I Reallocated my 401k Already but

[crokett]

There's a fire sale on stocks right now. Nice to know a billionaire agrees with me.

From Warren Buffet:
https://www.hemscott.com/news/static...68240588878747

I took what I had in my company stock fund (too many eggs in one basket anyway) and reallocated between small cap stocks and international. The rest is in large cap. After everything recovers I will move most of it into something more stable, probably 70-75% then put the rest into higher return options and anything I make gets moved every quarter into the stable investment so as to keep about 25% in the higher return funds.

[cgallery]

I'm waiting until next Tuesday, when AIG has to pay-out its share of the $350B on Lehman credit default swaps it wrote. At some point the U.S. government will have to announce just how bad it is (some estimate that AIG has written about 80% of the Lehman swaps--thus requiring another $280B from the U.S. government).

Obviously AIG's debts are now guaranteed by the U.S. government. But what about the $70B that non-AIG writers will owe? Will they be calling the government asking for bailouts, too? Will Paulson/Bernanke be smart enough to write checks out for them this time?

If you haven't already, everyone should read up on the $51T (yes, fifty-one TRILLION dollar) credit default swap mess. Just like failing to rescue Lehman led to a to-be-announced multiple hundred billion dollar rescue of AIG, failing to help even one or two smaller CDS underwriters could send the entire $51T CDS market into a tailspin.

If they could go back in time, I guarantee that Paulson/Bernanke would undo letting Lehman go under. The costs are going to be too high. It would have been far less expensive to the taxpayer to rescue Lehman. Either they (Paulson/Bernanke) did a poor job communicating with the congress/public the need for bailouts, or Paulson (formally of Goldman) wanted to stick it to the Lehman guys (don't laugh, it is possible).

On conspiracy theories, I have some concern that Buffet is working at the behest of Paulson/Bernanke. It does seem odd to me that Buffet is so convinced of a market bottom, but isn't stuffing Berkshire Hathaway dollars into it, just his personal dollars. If you were Paulson/Bernanke and wanted to reassure markets, who is the first guy you'd call, and what would you ask him to do for you? Don't laugh!

All that typed, I have no idea how much the markets have already factored all of this in. Perhaps it will be a non-event. Maybe I will lose 5 to 10% of upside. But thanks Warren, I'll wait and see what happens next Tuesday.

[jackellis]

On conspiracy theories, I have some concern that Buffet is working at the behest of Paulson/Bernanke. It does seem odd to me that Buffet is so convinced of a market bottom, but isn't stuffing Berkshire Hathaway dollars into it, just his personal dollars. If you were Paulson/Bernanke and wanted to reassure markets, who is the first guy you'd call, and what would you ask him to do for you? Don't laugh!

Buffet has a long-standing practice of not talking about what Berkshire is buying and I believe he's sticking with that practice. His personal net worth other than Berkshire stock is pretty tiny compared with Berkshire's assets. Not long ago Berkshire had $44 billion in uninvested cash and I'm betting Buffet is putting a lot of it to work right now, even if he's not saying so. After all, this is the bloodletting he's been waiting for. we'll know soon enough because Berkshire has to tell the SEC when it takes sizable stakes in companies, and Berkshire has to buy a lot of a company's stock to make the transaction worthwhile.

[radhak]

Buffet would not want to talk of Hathaway's investment strategies till they are officially announced, but he can always disclose personal stuff. While I agree his announcements would be welcome for Paulnanke, he's not gonna oblige them for any ulterior or even altruistic reasons.

But I was waiting for somebody to say it's okay to start buying now. My strategy for this year has been to keep accumulating my investment cash (whatever little it is) separate, so i guess this is a good time to buy. Thing is, I only have vanguard; need to get a regular share account at either Schwabb or Etrade...

edit : I should caution everybody - Buffet has said it before, and other experts have agreed, that what works for Buffet may not work for anybody who's not a billionaire.
Of course, I have always assumed they trying to keep their billionaire's club exclusive

[JR]

Thing is, I only have vanguard; need to get a regular share account at either Schwabb or Etrade...

Vanguard has a brokerage affiliate. It makes moving money into and out of stocks or non-Vanguard mutual funds very easy. Low cost, too.

JR

[cgallery]

Buffet would not want to talk of Hathaway's investment strategies till they are officially announced, but he can always disclose personal stuff. While I agree his announcements would be welcome for Paulnanke, he's not gonna oblige them for any ulterior or even altruistic reasons.

Then I have one question for you: Why would he announce any of his intentions whatsoever, even personal ones? Why write an editorial? Okay, that is two questions.

J.P. Morgan acted sometimes unilaterally to save the U.S. economy. But more often than not, he acted at the government's request (the book "The House of Morgan" has to have at least a dozen minor and two major examples).

I believe Warren Buffet is a modern-day J.P. Morgan.

[crokett]

edit : I should caution everybody - Buffet has said it before, and other experts have agreed, that what works for Buffet may not work for anybody who's not a billionaire.

True. But in this case he is saying, in essence, 'buy low sell high'. As far as I know that approach will ALWAYS work.

[just started]

Buffet would not want to talk of Hathaway's investment strategies till they are officially announced, but he can always disclose personal stuff. While I agree his announcements would be welcome for Paulnanke, he's not gonna oblige them for any ulterior or even altruistic reasons.

But I was waiting for somebody to say it's okay to start buying now. My strategy for this year has been to keep accumulating my investment cash (whatever little it is) separate, so i guess this is a good time to buy. Thing is, I only have vanguard; need to get a regular share account at either Schwabb or Etrade...

edit : I should caution everybody - Buffet has said it before, and other experts have agreed, that what works for Buffet may not work for anybody who's not a billionaire.
Of course, I have always assumed they trying to keep their billionaire's club exclusive

Take a look at ING ShareBuilder, they have the best trade pricing of anybody. I opened an account with them a couple of months ago and have been much happier with them than Etrade.

[Alex Franke]

True. But in this case he is saying, in essence, 'buy low sell high'. As far as I know that approach will ALWAYS work.

Of course we're assuming that what we're currently seeing is "low" and that it will later become "high."

That said, there really do seem to be some good deals out there. Seems like we've been shopping a lot lately. Great P/E's on strong companies and some great dividend yields, too. But I still wouldn't go "all in" all at once -- dollar cost average if you have cash to spare.

I guess it depends on what you mean by "more stable" and "higher return", but that allocation sounds pretty conservative to me...