A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.He's right. I'm still kicking myself for not doubling down on Charles Schwab after the '87 crash --I'd have made a huge killing by selling off in 1999. Mr. Buffett's logic is a perfect example of contrarian investment, and his track record is pretty good. I'm long in cash right now, and for the short-term that is very good. Buy for the long haul and quit looking at the news. Companies that are fundamentally sound will survive and prosper.
A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.
Remember: if no one were buying any stock, the market would be at zero. The market is not at zero, ergo there are people buying stock.