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What's Buffett Buying?


Parsing the Oracle's words will get you nowhere.


From Bloomberg, September 16, 2009:

"Stocks climbed yesterday as Buffett, known as the 'Oracle of Omaha,' told a conference in California that his company was buying equities because 'I am getting a lot for my money.' "

From The New York Times' front page, September 8, 2009:

"But now, only a year after the crisis struck, [Buffett] seems to be worrying that the broader stock market might falter again. After boldly buying when so many were selling assets, his conglomerate, Berkshire Hathaway (BRK-A), is pulling back, buying fewer stocks while investing in corporate and government debt."

What gives, Mr. Buffett? Little has changed in eight days to make an investor of your stature want to run back to equities. Certainly Fed Chairman Ben Bernanke's declaration yesterday that the recession is dead wasn't news to you.

In the interview with the New York Times last week, Buffett said: "We are not out of problems yet. We have got to get the sputtering economy back so it is functioning as it should be."

In an interview today with CNBC, he said: "We have not bounced but we've quit going down," adding that the economy had "hit a plateau at the bottom" and that he doesn't expect a double-dip recession.

So we have more problems, but those problems won't cause another economic crater. We're going to traverse the base of this mountain for a good while longer, but stocks are a buy. Right?

To his credit, Buffett placed big bets during the crisis last year, putting money where no one else would, including Goldman Sachs (GS), General Electric (GE), and Wells Fargo (WFC). Thanks in part to Buffett's favorable terms, many of those investments have paid off quite handsomely. But at the same time, Berkshire Hathaway has faltered along with the rest of the stock market and still has a long climb ahead to regain losses.

Perhaps no single investor has ever been so influential on the broader market as Warren Buffett. His words move stocks like no one else's, which is why he often uses vague language when asked where he's investing.

But the truth today is probably much closer to what he told the conference yesterday and Becky Quick today: He's buying equities. The New York Times reported last week that Buffett wouldn't say what he was investing in, but it wrote a headline based on data from Berkshire's public filing at the end of the second quarter, when its spending on stocks fell to its lowest level in more than five years.

The end of June already feels like a lifetime ago, and it likely was in Buffett's investing strategy.

But in the end, perhaps it doesn't matter quite so much anymore. When Buffett gave his remarks on Tuesday about buying equities, the Dow Jones closed up 57 points. And on September 8, when the New York Times had Buffett declaring stocks were dead? The market closed up 56 points.

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No positions in stocks mentioned.
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