Transcripts

"Money File"-What Would Warren Do?

SUSIE GHARIB: And finally tonight, in the "Money File," what would Warren do and why maybe you shouldn't. Chuck Jaffe, senior columnist at "Marketwatch" explains.

CHUCK JAFFE, SENIOR COLUMNIST, MARKETWATCH: No single phrase in the English language can instill investor confidence in a stock or the entire market like this one: Warren Buffett is buying. The fact that the nation's greatest living investor is actively buying, clearly has been seen as a ray of hope for investors and many have said they want to take up his lead and encouragement. America's basic understanding of Buffett is that he's a main street investor, with a preferred holding period of forever and the patience to wait for the business cycle and the market cycles to come around. There's just one hitch: Buffett gets better investment terms than you do. You could go out and buy General Electric or Goldman Sachs like Buffett did, but you're not getting special preferred shares or extra warrants thrown in, effectively letting you buy in at a big discount. Study Buffett's history and you will find for example, that he turned bullish anticipating a bottom in 1974, at a time when the market decline had one more downward leg to go. Look at the market and the economy now, and it looks like Buffett may be doing it again, getting in early. Those sweetheart deals certainly help him to afford it and so do his billions of dollars. You may want to invest like Warren Buffett, but don't confuse your resources for his. With that in mind, even if you think the market may be bottoming out, you need to plan as if the worst-case scenario could continue, particularly for any money you might actually need to access say in the next five years. I'm Chuck Jaffe.