Within the past two weeks my neighbor, my lawyer, and my doctor each told me that Warren Buffett is suggesting that Americans buy shares in American companies. I tolerated the first two, but I really let my doctor have it today. I blurted out - “AND???” “How does that apply to me and you?” “Are you a billionaire?” “Do you draw a $100k salary?” “Did you just give $30B to the Bill and Melinda Gates Foundation?” “Have heads of State begged you to make verbal intervention because your wealth is the size of a second tier economy?” “What, precisely, do you have in common with Warren Buffett?”
These are perfectly sensible questions given that the risk tolerance of one person is rarely the risk tolerance of another. How many Americans have the exact retirement goals, financial means, and other suitability fingerprints of Warren the Oracle of Mutual of Omaha Buffett? GET YOUR HEADS ON PEOPLE!
Here are five reasons to eschew EVERY WORD Warren Buffett said here:
1. He bears no significant risk to a complete loss in his “personal” account. If he was 100% in treasuries, as he mentioned, he has already lost nearly 50% of his account. It is a psychological “sunk cost” and switching to U.S. equities from those debentures was more about propaganda than profit. Furthermore, what if his personal account is only a couple hundred thousand? It would be comparable to you and I taking our spare change and buying penny stocks (instead of leaving them in U.S. currency form).
2. He is 78 years old. Any of his actuarians would not give him the benefit of another 10 years on this earth, let alone the 20 that he estimates it may take for domestic stocks to recover. This is proof that he doesn’t need the money and doesn’t even care IF they recover. It also implies that he doesn’t care if you live to see the prediction come true or not - he’ll be dead. What will he care? Again, no consequences for his statements.
3. Buffett carefully omits that Berkshire Hathaway (NYSE:BRK.A) holds several publicly traded foreign stocks: SNY (Paris, France), GSK (Middlesex, ENG, UK), IR (Hamilton, Bermuda), and according to his advertisement, the list is growing to include Israeli and Far-East Companies too. There is a huge difference between what a personal account, without a stated value, and the behemoth Berkshire Hathaway is buying. The first is insignificant, the second is expedient (hence, it is going global).
4. He’s a political puppet now. Notice how many meetings he’s had with the president and future presidents? Who else can politicians turn to? Greenspan “Mr. Midas Touch” got his head handed to him earlier this week over his fallible self-regulating model and short sighted risks. Bernanke is a joke. And no politicians are worth a shake until after elections. So who is the US pinch hitter? Buffett! Yeah, everyone knows he’s rich and actually makes money - let’s see if he’ll do some “verbal intervention” for the good old USA.
5. HE ISN’T YOU. Every investor has a risk tolerance, time horizon, saving potential, investing potential and personality that makes them special. From a suitability perspective, if the average CFP (Certified Financial Planner) told the New York Times that he was moving all of his senior citizen accounts out of bonds and into equities, he would be tried for malpractice due to improper suitability assessment.
Bottom line: it is all propaganda. Go back to your jobs (if you are lucky enough to have one) and ignore Warren Buffett and anyone else with lifestyles of the rich and the famous.