Legendary investor Warren Buffet’s Berkshire Hathaway corporation reported that its entire portfolio value fell 25% last quarter, which is a significant amount. Contrary to his own assertions in the New York Times about how now is the time to buy stocks (a philosophy I believe he follows for his personal portfolio because, let’s admit it, he can afford to lose some money), his firm is buying fixed-income securities: Preferred shares and debt at various firms such as Goldman Sachs, General Electric, Tiffany’s, Harley-Davidson (etc) each paying his firm 10%, 10%, 10% and 15% a year.
Those are immense return rates from solid American firms (except maybe for Harley-Davidson) that only he can negotiate (the rest of us are lucky to get half of that). The fact that he’s going for 10-15% safe return vs. potentially 40-80% (if the economy recovers in a reasonable amount of time) suggests that he thinks the chances of a fast recovery are extremely low.
I don’t know what that says to you, but to me, if Buffet believes that recovery will be delayed and slow, I am inclined to believe him. For those of us with lots of money in equities (stocks), it might be time to shift to fixed-income.