How Warren Buffett makes money from crisis
Warren Buffett is a very kind and selfless person. He still lives in a modest house in his home state where he lived before he became rich and famous. The financial guru donates millions or even billions of dollars he earns for various charities.
As soon as another crisis emerges in the financial world, Mr. Buffett goes ‘hunting’ to make ‘a little money’ for his charity or to buy a stake in a company of his interest. The guru’s strategy is directly opposite to the advice leading analysts and experts give. The ‘oracle from Omaha’ buys when everyone else sells and sells when 99% of market actors are positive it is buy time. Mr. Buffett’s Berkshire Hathaway made as much as $10 billion from the 2008 crisis alone. The shrewd financier will definitely use the ongoing fluctuations of crude quotes and the dollar to his advantage.
Mr. Buffett sincerely believes that any investor can make several millions or even a billion buying stock on a panicking market.
How does the world-famed investor act?
One of the richest persons of the world has loads of money in his pocket, and he plays big during financial shocks. As a rule, blue chips are rescued at their most unfortunate moments. Charity is not on the table under such circumstances, and the future success is forged by the billionaire’s business acumen and vision. Decades-tested investment in commodities which are always in steady demand pays off very quickly. Catch phrases sporadically uttered by the guru show best his approach to monetary transactions, investments and the work done on financial markets. The idea is to be careful when most market actors are too busy buying assets and to be active when most traders tend to be reserved.
Mr. Buffett sincerely believes that any investor can make several millions or even a billion buying stock on a panicking market. Everything happened precisely that way in fall 2008. Shares of most companies fell to a record minimum and all one had to do was to invest and to wait for the market to go up again, which was guaranteed within a certain period of time.
There is just one snag. Everything looks so simple and even primitive when Warren Buffett speaks about investment. But far from all can make billions of dollars on financial markets.
Many, among them the U.S. Department of Treasury, are copying the guru’s strategy with a firm belief in success. Investments made in shares of distressed companies on behalf of the American government in the times of crisis amount to hundreds of billions of dollars. Return on these investments is rather big, 12% on the average, but this ratio is still thrice smaller than the return on Buffett’s deals.
How does ‘Mr. Sagacity’ spend his money? Being a modest man who does not need much, Mr. Buffett prefers to invest the money he makes in stakes of his interest. A reason is that the guru prefers his money in the form of shares and has been sticking to this principle throughout his life. Berkshire never stops eyeing the expediency of buying a stake in certain companies. The entity’s investment portfolio has long exceeded $100 billion.
Although he has practically no rivals, Mr. Buffett notes a decrease in opportunities on the big investment market. Quotations often grow very rapidly, and deals worth of several dozens of billions of dollars have become extremely rare in recent years.
Warren Buffett brings luck!
The legendary trader, investor and financial analyst not only invests in companies saving them from a crisis but also makes surprisingly precise forecasts about their future business. Generally, the billionaire’s predictions are positive because his company, Berkshire Hathaway, practically never makes mistakes and does not trust low-reliability enterprises with its money.
The same thing happens to shares of the companies in which Buffett invests – their quotations begin to grow some time after they become property of the celebrated billionaire. Some enterprises which post gains after being ‘rescued’ offer Mr. Buffett to buy out their stock at a better price, and the guru accepts their offers often and gladly. Such deals bring good dividends as well.
Best time to invest in Russia
Other major investors, Jim Rogers and George Soros, own Quantum Foundation, which is no less influential than Buffett’s company. The entity sticks to the aforesaid strategy as well. For instance, Quantum launched extensive investment in the economy of Asian nations going through a protracted financial crisis in the second half of the 1990s. Back then Mr. Rogers moved to Singapore and even brought his family together with him because he deemed that place to be more interesting for living and investment than the United States.
Mr. Rogers has been saying recently (and Mr. Buffett may agree with him) that it is time to invest in Russia. The country is a total wreck. The involvement in several military conflicts, the plunging oil prices and the sanctions hindering economic growth and development are what experienced investors call ‘a perfect economic storm’. It is perfect because it is pointless to wait for a better time for investing in the economy of the Russian Federation: this moment is here and now. Moscow has turned into ‘an ugly duckling’ hated by everyone but this is what makes it attractive for big investment in the eyes of such financial market gurus as Buffett, Soros and Rogers.
No one believes in Russia’s economic growth now, and the prices of public and private assets have fallen to their minimum. Now, do you believe that the Russian economy will remain in stagnation for the next 20, 30 or 50 years? Successful billionaires and investors do not believe this either. Obviously, these negative factors will be gone sooner than we can imagine. The rapid economic growth stage will begin pretty soon, and capitals of interested businessmen will come to Russia within the next few years.
Other, less experienced and undecided investors should take a closer look at the investment options Russia has to offer if they want to reap the real benefits of the progressive investment strategy a few years from now.