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Quotes and Investments

Quotes from famous, funny or brilliant people are widely referenced, sometimes overused to emphasize a point. There are certain quotes or phrases that can help guide us when we are making ordinary life or important decisions. They can serve as powerful reminders of key concepts. When using quotes to justify or explain our investment decisions or interpret current market conditions it may not be as straightforward as one would hope. 

Quotes from the same author may give contrary advice. For instance, in financial circles, Warren Buffet’s good words have been cited as gospel for well over two generations. The Oracle of Omaha has two quotes that might lead investors to take different actions.

“A simple rule dictates my buying: Be fearful when others are greedy, and greedy when others are fearful.” This appeared in an op-ed in the New York Times in October of 2008. This statement was made at the heart of the financial crisis. Mr. Buffet has used this line or some fashion of it dating back prior to this as well.

Another quote is from the Berkshire Hathaway Annual Letter to Shareholders.

“Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

–Warren Buffett, 2009 Letter to Shareholders

These two quotes are fresh on my mind because they have either been included in an email or a conversation I have had this week about the current state of the market. One person used the first quote as a way to justify their current cautious stance. The second quote was part of an email saying they felt there was more room to the upside. Both individuals are close in age, income and goals yet they found Mr. Buffet’s guidance leading them to two different conclusions.

The origin of both quotes were only about six months apart, but the context was vastly different. In Mr. Buffet’s op-ed he encouraged investors to join him in buying some of the great American companies that were selling at attractive prices during the financial crisis. Berkshire Hathaway was buying Bank of America, General Electric and Goldman Sachs in the fall of 2008. It can be much easier to determine when market participants are fearful than greedy. 

In the quote pulled from the annual letter, Mr. Buffet talks about the gains Berkshire had made from buying municipal and US treasury bonds leading up to the financial crisis. This quote was a humorous anecdote because he wished he could have bought more and was not a reflection on letting their winning trade continue to run.

Context is import. but if you feel things are overvalued, undervalued or fairly valued make your case and leave the quotes out of it. Breaking my own advice, I will leave you with this quote from author Julio Cortzer, “In quoting others, we cite ourselves.” Create your own statement, don’t always hide behind others.

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Comment   |  1 year, 2 months ago from Leawood, KS