Warren Buffet once said that he wouldn’t mind if the stock market closed for one year or more.
The reason was that Mr. Buffett invested in companies, not stocks.
He went on to explain that after analyzing the company’s management, free cash-flow, product placement, innovation, marketing, and everything else that makes a great company truly great, he would determine a current market price.
Using time honored valuations, he would then determine if the company was fairly valued, overvalued or undervalued.
The more undervalued the better.
Once a company met his criteria, he would leap into action and buy the company itself, or buy large chunks of stock. Time was not an issue since he knew if he had done his homework correctly, he would be handsomely rewarded.
How successful has his technique been?
Well, just look at his net worth.
However, Buffett also realized that while he was waiting for these growth-oriented deals to be consummated, he needed to create cash-flow to offset the impatience that might be experienced by himself, his partners, or his investors.
Therefore, he went shopping for companies that had strong cash-flows, like GEICO, to provide constant liquidity and cash-on-cash returns.
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Many people try to copy Buffett’s style, but don’t have either the fortitude or the patience.
Today, I would offer that most people should use a portion of their money in the same way Buffett has for long-term investment.
The twist, however, is not placing money for long-term growth, but for long-term decline.
That’s right, decline.
Having analyzed like Buffett, the economics that the current administration has forced down our throats and the worldwide chaos we are facing, it seems logical to me that the best bet is on the downside.
Thorough analysis, much like Buffett, shows continuing housing price decline, rising unemployment, and European turmoil, just to mention a few of the major issues.
Which leads me to a simple conclusion; things are getting worse, not better. Just ask anyone you know how they currently feel about the economic and financial future of our country, and they will most likely concur.
Therefore, take a page from Warren Buffett.
Bet on what will ultimately happen, and when it does happen, you stand to benefit significantly.
There are investment vehicles which allow you to do just that, so don’t be afraid of them. Just make sure that the bulk of your money is in guaranteed assets non-correlated to the market, safe and secure, and producing a good cash-flow.
That will provide peace of mind to wait for the inevitable.
Copying Warren’s strategy could prove to be one of the best investment decisions you’ve made in a long time.
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