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A lesson from Warren Buffett on buying fear Part 3

On the Runnymede blog, I have discussed buying fear in 2014 and 2015. The thesis is simple and taken from the great Warren Buffett. His famous rule is "Be fearful when others are greedy, and be greedy when others are fearful. While this seems like a simple rule, even Buffett admits that it is easier said than done. Buffett said, "There is no comparison between fear and greed. Fear is instant, pervasive and intense. Greed is slower. Fear hits."

Fear and Greed

Recently headlines had shifted to fearful ones. Here are a few articles from the last 2 weeks.

Paul Tudor Jones says US Stocks Should 'Terrify' Janet Yellen

Einhorn's Greenlight Warns of Bubble with Tax Reform Prospects Fading

Cooperman's Omega: 'There is sizable risk' to the stock market

While these are scary headlines indeed, they should be taken with a grain of salt. Sure they are worth reading but remember that media companies are trying to get you to click and one way is to generate fear. This may be good for their ad dollars but doesn't necessarily make for a good investment strategy.

One of the many indicators that we look at is called the Fear and Greed Index. Here is my Tweet from April 13th.

This proved to be a good "buy the dip" moment as markets have rallied from there. And if you worry that there is there is irrational exuberance in the markets like 2000, we don't see it. At least not yet. Right now the index is in a neutral position and nowhere near extreme greed.

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About the Author: Chris Wang

Chris Wang


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