Legendary Buffett has the last laugh

Last month, legendary investor Warren Buffett sent a letter to Berkshire Hathaway shareholders explaining his investment strategy over the past year and for the future.

One of the highlights of the letter was that Berkshire Hathaway had US$128 billion (HK$998 billion) in cash by the end of last year.

At the same time, Buffett pointed out that it had been difficult to find suitable large investment opportunities, which seems to reflect that the god of stocks couldn't find any physical capital which could be bought at a reasonable price and achieve good returns after being run by competent and honest management.

So even if Buffett thinks that interest rates will continue to be low, he believes that investing in stocks is better than bonds. But in the end he would still hold large amounts of cash, as he mentioned in his letter that the stock market could collapse by up a magnitude of 50 percent or even more.

Most people couldn't really figure out what exactly he meant by this, but one month on, don't you think that Buffet has greater insight than the man on the street?

Who would have thought that US interest rates would return nearly zero within the span of just month, and who would have thought that the stock markets would actually crash?

And while the S&P 500 has not fallen 50 percent, it is down by more than 30 percent from its historic highs, and all this has happened in little over a month.

Therefore, the Oracle of Omaha's letter to Berkshire's shareholders last month now seems more like the Book of Prophecies.

Therefore, I find it a bit strange that the media has been highlighting how Buffett lost US$70 billion in the market crash, rather than praising how he was able to foresee the rout.

Berkshire Hathaway is an investment company. It can't just hold cash, and because of its reputation for value investing, it can't sell short when it's nervous about the market, as hedge funds do, because that's George Soros's specialty, not Buffett's.

What is more noteworthy is that Berkshire Hathaway still has more than US$120 billion in cash, thereby reducing its losses from the recent crash.

In fact, Buffett does not mind the losses, as when the markets started to crash, he began snapping up stock, boosting stakes in Bank of New York Mellon and Delta Air Lines.

But if we were to look at Berkshire's purchase of BNY Mellon's stock at US$38 and Delta Air Lines at US$46, it is obviously been a failure up to last Friday, since BNY Mellon closed at US$29.07 while Delta Air Lines was even lower at $21.65 - more than 50 percent less than Berkshire Hathaway's holding price.

But win or lose, should we just look at what's happening now?

In a recent interview, Buffett mentioned that though negative rates are a bit confusing, he was not afraid of them. He also mentioned that he has been around for 89 years but this the first time he's ever faced the prospect of this happening.

This means even he can't predict where the real bottom lies.

But now that value has come, why not make timely purchases? Because Buffett has learned though experience that the best time to enter the market is when there are excessive falls, and those who hesitate will regret missing the opportunity.

Meanwhile, since Delta Air Lines and BNY Mellon are far below the Berkshire's recent buy-into price, this appears to be a great buying opportunity. So if you want to score one over the god of stocks for once, now's your best chance.

Andrew Wong is chairman and CEO of Anli Securities