This morning, Warren Buffett says he is now buying American equities. Once, his personal portfolio was totally invested in U.S. government bonds. Soon, he notes in his New York Times op-ed, he will own nothing but the shirt on his back and American equities. His argument is simple: “Be fearful when others are greedy, and be greedy when others are fearful.” Good American companies will recover and produce “new profit records 5, 10 and 20 years from now.”
They don’t call Buffett the Oracle of Omaha for nothing, and he is undoubtedly correct. Over the long term, stock of American companies will be the best performing assets in the world. And it’s not hard to see why. Western Europe, plagued by ideas of state-led capitalism, will be stagnant. The oligarchs will continue to strangle the Russian economy, and China will be struggling to come to grips with the “contradictions” of “socialism with Chinese characteristics.” People will soon forgot names of wealth-accumulation wizards like George Soros and Jim Rogers. And no one will be buying gold.
Nobody makes money betting against Buffett. Yet there is one factor that he does not mention in today’s New York Times piece. Great-power autocracies and rogue states always try to take advantage of the uncertainty and turmoil that inevitably accompany sharp economic downturns in the world’s democracies. In the past, they were never able to deliver knock-out blows. Now, however, some of them are armed with the ultimate weapons in history and others are on the verge of acquiring them. Their possession of dangerous arsenals destabilizes us all and even changes the structure of the international system.
So, we are at a precarious moment. The global financial architecture is disintegrating and the post-Cold War geopolitical structure is decaying. We are passing from a sweet spot in history-the best possible world-to something else. We may not yet be the “greatest generation,” but we may end up as the generation that faces history’s greatest challenges.
When that happens, Americans must once again find the will to lead. And when we do, Buffett will be proved right.