Warren Buffett’s “Wartime Stock Buying” from the Russian-Ukrainian Situation Nikkei Chinese

On the U.S. stock market on February 24, the Dow Jones Industrial Average rebounded 92 points to close at 33,223. Affected by Russia’s attack on Ukraine, it fell more than 800 points in the morning session. But President Biden announced economic sanctions against Russia, mainly to stop bank transactions, and for this reason, stocks of high-tech companies and manufacturing companies were bought back after the afternoon open.

Buffett urged people to keep investing in stocks during the 2014 Crimea crisis (File photo, REUTERS)

For U.S. companies, the Russian and Ukrainian operations are small. Businesses in both countries account for just 1 percent of total S&P 500 sales, according to FactSet, a research firm. Due to the easing of tensions between the United States and Russia, American manufacturing companies and catering companies have entered the Russian market one after another since the 1990s. However, after the Crimea crisis in 2014, many companies reduced their Russian operations.

General Motors (GM) started local production in Russia in 2008, but exited the business in 2015. Ford Motor, which first started production in Russia as a foreign auto company in 2002, also stopped local passenger car production in 2019. After the Crimea crisis, Exxon Mobil dismantled an exploration-research business partnership with Russia’s state-owned oil company Rosneft.

On the other hand, U.S. chemical products and agricultural-related companies are still continuing to develop a certain scale of business in Russia. Shares of Dow, which makes resin products and industrial tape outside Moscow, closed down 2 percent on the 24th. Shares in Caterpillar, which has factories such as excavators outside St. Petersburg, also fell 1 percent.

“Gold and Bitcoin should not be bought in wartime”, on the 24th, the American investment information website Markets Insider quoted the famous investor Warren Buffett and launched such a column.

After Russia annexed the Crimea peninsula in March 2014, Buffett called on investors to continue investing in stocks in an interview with American media, saying that “there is value in American companies. The worst thing is to hoard cash in times of war.” He noted that “in all the crises I’ve been through, stock prices have gone up”, citing the Cuban crisis and the 9/11 terrorist attacks as examples.

Buffett allegedly made his first stock investment in 1942 when he was 11, buying $115 in stock. As the Second World War intensified, the stock price was depressed for a time, but he later recalled that “if the stocks were exchanged for gold at that time, the assets would have shrunk to less than one percent now”.

Later, U.S. stocks overcame the Crimea crisis of 2014. Although the price of crude oil plummeted in 2015, the stock price turned to decline, but in the case of the price of West Texas Intermediate (WTI) falling nearly 70% in a year and a half, the stock price fell by only about 10% at most.

On February 24, the price of WTI once exceeded $100 a barrel, approaching the record of $107 set in June 2014. Crude oil futures have been the direction of capital inflows for investors desperate for weak stock prices, but it is unknown when the cooperation between the Organization of the Petroleum Exporting Countries (OPEC, OPEC) and Russia and other countries “OPEC+” will continue to cut production. .

There is an investing motto called “buy aggressively in a major crisis.” The stock price reversal on the 24th reflects the attitude of investors who dare to challenge the crisis. Although ordinary investors will not be as open-minded as Buffett, who has 80 years of investment experience, keeping in mind the detailed dynamics of the stock market during this crisis will provide a reference for future investments.

Nihon Keizai Shimbun (Chinese version: Nikkei Chinese website) Nakayama Shuzhi New York

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