Everyone knows Warren Buffett's saying, "Be fearful when others are greedy and greedy when others are fearful." It's the most repeated investment maxim in history.
But here's the truth: It's much easier to say, "I'll be greedy when others are fearful" than it is to do it.
There have been four distinct incredible times to be an investor over the last century: 1933, 1942, 1982, and 2009. During each period, you could have doubled your money over the following three years. And during each period, newspapers around the country preached a constant message: Be fearful. Sadly, most of us listened. We are the "others" Buffett was talking about.
I dug through a pile of news archives to see what the media was saying about stocks and the economy during the four greatest buying opportunities of the last century. What I found is what "fearful" looks like.
2009 -- S&P 500 set to return 104% over the next three years
"The bottom line is that there is ample reason to worry about slipping into a depression." -- The Wall Street Journal, March 4th, 2009
"How Low Can The Stock Market Go? Lower ... much lower ... Expect ... new lows reached in the next months and the year ahead." -- Forbes, March 12, 2009
"A market for window-shoppers only." -- MSNMoney, March 9, 2009
"Renowned investor George Soros said Friday the world financial system has effectively disintegrated , and there's no near-term bottom to this financial crisis in sight." -- Market Oracle, February 23, 2009
"As bad as things are, they can still get worse, and get a lot worse." -- WiredPRNews, March 4, 2009
"Banking problems drain stock market of hope" -- Houston Chronicle, January 20, 2009
"Stocks are in free fall. Investors are in panic mode ... And how low stocks must go before bottoming out is anyone's guess. 'It's a bloodbath, pure and simple.'" -- USA TODAY, March 2, 2009
"The stock market slide isn't over yet." -- MoneyWeek, March 2, 2009
"At least six suicides have already been linked to the stock market collapse." -- Macleans, January 12, 2009
1982 -- S&P 500 set to return 102% over the next three years
"The frenzy began quickly after Florida market analyst Joe Granville telegrammed subscribers to his 'early warning' service. His advice: Sell everything. He gave no reason." -- Edmonton Journal, January 8, 1982
"Nervous? Here's how you can get ready for economic disaster" -- The Montreal Gazette, February 8, 1982
"With the recession persisting and stock prices in a long slump, pessimism is plentiful supply right now on Wall Street." -- Daily News, June 5, 1982
"In the current climate ... investors would rather [invest] in a money fund than take their chances in the stock market. So far they certainly have been right." -- Daily News, June 6, 1982
"[Businesses] are curtailing, postponing and canceling capital spending programs. Some are forced to do so simply to survive a terrible cash flow crisis." -- The Milwaukee Sentinel, May 31, 1982.
"Investors are apparently convinced that the current recession will get worse and are hurrying to sell some of their holdings." -- The Miami News, November 17, 1981
"The current downturn will be far worse than envisioned in our earlier scenarios." -- Gettysburg Times, March 2, 1982
"Things have gotten pretty bad and they are going to remain pretty bad ... there are some signs the worst may be over, but the best is far, far away." -- AP, March 7, 1981
"Lots of investors, mostly Americans, scared by the doom-and-gloom guys, recently bought diamonds for investment." -- The New York Times, June 20, 1982
1942 -- S&P 500 set to return 120% over the next three years
"Stock Market Averages at Lowest Level Since 1933" -- Schenectady Gazette, April 18, 1942
"Turnover on exchange in 1942 smallest since 1913" -- The New York Times, January 1, 1943
"So much of the stock market's judgment of the value of common stocks is centering about how they are faring or are likely to fare in a war economy that the whole price structure would be open to radical revision if the war should come to an unexpectedly early end." -- Daily Boston Globe, Jan 1, 1942
"While stock exchange prices have been on the downgrade for several months the average had not until today penetrated the lowest range of the last four years." AP, April 15, 1942
"Serving as a leading motive for a good part of the selling, brokers reported, was the wide belief that whatever the form of the new tax bill it would likely cut down sharply the profits available for dividends for a great many corporations." -- The Telegraph-Herald, March 11, 1942
"Buying was held at low ebb, brokers said, by fears of new complications in international affairs as a result of bombing of Paris Suburbs." -- The Telegraph-Herald, March 4, 1942
1933 -- S&P 500 set to return 172% over the next three years
"Economic Breakdown Made 25 Percent of the Population Jobless." Milwaukee Journal, August 1933
"Police Rout Mobs of Unemployed" -- Pittsburgh Gazette, October 31, 1932
"Roosevelt warns hardest struggle lies ahead of us; Calls on Nation in Speech to Redouble Relief Efforts Till Recovery Is Complete." -- The New York Times, October 5, 1933
"PERIL TO OUR CREDIT SEEN ' Truly Balanced' Budget Is Declared Means of Avoiding Unsound Money. Economy League Warning of National Debt Rise." -- The New York Times, December 13, 1933
"Chicago Economy Pares Down Jobs" -- Spokane Chronicle, April 18, 1932
Next time around
Most investors want big returns but fear scary headlines. History repeats over and over again that the two actually go hand in hand. Even if we repeat Buffett's "greedy when others are fearful" mantra a thousand times, the idea that the biggest returns come when the outlook is the darkest seems so absurd that most won't be able to follow it. Those who can invariably do the best.
We'll have more panics, recessions, and crashes. Most investors will become fearful. What about you?
Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.