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It's time to reread Warren Buffett's op-ed he wrote during the crisis

Sam Ro
Managing Editor
Warren Buffett, 1994. (Patti Gower: Toronto Star via Getty Images)

Late Monday, North Korea fired a missile that flew over Japan and landed in the Pacific Ocean. It was an act of aggression that triggered volatility in the financial markets.

Historically, threats from North Korea have been nothing to worry about. In fact, Goldman Sachs analysts once said: “For decades, complacency has been the ‘right trade’ when it comes to North Korea.”

What if this time around, things were to escalate into a prolonged, violent military conflict? With stock prices near all-time highs, valuations stretched, and controversy crippling the White House from passing business-friendly legislation, it wouldn’t be surprising to see the market sell off in a big way.

With these risks in mind, it’s worth considering how Warren Buffett, who turned 87 years old on Wednesday, thinks about market turmoil.

We remember an incredibly prescient piece Buffett wrote in fall of 2008.

“I’ve been buying”

Over the span of his legendary career in investing, Buffett has said a lot of brilliant things. But during the darkest, most hopeless moments of the financial crisis, Buffett wrote an op-ed for The New York Times that was particularly timely.

“The financial world is a mess, both in the United States and abroad,” Buffett said in the piece dated October 16, 2008. “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.”

Just the day before, the Dow Jones Industrial Average (^DJI) fell a breathtaking 733 points or 7.9%. This was only a month after Lehman Brothers went bankrupt, Merrill Lynch was saved by Bank of America, and AIG secured an $85 billion bailout package.

To be clear, Buffett never suggested the stock market had hit rock-bottom. He only argued the market would be higher in years to come.

“I can’t predict the short-term movements of the stock market,” he said. “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.”

Indeed, the Dow would fall from 9,000 that day to 6,600 in March 2009 before booming to the near-18,000 level it is at today. In other words, the Dow has doubled.

Warren Buffett was buying low.

It’s an op-ed this author has personally quoted over and over and over and over and over again whenever the market had appeared to be reacting to bad news, which is often.

This is not to say you should just constantly be buying stocks no matter what. Rather, it’s about putting worries and fears about the market into context.

“Over the long term, the stock market news will be good,” he said. “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.”

It’s no wonder why Buffett is the most accomplished investor of all time.

Read Buffett’s full op-ed at NYTimes.com.

Sam Ro is managing editor at Yahoo Finance.

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