Warren Buffett: "Bad News is an Investor's Best Friend"

In these times of turmoil it might be a good time to reflect on some poignant words from one of the world's greatest investors. Warren Buffett writes, “During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent.” He goes on to say, "Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend."

To quote more of Buffett's words of wisdom:

"Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky's advice: 'I skate to where the puck is going to be, not to where it has been.''

"I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities."

Wise words if you have the money of course....

Ranking World Banking

As banks around the world rush to guarantee depositor’s funds just how risky are banks? A survey recently conducted by the World Economic Forum shows the following top five ranking countries with regard to safe and sound banking systems:

1. Canada
2. Sweden
3. Luxembourg
4. Australia
5. Denmark

New Zealand comes in at number eight while the USA comes in at number 40 (behind Chile and Namibia) and just behind Germany at number 39. Britain once ranked in the top five but now only makes 44.

Source http://www.weforum.org/GCR0809_Browser

Comment: Give KiwiSaver a Fair Go

Watching the trailer for Fair Go last week I was left wondering what on earth could have happened that would make a young boy (age seven) warn people against KiwiSaver. I guess it got the right reaction in that I just had to watch it.

Following the item on the TV I fully expected to be inundated with calls the next morning from worried parents and grandparents. I must have explained it well enough as this didn’t happen.

I found it a concern that no mention was made about being able to take a payment holiday 12 months after the first contribution (the Act defines a contribution as: “any contribution to a KiwiSaver scheme, including an employer contribution and a Crown contribution”). Certainly older children who are in a position to work and pay PAYE just as the 17 year old featured was would have to pay 4% of their income but as for the seven year old saying he was “stuck” in KiwiSaver….

KiwiSaver is not a place to save for education, weddings, overseas travel or anything short term. It is what it was designed as – an investment vehicle for retirement. This doesn’t mean that kids can’t benefit from KiwiSaver even if they never ever make a contribution themselves. The effect of compound interest on their $1,000 kick start should teach them about the importance of starting early. This surely is a valuable lesson. So Fair Go, don’t forget to publish all the facts and indeed give KiwiSaver a fair go.