In Times of Crisis, Buy Stocks.

Warren Buffett wrote an opinion piece in the NYT with advice that seemed contradictory to what I thought people would do during a major economic crisis with an unstable stock market -- buy more stocks. And not stock in foreign companies, where the money might be 'safer', but American stocks, the value of which are changing wildly every second.

Some of his arguments:

• He follows his own rule of: "Be fearful when others are greedy, and be greedy when others are fearful." When the stock market was at its prime, and investors were reaping billions of dollars of returns, he had his personal account put into secure government bonds. Now when everyone is fearful, that's when he is buying.
  
• People should not overlook the long-term prosperity of sound American companies, despite short-term uncertainty.
  
• "Bad news...lets you buy a slice of America's future at a marked-down price."
• After all that's happened to America in the past century (wars, a depression, an epidemic, etc) the stock market has continued to go up.
  
• People are holding cash right now to feel safe, but they shouldn't because it's a "terrible long-term asset". Especially after the potential inflationary effects of the bailout plan. Instead: equities, equities, equities.

I guess this is a form of long-term speculation but it also sounds like common sense. One's first instinct might be to pull money out of the market while they can before the value declines even further, but the better solution might be to wait out the crisis, and even add to that stock because now it's cheaper.

Then again, it may be only a certain number of people that have that much optimism and can afford to buy stock and wait for an unknown time before seeing any returns. Most people have immediate bills and loans to pay off and they need as much cash as they can get now.

In any case, Buffett sounds optimistic about the future (American optimism?), which may instill confidence amongst investors and the American public. (Well, probably the global public because of globalization and all). And I guess when one of the world's richest men tells you what he's doing with his own money at this time of crisis, you'd be silly not to at least consider what he has to say.