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Warren Buffett turns 90: His 1959 letter to partners had words of caution for new-age investors

The current market situation is fairly similar to what the US equity market was in 1958 when investing in the market acquired significant momentum

August 30, 2020 / 01:40 PM IST
Warren Buffett (Image: Reuters)

Warren Buffett (Image: Reuters)

Warren Buffett turns 90 on August 30.

A super successful investor and generous philanthropists, Buffett, has a legacy that cannot be matched by anyone ordinary.

He first bought a stock at the age of 11 and first filed taxes at the age of 13. At present, the CEO of Berkshire Hathaway's net worth is more than $82 billion.

Buffett's acumen to understand the trends of markets is no less than extraordinary. Every year, when he addresses the shareholders of Berkshire Hathaway, he doles out the pearls of wisdom that he has acquired after decades of experience.

The current market situation is fairly similar to what the US equity market was in 1958 when investing in the market acquired significant momentum.


In his letter to partners in 1959, Buffett wrote that almost any reason was seized upon to justify investing in the market at that time.

With the new-age Robinhood traders cropping up in the market, a similar scenario is visible.

Also read: Robinhood fever grips Indian stock market as hordes of first-time investors bet on share trading

Buffett has always cautioned about being too greedy in the market.

In his same letter in 1959, Buffett wrote, "I do believe that widespread public belief in the inevitability of profits from investment in stocks will lead to eventual trouble. Should this occur, prices, but not intrinsic values in my opinion, of even undervalued securities, can be expected to be substantially affected."

"There are undoubtedly more mercurial-tempered people in the stock market now than a for a good many years and the duration of their stay will be limited to how long they think profits can be made quickly and effortlessly."

"While it is impossible to determine how long they will continue to add numbers to their ranks and thereby stimulate rising prices. I believe it is valid to say that the longer their visit, the greater the reaction from it."

Buffet clearly hinted that the market was not able to sustain the greed and irrational attitude of investors which remains a fact for always.

Buffett also mentioned in the letter his love for undervalued stocks.

"I make no attempt to forecast the general market - my efforts are devoted to finding undervalued securities," Buffett had written.

But Buffett mentioned - higher the level of the market, fewer the undervalued occur.

In the last paragraph of that letter, Buffett underscored his time-tested winning formula of picking undervalued stocks that give an above-average performance in a bear market or natural market, and normal performance in a bull market.

Buffett's enormous wealth cannot be seen as the biggest achievement of his life. Buffett's biggest achievement, perhaps, is the legacy that he has created.

His words of wisdom, his sharp acumen to understand the emerging trends and his ability to touch lives by the act of philanthropy make him a role model for humanity.

As per Forbes, Buffett's Berkshire Hathaway owns more than 60 companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.

He has promised to donate over 99 percent of his wealth. So far, as per Forbes, he has given more than $41 billion away.

What a worth-emulating journey!

He had said once, "I measure success by how many people love me." Many, undoubtedly, admire him and will keep doing so.

Happy birthday, Oracle of Omaha!

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Aug 30, 2020 01:05 pm
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