Thursday 19 February 2009

The Oracle Sells America

Struggling. I’m struggling this morning with some of the things that Warren Buffett is doing with his cash these days. I am struggling because he is selling America, selling Johnson & Johnson, selling ConocoPhillips and selling U.S. Bancorp.

1 comment:

Guanyu said...

The Oracle Sells America

Cramer
18 February 2009

Struggling. I’m struggling this morning with some of the things that Warren Buffett is doing with his cash these days. I am struggling because he is selling America, selling Johnson & Johnson, selling ConocoPhillips and selling U.S. Bancorp.

What’s more American than these stocks? These are not small trimmings. He sold more than half of his 52 million shares of Johnson & Johnson and he sold it at a 20-year low relative to its yield. That doesn’t sound like “Buy America.” That sounds like “Sell America.”

Yet, on Oct. 16, 2008, with the Dow Jones Industrial Average at 9000 and the S&P 500 at 950, Buffett penned a now-famous op-ed submission to The New York Times saying it was time to buy America. Those who bought America that day are feeling ... well, downright un-American.

Or at least they’re feeling poorer.

Mind you, this isn’t Boone Pickens selling almost all of his energy positions while predicting oil will double, although that’s some benchmark. Who knows why Pickens is selling? I think the market’s given him a real whopping. But whenever you say that any rich person has lost money, one whom we respected, you can expect to get corrected posthaste. So, I will simply leave the sales and the facts out there and let Pickens arrive at a story arc.

No, these are sales by Buffett. The “out” Buffett always has is that he buys for the long term. I have no problem with that if you are really rich because you aren’t worrying about losing your house or putting food on the table or putting a kid through school. I have argued mightily that it isn’t a fair time frame for the hundreds of millions of Americans -- lotsa people -- who aren’t rich. However, as long as Buffett was buying and not selling, or as long as he was at least holding, you couldn’t knock him.

But now it turns out he’s putting a terminal value on something we thought we were to hold forever.

I am sensitive to this missive of his because the same time that he wrote it, I said it was time to exit stocks. And as they rallied after I repeated that multiple times, finally culminating in a call at Dow 10,000 that amounted plain and simple to if you needed money for a major purchase for the next year then you should exit American stocks.

Now, Buffett doesn’t have to answer for anything. He has had a long and distinguished career and is obviously a tremendous investor. But it is fair to say that many, many people relied on his judgment to buy stocks just like the quintessential American names of Procter & Gamble and Johnson & Johnson.

To them, what can I say? “Don’t worry about it”?

In that now-fated editorial, Buffett wrote that those in cash are making a bet that they will be able to get in again, and that’s often a foolish bet. He continued that those waiting for the comfort of good news are ignoring hockey great Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

Looks like those who waited can now buy all the JNJ and PG they want. They are much lower than Oct. 16, 2008. The puck never got there. And, in this horrible market, cash and patience will beat “buy high and sell low” any day of the week. American or not. Sobering.

I think that Buffett’s actions should be scrutinized just like anyone else’s. I have been turned on to this view by my good friend Doug Kass, who has been on this case for months now. In fact, I have talked to the editors and we are starting a “Buffett Watch” to see what is happening with Berkshire Hathaway as it lurches from Johnson & Johnson and U.S. Bancorp to General Electric and Goldman Sachs and Tiffany and Harley-Davidson.

We need to know what’s happening. Buffett’s firm is too big, and he is too important to ignore. We need to know daily and some institution has to have the guts to do it. Glad it’s us.

At the time of publication, Cramer was long Johnson & Johnson, ConocoPhillips, General Electric and Goldman Sachs.