| Buffet Hath A Way |
17 March 2003
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Buffet Avoiding Stocks
Warren Buffet did not get to be the second richest man in America (Bill Gates is first) by being a fool with his money. When the boss fellow at Berkshire Hathaway (an insurance company with a stratospheric stock price) speaks, investors take note. The news from the Oracle of Omaha is that stocks are over-priced, and Mr. Buffet has had his money in high-yield corporate bonds.
Mr. Buffet follows an investment strategy usually called "value investing," which merely means finding a stock priced below where its fundamentals say it should trade. "Easier said than done," comes to mind. Yet, Mr. Buffet is a billionaire many times over because he does his homework and studies the ledgers. Also, he doesn't invest in anything he doesn't understand.
So, his position in what was once called the junk-bond market is interesting. He believes that the firms in his portfolio will make enough money to meet the payments owed their creditors, but he doesn't believe that there is much in the way of stock price potential. With the Dow struggling to make it back to 8,000, Mr. Buffet is announcing that the market has not so much hit bottom as established a new top.
If Mr. Buffet is right (and he has billions to suggest that he often is), the economy will not be bouncing back any time soon. Rather sluggish growth, more of the same job statistics, and doldrums at the brokerage houses loom ahead -- no matter how many economists say other wise.