Yesterday’s op-ed article in the New York Times from Warren Buffet provides extraordinarily sound advice in a tumultuous time.
Buffett references the great Wayne Gretzky’s sentiment of playing where the puck is going to be, not where it was, in decisions about current financial investments. His very simple rule is: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
The core concept of this idea in the current financial “crisis” makes me think of the first line of the Rudyard Kipling poem If…
If you can keep your head when all about you are losing theirs … Yours is the Earth and everything that’s in it.