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The Buffet Factor. Surefire proof that its a GREAT time to buy.

February 23, 2009 – Comments (5)

I fell in love with Wall Street in 1998.  The tech bubble was heading towards full swing, stocks like QCOM, SUNW, CSCO, DELL, MSFT, JDSU, NT, LU, anything.com and 100's more would hit highs never to be seen again in the next couple of years.  So positive was the market then that it was common knowledge among laypeople that if you bought an IPO you'd double your money in a few days.  My long-time business partner and I were saving our table-waiting tips to start our first business (a glowing failure, BTW) and commonly had people tell us to put it on the market, let it double, and then start a business.  Red Herring magazine had a headline that went a little something like this:  "if you're reading this you're going to be a millionaire".  They named DELL, CSCO and every other tech-stock-of-the-day as the 10 best stocks for the next 20 years.  I don't think ANY of those stocks have gotten even close to those prices again. 

We know how it ended.  The greatest bubble in world history crashed hard and shoved the country into a recession.  My cousin was a huge tech fan.  He went up 375% from early 99 to early 2000. 

And something remarkable, at least in hindsight, happend in those years.  Warren Buffet, the greatest investor in history (along with perhaps Julian Robertson) was known to be stupid, a fool, behind the times, outdated, a has-been.  Every night on CNN, it seemed, someone talked about how Buffet had lost it, was behind the times, his stuff was great in the old economy but there was a new economy now and he had missed the boat.  Ya Buffet was great in the 80's, but today you better invest with me, baby.  I'm the man now, i'm in the dot coms.  Buffet is in shaving cream, who wants that anymore?

And Buffet was early on that one, he said in I think 98 that stocks were overpriced and investors shouldn't expect much.  And for the next 1.5 years he was wrong.  And then lordie, oh lordie, was he right.  Right as the rain, right as Babe Ruth pointing his bat towards center field, right as Joe Namath being cocky towards the Colts.  He had the last laugh, and a very good laugh i hope he had.

Today we have the opposite.  If you're in stocks nobody is saying you'll get rich.  They ar esaying you'll lose it all.  Stocks are for fools these days, except wal mart maybe.  And Buffet, oh my lord he is a fool today.  He's doing everything wrong.  Just as Jim Cramer.  He's selling America, he's selling JNJ which isn'tn down that much and buying HOG and GE and USG and everything thats down.  What a fool he is, surely anyone with a brain must know that stocks that are down now are going down forever.  Warren Buffet is a fool.  He said buy when the Dow went under 9000, what a fool, its in the 7's now.  Buffet is behind the times, his stuff was good in the 60's and y70's and 80's and 90's and 2000's but today he's done.  Out of date.  He can't accept, that dummy that he is in his senile old age, that stocks are going down forever.  Those puts he sold on the broad indexes, that are not pretty on paper now... further proof that he's done. 

Except you know what?  The greatest investor in history, ever, (no offense to Julian Robertson or George Soros but I think Buffet is the Babe Ruth of this thing) is probably right.  This is probably his swan song, his last hurrah.  Buffet not only bought stocks at the lowest prices of his lifetime, he will probably snatch up a few companies for pennies on the dollar, make a killing when the puts he sold expire worthless, and wind up with one final smile before he drifts off into retirement. 

He is Warren Buffet, not one of us Fools can claim to be his equal, and he has rarely made predictions about the markets.  In Nov 1974 he said buy.  In 1979 he said those waiting for lower prices were not going ot get them.  In 1998 he said tech was high.  And I'm sure he bought after Black Monday, but I haven't been able to find evidence that he made a public statement.

One of the MF staff said to me in a debate about MRVL that buying banks or auto was a gamble, nothing more.  Well, folks, betting against Buffet is no better than a gamble.  With all respect due to anybody, they (whoever they are) are a damn far cry from his resume and credibility. 

Before you short this market, ask yourself:  do you REALLY want to bet against Buffet?  Do you REALLY think that he's lost it, that after 40 or 50 years of exceptional performance he's dead wrong?  Do you REALLY think stocks are not goo dlong term investments from here?

Me?  I'm with Warren B.  And you know what?  Beer is on me in 3 years, when I'm rich. 

good night,

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