More Buffet

For those that didn't follow the link to the full transcript of the CNBC interview, I will post the best part in my opinion which has been alluded to in the last few posts here:

Becky: That's the most concerning view I've heard from you as long as I can remember talking to you.

Buffett: Yeah, but .. We will have ... I hope I live long enough to see a couple of recessions in this country. (Laughs.) At your age, you'll see 6 or 7 in your lifetime. It is the nature of capitalism to periodically have recessions. People overshoot. So, it isn't the end of the world. I mean, as a matter of fact, for an investor, you know, it turns out to be the times when you make your best buys. I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap.

The real thing to look at is how much you're getting for your money and not worry about what they're going to do next year. The American economy is going to do fine over time.

Becky: But when you start talking about that, are you comparing what's happening right now to 1974?

Buffett: No.

Becky: Do you think prices are as cheap?

Buffett: No, no, they're not remotely .. oh no, they're not within miles as cheap. But, you know, they may get cheaper. We'll find out. But if they get cheaper .. as long as you're a net buyer of stocks, which we are at Berkshire, we want them to be cheaper. I mean, if they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper.

So the club and arguably most of us that are early in our investing careers, are so called net buyers, so we should relish a good market pullback. I know I do! What struck me even more was that Buffet doesn't get too fussed if what he has bought has gone down in price as long as he thinks he's still bought a valuable business, because he'll buy more cheaper!

I must admit that being a contrarian investor has led me on occasion to buy too early into a company that would continue to suffer losses. I have dealt with this in many ways including buying more cheaper, selling at a loss, and just holding on until it finally recovers. None of these are easy! Each one requires a good judgment as to the residual value of the business and it really tests one's psyche more than anything else.