Buffets view on 2008

Warren Buffett became one of the wealthiest people in the world by making predictions and putting money behind those predictions. Every time he buys a stock or a business or some other investment, he's forecasting the future.


Judging by the incredible returns of his holding company Berkshire Hathaway, Buffett and his colleagues are very good at making those predictions.


Of course, it helps when you can give your predictions plenty of time to come true. That's one reason Buffett's favorite holding period for investments in "outstanding businesses with outstanding managements" is "forever." After all, "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."


1. Recessions can't be avoided forever.


In the last few days, Buffett told that if unemployment picks up significantly, the "dominoes" will fall and the U.S. economy will fall into recession in 2008. He's not sure, however, that unemployment will go up next year. In fact, he's surprised that all the weakness we're seeing in housing hasn't affected the jobs market ... yet. Here's what he is sure about: "It is the nature of capitalism to periodically have recessions. People overshoot."


2. We'll survive future recessions just as we've survived past problems.


As Buffett told in August, "We've got a wonderful economy... There's never been anything like that in the history of the world. We live seven times better than the people did a century ago on average...We've had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well."


3. Recessions will create opportunities.


"I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap."


4. All stocks won't be cheap.


Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn't happen every day. "What's nice about investing is you don't have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don't have to swing. No umpire is going to call you out." You get in trouble, Buffett says, when you listen to the crowd chanting "Swing, batter, swing!"


5. The crowd will make mistakes.


Buffett cites this piece of advice from his mentor Benjamin Graham: "You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right, and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else."


6. Investors will mistakenly think falling stock prices are bad.


"If they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper.


7. Good times will prompt bad decisions.


In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. "They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands."


8. There will be more dancing at another wild party followed by another painful hangover.


Looking back at the Internet bubble, Buffett is quoted as saying, "The world went mad. What we learn from history is that people don't learn from history."

Mr. buffet is just an amazing individual, I love reading about him he's so different from the crowd. He hardly ever goes to wall-street, he doesn't have a fleet of cars and analysts working for him, in fact I read an account where Peter Lynch recounts his visit to Berkshire Hathaway office in Omaha.

1) He only had 12 employees !
2) The office didn't have a single computer (so much for back testing and using expert advisors, and having programmers write your own dll's)
3)Buffet didn't use email at that time
4)He didn't have a cell phone (Gee whiz wonder how he got min by min quotes??)

I read in the "Warren Buffet Way" book he once read a book and the next day called up the company CEO and bought the company for 900 million dollars without any other information ...... over the phone. I need hardly mention this decision of his like most of his other decisions was a winner.

Oh and one more thing ... he hates wall street ..... everything about wall street .... including the people associated with wall street despite the fact that these very people are falling over each other to pay him more than a miilion dollars just to have lunch with him ..... including paying for his lunch.



How does he do this?