You think you've had a bad year? Poor Warren Buffett has seen more than $16 billion evaporate from his net worth as Berkshire Hathaway  (NYSE:BRK-B) followed the market's swoon.

Adding insult to injury, he's been criticized for the awful performance of recent investments in Goldman Sachs (NYSE:GS) and General Electric  (NYSE:GE). In addition to preferred shares that pay 10% dividends, he got warrants for common shares at what seemed like great prices -- prices that are waaayy higher than where the stocks are currently trading.

In response to the market panic, Buffett recently penned an op-ed in The New York Times saying he was buying U.S. stocks for his personal portfolio. Since then, markets have done absolutely nothing good, and many sectors have been drowning in red ink.

Has the Oracle of Omaha lost his touch? 

Seriously?
Simon Maierhofer thinks so. In fact, he took issue with Buffett's claim that stocks will outperform cash in the coming years:

How did [Buffett's] "cash is trash" philosophy fare over the past 10 years? $10,000 invested in the S&P 500 exactly 10 years ago would be worth $7,500 today. The safest cash equivalent, [Treasury bills] ... would have returned about 30%, putting you at $13,000. We don't encourage investing by looking in the rear view mirror but a look at the numbers shows that the only bull market right now is in cash.

Let's leave aside for a moment the question of inflation, which ensures that the $10,000 of 10 years ago is not, in fact, the equivalent of $10,000 today. What does the market's performance over the past 10 years suggest for the future?

Up, up, and away
Any 10-year retrospective has to contend with the fact that 1998 was smack in the middle of the dot-com boom, when tech companies like Oracle (NASDAQ:ORCL) and Cisco Systems (NASDAQ:CSCO) -- and even stalwarts like Home Depot (NYSE: HD) and Tyco (NYSE:TYC) -- traded like infinite growth was engraved in the stock price. Since then we've seen not one, but two bubbles burst. The fact that trailing 10-year returns are pretty bad is hardly news. 

But if we look at 10-year returns for the Dow Jones Industrial Average over the past 100 years, a pattern emerges:

10-Year Period

Dow Jones Industrial Average Return

1998-2008

(9%)

1988-1998

331%

1978-1988

165%

1968-1978

(19%)

1958-1968

77%

1948-1958

226%

1938-1948

14%

1928-1938

(49%)

1918-1928

254%

1908-1918

60%

After booms come busts, after busts come booms. That's how markets work. If we had chosen a different time frame (i.e., ending in 2006 instead of 2008), the numbers would likely be different, but the overall pattern would be the same.

This isn't a short-term, cherry-picked set of data, after all. It's 100 years of market returns, during which time the nation overcame two world wars, four smaller wars, a flu epidemic, the Great Depression, civil uprisings, multiple recessions, oil shocks, and terrorist attacks -- not to mention sideburns, Chia Pets, Carrot Top, and boy bands.

Anything can happen in the short term -- and the short term right now is volatile and unpredictable, as it always is. Over the long term -- going back an entire century -- the trend of the stock market is pretty clear.

But the author doesn't just claim that the past 10 years have been rough for investors -- he claims that this proves investors should be in cash going forward. The problem is, that 30% return he cites in T-bills doesn't account for the 27% compound inflation over the past 10 years, which leaves cash roughly holding even -- and that's largely true across time periods. And if you hold cash as actual cash, well, inflation just keeps taking its bites out, leaving you with less than you started with.

It's time to be brave
Yes, stocks are volatile, especially now. Yes, there will be boom times and bust times -- and the busts are no fun, even when we're resigned to their presence. But if you want your money to earn you positive post-inflation returns over the long term, cash isn't going to get you there.

Not only that, but the very best time to invest in the stock market is when everyone else is panicking -- because you can buy excellent companies at bargain prices. None of this is to say we've reached a market bottom just yet. Historical earnings multiples, for example, suggest that more pain could be in store for investors, and some periods of market lethargy have indeed lasted for longer than 10 years.

Nonetheless, the trend is as true today as it's been for the past century: We're at a point where bargain-hunting investors can be as assured as they've been in decades that stocks will perform well in the long term.

Our team at Motley Fool Inside Value is sifting through the rubble in search of the bargains that will translate into long-term opportunities. To see what they're recommending right now, click here to try the service free for 30 days. There's no obligation to subscribe.

Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Tyco International, Home Depot, and Berkshire Hathaway are Motley Fool Inside Value selections. Berkshire Hathaway is also a Motley Fool Stock Advisor pick and a Fool holding. The Motley Fool is investors writing for investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.