The Oracle of Omaha, billionaire and CEO Warren Buffett thinks all the worries about the impending recession are overblown.
Berkshire Hathaway CEO and billionaire Warren Buffett does not put too much importance into the effects of a recession, a recent letter reads. As analysts and experts panic for fears of a general banking crisis and a worldwide recession, “the Oracle of Omaha” calls these forecasts “worse than useless”.
Warren Buffett is one of the most successful investors of all time, currently the 5th richest person in the world with a net worth of $115 billion. Buffett has made all of its fortune through slow and steady investing with extremely successful strategies.
Buffett’s motto has always been “invest in the business, not in the stock”. By that Buffett means he does not rely much on technical analysis like graphs or forecasts, rather he studies in depth the business. Buffett and his company look at the business’ core mission, its fundamentals and its accounting situation.
Buffett does not care if the business’ stock falls in the short term, he only chooses investment opportunities that will benefit him in the long term.
And he applies the same concept to today’s fears of recession.
Yes, the American economy is slowing down and inflation is still a major problem. Yes, the American Federal Reserve keeps raising interest rates followed by other major central banks.
However, according to Warren Buffett, none of these things should discourage investors.
“The American tailwind”
Warren Buffett admitted to ignorance regarding the impending recession in his letter. He doesn’t care if or when a recession will occur because, he says, they always do and we should consider them normal.
“Our job is to manage Berkshire’s operations and finances in a manner that will achieve an acceptable result over time and that will preserve the company’s unmatched staying power when financial panics or severe worldwide recessions occur,” Buffett writes.
Indeed, what is important is that the economy will grow in the long term. A fact, according to Buffett, which should set no doubt in investor’s minds.
Buffett calls this “the American tailwind”, some sort of magical power that allows the United States to keep growing. “I have yet to see a time when it made sense to make a long-term bet against America,” the 92-year-old CEO said.
If investors are nevertheless worried for the short term, Buffett advises them to put options into an index fund. Berkshire Hathaway, as well as many other investing firms, have a significant share of their portfolio invested in index funds.
Investing in index funds is usually considered extremely safe, protecting one’s money from inflation without excessive risk.
