These are uncertain times. At least that’s what I’m hearing in the news and in the property circles.
Enter Warren Buffett
Let’s imagine for a moment, we could get Warren Buffett’s attention for about 2 minutes. For some reason he’s agreed to a short interview. We want to get his insights. His views on all this uncertainty. Maybe we’ll get some concrete advice to guide us through these precarious economic times.
I’m ready for the interview. I’ve got in my hand a short list of questions. Questions from all over Australia. Whittled down to this short list. Now, I’m just waiting for “The Oracle of Omaha” to arrive.
I can’t believe it – he’s here! I’ve only got 2 minutes, so no time to waste!
The Interview
Warren: Ask away. What’s on your mind?
Me: Well, Mr Buffett. These seem to be uncertain times. People are scared. They don’t know what to do. What advice would you give?
Warren: You know, people talk about this being an uncertain time. You know, all time is uncertain. I mean, it was uncertain back in – in 2007, we just didn’t know it was uncertain. It was – uncertain on September 10th, 2001. It was uncertain on October 18th, 1987, you just didn’t know it.
Me: What should we do? Should we diversify our investments? Spread them out over a variety of shares and different types of property?
Warren: Wide diversification is only required when investors do not understand what they are doing.
Me: Historically, housing prices have doubled ever 10 years or so. With these uncertain times, do you see this trend continuing?
Warren: If past history was all there was to the game, the richest people would be librarians.
Me: With the US in such a mess, do you see any chance for recovery?
Warren: In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
Me: There seems to be a lot of articles that recommend some drastic measures to counteract what’s going on. How do we know who to listen to? Who’s advice is sound?
Warren: Let blockheads read what blockheads wrote.
Me: (Turning red faced!) Yes sir. Hum, uh-huh, ok (fumbling around with my pen and paper) Let’s see. The US housing market has crashed. Could the same thing happen here in Australia? Should people consider getting out of the housing market to avoid disaster like we saw in the US?
Warren: Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
Me: What do you think was the main cause of the US housing disaster?
Warren: When you combine ignorance and leverage, you get some pretty interesting results.
Me: What’s it going to take for the US to recover?
Warren: Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We’ll break out of it. It takes time.
Me: You are a very wealthy man. For instance, you could buy expensive suits but instead you choose not to. Why?
Warren: I buy expensive suits. They just look cheap on me.
Me: What’s your secret to knowing when to buy? What insights do you have that other’s don’t? How do you avoid the traps? What gives you the edge?
Warren: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Just then, Warren’s secretary enters the room and signals he must leave. He must attend his next appointment. And, he’s wisked off into his corporate jet.
Although short, this interview proved something to me. You can learn a lot in 2 minutes. Just depends on the teacher and if the student is ready to absorb the information.
It would be difficult to find a better teacher than Warren Buffett. As a student, hopefully I am ready to absorb his message. Are you?
(Warren’s answers courtesy of brainyquote.com)