When you're at a "Buffett" pick up some food for thought

Portions of CNBC Transcript: Warren Buffett's 'Stock Split' Interview - Part Three: Kraft-Cadbury

Published: Wednesday, 20 Jan 2010 

In response to the reporter's comment that there is a great deal of uncertainty in today's economy and perhaps we should wait to invest when things are not so uncertain., Mr. Buffett had this to say:

 It doesn't make any sense to try and time things that way.  Nobody knows what's going to happen tomorrow, ever. The only thing is they get very apprehensive about it at certain times, particularly when other people are apprehensive.  When people get scared, they get scared as a group.  The confidence comes back sort of one at a time...

In response to the reporter's question on whether the  uncertainty about the near term future of a company should postpone  the purchase of the stock of that company Mr. Buffet stated:

The idea that you try to time purchases based on what you think business is going to do in the next year or two, I think that's the greatest mistake that investors make because it's always uncertain.  People say it's a time of uncertainty.  It was uncertain on September 10th, 2001, people just didn't know it.  It's uncertain every single day.  So take uncertainty as part of being involved in investment at all.  But uncertainty can be your friend.  I mean, when people are scared, they pay less for things.  We try to price.  We don't try to time at all.

Later in the interview the reporter stated that many consider that the market is currently overpriced and has diverged from the economy. Mr. Buffett responded:

 ..., I think markets frequently will diverge from the economy.  That's why I think it's a big mistake for people to start when they think about buying a stock, I think it's a big mistake to start, to think about what's going to happen in the next 12 months or the next six months either to the company or to the -- or to the economy generally.  I do not -- if I'm buying XYZ company I am not concerned about what they're going to earn in the next year. The next year is going to be over and then people are going to be looking at the year after that.  If I'm right about where they're going to be in five or ten years we'll make a lot of money but I can't time stocks based on what they're going to do this quarter and next quarter.  I don't know anybody else that can, but maybe they can.

In my view thats the difference between someone who can actually have a positive Alpha and people who try but can't for any length of time.