Warren Buffett withdraws as CEO of Berkshire Hathaway But will remain chairman of the Board of Directors of the conglomerate and its greatest shareholder. He will also be the one and only “Oracle of Omaha”. This nickname is well deserved due to Buffett’s incredibly successful investment assessment.
The nickname “Oracle of Omaha” seemed particularly applicable during the recent annual meeting of Berkshire shareholders. For what? The legendary investor commented on the experienced stock disorders this year. More importantly, Buffett has made a disastrous prediction in the stock market markets.
Image source: The Motley Fool.
A “hair burler” arrives
Buffett was not imperturbable by the recent market volatility. He told Berkshire Hathaway shareholders: “What happened in the last 30 to 45 days, 100 days, whatever this period is really nothing.” The 94 -year -old added: “It is not a huge decision.”
The perspective is essential. Buffett noted that the Industrial average Dow Jones (^ Dji 0.78%)) reached 381 in September 1929, almost a year before his birth. He finally plunged as low as 42, a drop of about 89%. With this as a background, he pointed out: “This (the recent slowdown) was not a dramatic bears market or anything like this.”
However, Buffett also warned:
You will see a period in the next 20 years which will be a “hair burler” compared to everything you have seen before. The world makes great mistakes and surprises occur dramatically. The more sophisticated the system, the more the surprises can get out of the left field.
Above all, Buffett did not predict a stock market crash in 2025. He did not say that the shares would fall next year, but estimates that a massive sale will occur at some point in the next two decades.
Why is the investment icon so confident about its desire for prediction? Buffett explained: “It happens periodically.”
Buffett is right
He is right, by the way. THE S&P 500 index (^ GSPC 0.70%)) has experienced 20% or more decreases compared to its previous summit nine times since 1950. This results in a steep dive, on average, once every eight years.
^ SPX data by ycharts.
Simply based on history, I suspect that Buffett’s prediction will also be proven. There has never been 20 years when the S&P 500 did not drop at least 20% at a given time. Believe Omaha’s Oracle “when he prophesies that a decline in the” hair burler “market arrives in the future.
One of Buffett’s most famous quotes is: “Be afraid when others are greedy and gourmet when others are afraid.” Again, he was right. The collapse of the stock market markets have large purchase opportunities for long -term investors.
How should investors prepare?
The main problem with Buffett’s disastrous prediction, however, is that we do not know when it is filled. How should investors prepare?
The most important thing to do first is probably to adjust your state of mind. Buffett told Berkshire shareholders at the annual assembly: “I know people have emotions, but you have to check them at the door when you invest.” He said that the stock market is “a good place to concentrate your efforts if you have the right temperament for this. However, Buffett added that it is” a terrible place to get involved if you have frightened by the markets that decrease and excite when the stock markets increase “.
Another key decision is to always have money ready to invest when the opportunity arises. Buffett practices this principle. When the actions assessments are frothy, he built the Berkshire cradle stock. When the evaluations are attractive, he puts money at work.
In the meantime, however, do not be afraid to buy actions that meet your investment criteria. While Buffett was a net of shares seller during recent quarters, he still bought actions for the Berkshire portfolio.
If and when the “hair curler” stock market predicted by buffett comes, you can be ready for this. Make the right movements guarantee that you can keep your right wallet, even when the market is created.
Keith Speights has positions at Berkshire Hathaway. The Motley Fool has positions and recommends Berkshire Hathaway. The Motley Fool has a policy of disclosure.
