Monday, March 09, 2009

The Almost Daily 2¢ - The Magic 8-Ball of Omaha

We all know Warren Buffet's famous investment advice "to be fearful when others are greedy and greedy only when others are fearful" but given his performance as of late, it appears that you could get better clarity from seeking the guidance of a Magic 8-Ball… “Outlook not so good”, “Ask again later”, “Cannot predict now”.

You see, Buffet has gravitas and LOTS of it… But does he still deserve it?

Last October when, through a New York Times Op-Ed piece titled "Buy American. I Am.", he reaffirmed his confidence in the U.S. economy and appealed to the nation to go long U.S. stocks he was, in my opinion, making, at best, an unconscionable mistake.

If his article appeared in the Financial Times, Barron’s or even the Wall Street Journal, things might have been different but Buffet appealed directly to retail investors (regular folks with retirement accounts, savings etc.) through possibly the most widely read general newspaper.

He was seriously wrong on stocks… stock averages did not only NOT bottom in October they fell sharply again in November, rallied feebly during December and have continued to plunge ever since.

Worse yet, he was seriously out of touch with America’s “late-cycle” culture.

Most American’s are still today (even more so last October) functioning with very poor financial sense and skills acquired during a series of long bull runs (and their resultant prosperity) that appear to have all but erased any real notions of proper and balanced risk taking.

Longstanding “rules of thumb” have all been forgotten, replaced by unusual expectations, caution traded for the need of gambler-like speculative action while "skepticism" remains a pejorative term.

When Buffet made his appeal in October he was, in effect, directing a generation of Americans who sadly still trust his “cult of personality” status over their own personal judgment to either stay put in their stocks or worse yet, to broaden their exposure.

Now though, Buffet reports that the U.S. economy has “fallen off a cliff”

How many Americans were senselessly led astray by this washed-up “pied-piper” of Wall Street?

It is very clear now that the bull-run in Warren Buffet is over and his gravitas has run its course.

You may viscerally doubt this notion and cling firmly to the idea that Buffet is still truly an oracle but…

“Don’t count on it”