There has been so much talk lately about a stock market crash coming soon. The CEO of Goldman Sachs, Lloyd Blankfein, said this week in a conference that “Things have been going up for too long”. Gold prices are creeping higher at about $1,350 an ounces signally people are headed for safety. The famous economist, Robert Shiller, also thinks that there are some similarities to the .com bubble going on in markets now.
While there is no doubt that some signs point to an overbought market, what does legendary investor Warren Buffett think? Buffett admits that stocks have lost some appeal. However, in comparison to bonds, they are much more attractive.
As the moneyobserver.com states, Buffett is looking to invest 80 percent of the $100 billion in cash that his Berkshire Hathaway has stored away. This seems like a bullish statement, but we will let his investing do the talking.
One thing is for certain, crashes are very hard to predict. You may know they are coming, but it may not be imminent. It can take months or several years for these predicts of crashes to play out, if at all. Another great investor, Peter Lynch, once said:
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
As an investor, do not be fooled by your ability to time the market. Not even the professionals get it right. No matter what people tell you, they have no clue what the market is going to do. It is too complex, with an unbelievable number of moving parts.
If a crash does occur, this is typically a good time to start buying. As we sit in a major bull market, the deals just are not there. Think of the value that existed after the real estate crash. Stocks like Bank of America, AIG, and Citi could have made you a fortune if you didn’t panic and started buying when everyone else was selling.
Markets always eventually recover. It is just a matter if you have the patience to wait out the storm.