Smarty_Pants

History Lesson and Bear Market Advice

First: To be fair, Buffett is taking a no lose position that most other investors will never have an opportunity to get. He got preferred shares paying 10% dividends and in-the-money warrants.

As long as the companies he 'bought' don't go under he will make out with 10% on his money (where can you find those yields anywhere else?) and if the company's stock rebounds he will also make additional billions on top of the 10%.

To compare Buffett's buying to Joe Sixpack's buying is comparing apples and oranges. Buffett can't lose.

Second: Note that the Nasdaq has yet to reclaim it's 2001 high over 5000. You would need to more than triple your money from today's levels to "get even" for purchases made during that time frame. Given today's economy a market triple in the next 5 years is unlikely.

And finally: it took over 20 years to "get even" from the highs in 1929. The only reasonable parallel for today's banking crisis is the onset of the Great Depression. What is happening in the economy today is 1987 overdosed on steroids and turning into the incredible Hulk. Expect it to require a lot more time to recover than it did in 1987.

It's not always sunshine and lolipops. Just because buy and hold has worked in every 5 year period for the last 20 years doesn't mean it always works. Sometimes discretion is the better part of valor and keeping what you've got is the best choice available.

Disclosure: I went to cash in November of 2007 and am patiently waiting for signs of a market recovery to put my money back to work.