Warren Buffett's recent public invitation to invest in American stocks left me speechless. I don't lose my words often, but conflicting emotions often catch my tongue. First, I was annoyed that one of the richest men in America would assume that most Americans would have money to invest right now. Then, upon a second reading, I realized that Buffet's information was priceless. Now I have words...

First, I learned that – until this year – Buffett invested only in United States government bonds (This description leaves aside his Berkshire Hathaway holdings). But, he's buying American stocks now  under one condition – that his purchases are not short-term. He admits that he can’t predict the short-term movements of the stock market.

Then, I learned what it means to hold equities for long term when Buffett said, “...most major companies will be setting new profit records 5, 10 and 20 years from now.” I understood, then, that if I invest in a company, then it's like buying a 5, 10, or 20 year CD, where my money is tied up and I can't touch it. Now, that mentality might not fit your scheme of how the world should turn, but his explanation illustrated how I might look at investing at this point.

This understanding was validated when I went to the bank yesterday to make a deposit. The girl behind the counter was pleasant and curious, and she wanted to know what I did for a living. When I told her I wrote about personal finances, she leaned closer and told me with a smile that she had lost forty percent of her 401K over the past few months. I understood why she was smiling, and I responded, “So, your input to your 401K will buy more now, eh?” She nodded, “Yes, and my employer matches my contributions up to 50 percent!”

The bank teller was a young woman, and I commented that she was wise to be saving at such a young age. Instead of gloating, this young lady stated that it was her great fortune to be working for a bank that didn't delve into risky mortgages, and that she loved her job. She also stated that she had learned more by working at that bank than she had in any economics class.

For instance, she understood that her 401K savings were insured only up to $250,000, so she found ways around that limitation by changing beneficiaries on some of her accounts. She also watched  interest rates, and she was proud to show that her bank had, just this week, introduced higher rates on their CDs. Plus, she mentioned that Warren Buffett was her hero, and she knew everything about that man – including his preferences for investing.

Folks, this young lady works in a bank branch in small town America, in the middle of a local grocery store. She was, from my judgment, about twenty-five years old. And, I could see from her face that she had great hopes for her future, and that these hopes were grounded in the knowledge that she chose to obtain about her financial future.

I could see her buying a house and staying in that same house for thirty years, like Warren Buffett. And, I could see her about thirty years from now as she bailed out some financial giant for ten percent profit, just like Buffett. Why did I envision this scenario? Because she quoted Buffett in his New York Times' op-ed. When I asked her about her strategy, she said, “Be fearful when others are greedy, and be greedy when others are fearful.” And, she quoted this statement with a smile that would have disarmed an angel.

Although I had always admired Buffett, it wasn't until recently that I truly understood his capacity to read financial markets. And, after my encounter with that charming bank teller, I spent most of the day researching news articles about Buffett. I realized that, early in 2008, Buffett had read the writing on the wall for this country's current financial situation.

With that said, Buffett is not an aberration, but he does serve as a mentor to many wealthy individuals. His disciplined followers are considered some of the most successful investors, and many of them are billionaires. Individuals such as Charles Munger, Charles Brandes, Seth Klarman, David Tepper and Robert Torray are all defined as 'value investors,' or investors who seek stocks selling for low multiples of earnings, book value or any other yardstick.

If you asked any one of these value investors about their investments, they may provide you with a range of stocks that vary in type, geography and sector. The true secrets to their success – ones that they learned from Buffett – is to avoid market timing, buy good companies, and sell at good prices. Sometimes, this means holding on to the stock for many years.

I don't have Buffett's billions to invest in today's American stock market, and that's why I took umbrage at first with Buffett's advice. But, like that bank teller, Buffett started from the ground up. While I'm not as young as that bank teller, I'm also not as old as Buffett. If he's willing to invest in American stocks at his age, you can bet I'm going to do what I can to follow his lead. As he said, “If you wait for the robins, spring will be over.”

Until Later,
Linda Goin