10:55AM EDT

Stocks will be low for a while so people will have about the next 6 months to buy. There's no need to rush into stock now.

- Friday October 17, 2008 10:58AM EDT

Berkshire Hathaway is selling 15x earnings so I dont think that represents a good deal when you look at Buffets method of going in cheap. When it gets down to 4 to 8x earnings then I will go for stocks.

- Friday October 17, 2008 10:59AM EDT

yes warren buffett is right cash is trash we should buy good value stocks

- Friday October 17, 2008 11:01AM EDT

WB, is right about one, being on the sidelines at this point won't earn you much... Better to buy quality stocks and wait for the turnaround.

- Friday October 17, 2008 11:01AM EDT

The dirty little secret is that Buffett got the cash to buy stocks today by shorting the market 9 to 12 months ago.

Yahoo! Finance User
Yahoo! Finance User - Friday October 17, 2008 11:04AM EDT

As the market has been going down, I've been putting in more and more. This is the best time to buy stocks since 1958.

- Friday October 17, 2008 11:04AM EDT

Bet on Buffett to point out that Mister Market is in the depths of his depression and giving stocks away. I love it. Hamburger is on sale and everyone is insisting on waiting till it's full price again before they buy any.

- Friday October 17, 2008 11:05AM EDT

Start buying only on dips. Buy up to 25% of your portfolio over the next week or two then stop. Now you will have a good "Hedge" in the event the markets rally. At that point, wait for the 25 day moving average to cross the 50 day moving average and begin averaging in your assets more aggressively.

- Friday October 17, 2008 11:06AM EDT

I agree w/ Mr. Buffett

- Friday October 17, 2008 11:07AM EDT

CAsh is Trash--nice ring to it but so true:::::::::::::::::::::

- Friday October 17, 2008 11:08AM EDT

I like trash, can you give me your cash? Big investors have to buy stock now to average their holding. You can not wait till your stock price to go back to your cost because it will take longer. By averaging them, you may cut out half of your waiting time. I don't trust Wall Street casino, unless you have huge amount of fund and an insider or connection. Remember, nobody teach you how to make money unless they have their own agenda.

- Friday October 17, 2008 11:08AM EDT

I smell fear like a wild animal.......I have been feasting on the weary lately and laughing at them while looking forward to a fat happy retirement in 20 years......

- Friday October 17, 2008 11:08AM EDT

Just read the fine print. Don't invest in equities if you have a short time horizon. He admits he don't know what will happen in the next few months. But what will happen is people will buy, and will get crushed when they find out banks will need more capital than what the government originally pledged. The government can save the banks, but can't save the economy in the short term.

- Friday October 17, 2008 11:08AM EDT

I am in for the long haul so the lower the better - I have started putting cash into stock.

Yahoo! Finance User
Yahoo! Finance User - Friday October 17, 2008 11:08AM EDT

the stocks will be low for next years or atleast not go above last high until atleast 3-4 years.

Yahoo! Finance User
Yahoo! Finance User - Friday October 17, 2008 11:09AM EDT

Paulson & Bernanke said that no quick fix for economy (stocks) and it will rebound around Q2 2009. Let's shorting the stock now

- Friday October 17, 2008 11:09AM EDT

So cash is trash. I have 31 billion but I want you to buy so my recent buys will go up.

- Friday October 17, 2008 11:10AM EDT

Dear Mr. Buffet I will be happy to take out your trash!!!

Yahoo! Finance User
Yahoo! Finance User - Friday October 17, 2008 11:11AM EDT

The history of Warren Buffet is kinda interesting. He started out more or less as an entrepreneur and at a younger age. It wasn't till AFTER he already had a few extra dollars in his pockets and was living well below his means that he really started pushing the stock market. Most Americans have the opposite problem. I think the stock market is a great place for people to put their money, so long as they don't NEED that money. Invest in the stock market with you disposable income. However if my nations economy was crumbling, I could think of a better person to tell me what to do than the world’s richest man. I wonder what kind of endorsement deals WB gets?

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