Buffett: "The economy will be in shambles throughout 2009"

On Friday, Warren Buffett released his annual chairman’s letter to Berkshire Hathaway (BRKA) shareholders. These letters have become famous on Wall Street, and every year investors are curious to see what the legendary Oracle of Omaha has to say.

Buffett’s letters are always informative and he has a folksy, easy-to-read style. This year, however, what caught many people’s attention was Buffett saying that the economy will be in “shambles” this year, and perhaps even longer.

Buffett also noted that 2008 was the worst year for Berkshire Hathaway under his tenure. The company’s book value dropped by nearly 10%, and Berkshire’s fourth-quarter net income fell an astonishing 96%. Despite these gloomy facts, Buffett did sound some optimistic notes, and he pointed out that America will survive this mess just like it has other periods of crisis.

Buffett made news in October when he wrote in the New York Times: “I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds.” The Dow rallied over 400 points that day, but it’s dropped another 2,000 points since.

I agree with Buffett that investors should take a long-term view of the market. The day-to-day gyrations can be very dramatic. Don’t let the market’s wild swings rattle your nerves or throw you off your investment game plan. Investors should continue to focus on high-quality stocks with rock-solid fundamentals.

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