New York – TheStreet.com’s Jim Cramer says Buffett’s now putting a terminal value on something we thought we were to hold forever.
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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 (NYSE: JNJ) and Procter & Gamble (NYSE: PG), selling ConocoPhillips (NYSE: COP) and selling U.S. Bancorp (NYSE: USB).
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 (NYSE: BRK.A) as it lurches from Johnson & Johnson and U.S. Bancorp to General Electric (NYSE: GE) and Goldman Sachs (NYSE: GS) and Tiffany (NYSE: TIF) and Harley-Davidson (NYSE: HOG).
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.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO.
Both Kramer & Buffett know just as much as you & me if hashem wants they make money if he wants they lose money, its a shame that VIN even publishes an article that shows a lack of emunah & bitachon
decent article but cramer has been dead wrong almost as many times as he was right. he also is mostly a commenter, his hedge fund isn’t even pocket change compared to buffet’s holdings, so the dynamics are much different. when buffet injects funds in a company, he owns a nice chunk of it. when cramer invests it’s immaterial to all concerned.
in fact warren buffet is a multi bill. and runs a qu. bill. company
and jim cramer is just a fool with a few hundred mill. and whenever he recomands a share it goes oppesite direction.
btw he is recomanding GS for over a week now (and look at yestordays plunge)
but he is bashing buffet for saving it.
how about buffet feels that now for long term positions GE and GS or better positions then JNJ and PG?
This is the same Cramer who told us Wachovia and AIG were fine. I think he even believed in Bear Stearns too.
Buffett is a guy who buys businesses and hold them forever. He also understands what he buys.
Cramer is an opportunity seeking fool. Buffett is a value investor who knows he is going to be made fun of when he doesn’t get it right all the time. Buffett has even admitted he could have been wealthier had he taken profits along the way. But Warren loves his businesses and the cash flow. Plus, Berkshire also invests in a lot of private companies too.
BTW, my only beef with Buffett is lies over the tax code. Warren, your secretary pays a higher percentage of taxes because income tax rates are generally higher than taxes on capital gains and dividends. Super rich people don’t make their money from income, as in a salary. They structure it to get as much dividend and capital gain income, along with tax-free interest from municipal bonds.
Go to a flat tax or a FairTax system, and you can have your fairness.
I’ve made good money doing the opposite of what Cramer says.
bla bla bla… bottom line is…..rabbot machashavot b’lev ish va’atzat hashem hee takum
It is said in the name of the holy Kotzker Rebbe zt”l “Lo lachachomim lechem”Because if you think you are smart, Hashem says go & try to make money on your own wisdom & you will see where it will bring you.
I am a Jewish business man who has lost a sizable amount of money as result of this crisis. I despise the people that request that these article be taken off. These are people who rely on other people who actually work! for their paycheck. It would be great if you could wake up! And stop living this protected life, realize that Jews and non-Jews alike are going through the hardest economic times in a very long time
Why do people think this guy Buffet is a Navi? He is NOT. Like anyone he makes and he loses. He needs to raise cash so he sells. He buys Goldman Sachs becuase he knows the billions of Govt cash is going to go into investments that Goldman Sachs will invest in too. Half the Treasury Dept worked for Goldman Sachs. Some genius. Meanwhile, people are broke and will not buy the name brands made by Proctor and Gamble or J & J if we are in a depression. They will buy generic store brands. What genius. Sell bank stocks. What genius since all banks are bankrupt and will be shortly taken over by the Govt. Eizeh navi ! Wake up people. The market is fixed and the little man will always get crushed. Invest in your business and your mishpucha. That’s all.
I think it’s time for all of us to realize that the stock market is not a place to invest in – EVER. If gains of 10 years can be erased in weeks then I don’t want to keep my money there. I think we need to invest in items that don’t go down in value. For example, gold, antiques, etc. I’m at a lose on finding a safe place to keep my money in.