Buffett Buying American

October 27, 2008
Special Feature

Optimists are in short supply in investment circles these days, but one of them is multi-billionaire investor Warren Buffett.

Optimists are in short supply in investment circles these days, but one of them is multi-billionaire investor Warren Buffett. The renowned Sage of Omaha, writing in the New York Times, announced that he is actively buying US stocks and that, if prices stay attractive, he will shift all his personal holdings, as distinct from his share of Berkshire Hathaway, into domestic equities.

Buffett claims that his “buy now” strategy is in line with his investment philosophy: be greedy when others are fearful and fearful when others are greedy. Worries about the long-term outlook for financially stable US companies are overdone, says Buffett, predicting that many of these firms will post record profits in the years to come. To drive home his point, Buffett provides a history lesson from the Great Depression. Back then, stocks hit their low point in July of 1932 as the economy continued to slump. By the time the recovery started in March of 1933, stocks had already gained 30%.

So far this year, Buffett has backed his upbeat talk with cold cash, funneling $28 billion of Berkshire Hathaway’s $180-billion stake into a variety of acquisitions, buyouts, and stock purchases. Among the deals is the recent investment of $3 billion in GE preferred shares, which pay a 10% annual dividend and are callable at a 10% premium after three years. Berkshire Hathaway shares have lost 15% this year, a far better record than the 36% drop in the S&P 500.