Warren Buffett Wrote "Buy American. I Am." 18 Years Ago This Week. Should You Still Follow His Advice?

On Oct. 16, 2008, in the middle of the financial crisis, Warren Buffett published an op-ed in The New York Times called "Buy American. I Am." It ran in the paper's print edition the next morning. That day, the S&P 500 (SNPINDEX:^GSPC) closed at around 941, already down about 40% from its October 2007 record.

From that Oct. 17 close, the index dropped another 28% before it hit bottom on March 9, 2009.

But anybody who bought that day and hung on has done extremely well. By my math, $10,000 put in the State Street SPDR S&P 500 ETF Trust (NYSEMKT:SPY) at the Oct. 17, 2008, close would be worth around $115,600 as of this writing, with dividends reinvested. The money has grown about 11.6-fold, or almost 15% a year.

The op-ed turns 18 on Friday, Oct. 16. Here's what following it meant.

Warren Buffett. Image source: Getty Images.

Buffett's own money

Buffett was frank about the backdrop. He called the financial world "a mess, both in the United States and abroad," and warned that in the short term, unemployment would climb and "headlines will continue to be scary."

"I've been buying American stocks," he wrote. "This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds."

Apart from his Berkshire Hathaway shares, which were pledged to charity, he said his net worth would soon be fully in U.S. stocks if prices kept looking appealing.

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," he explained.

But he was just as clear about what he couldn't know. "I haven't the faintest idea as to whether stocks will be higher or lower a month -- or a year -- from now," he wrote.

How much worse did it get?

A month after the op-ed, Buffett looked wrong. By Nov. 20, 2008, the S&P 500 had closed around 20% under its Oct. 17 level. A rebound into early January followed, then another slide. The index eventually hit its closing low of around 677 on March 9, 2009.

For that $10,000 fund investment, the low point meant a value of about $7,400, even with dividends. Following arguably the world's most famous value investor had cost around a quarter of the money in under five months.

But the recovery didn't take long. With dividends, the fund first moved back over its Oct. 17 mark in early May 2009 and held above it from mid-July, around nine months after the op-ed ran. And a year after it ran, the investment was up about 20%.

Waiting for good news cost the most

What Buffett was surer about was the order of events. The market, he wrote, would probably "move higher, perhaps substantially so, well before either sentiment or the economy turns up."

It did. The National Bureau of Economic Research later dated the end of the recession to June 2009, three months after stocks bottomed. And on Nov. 6, 2009, the Bureau of Labor Statistics said the unemployment rate had risen to 10.2%, its highest since 1983. By that day's close, the S&P 500 was around 58% above its March low.

Money put in the SPDR fund on the day of that jobs report has grown about 9.8-fold since, with dividends, a strong result that still lags the October 2008 buyer's 11.6-fold gain.

Waiting for full comfort cost much more. The S&P 500 didn't close above its October 2007 record until March 28, 2013. Every $10,000 put in the fund that day would be worth about $62,400 now, against about $115,600 for the investor who followed the op-ed.

Today's backdrop looks nothing like 2008. As I write this, the S&P 500 is just under the record close it hit on Oct. 6.

But I think the op-ed's lasting lesson has less to do with picking a bottom than with staying put. Buffett was buying about five months before the low, and he told readers in advance that he couldn't time the market. Investors who bought and held came out far ahead anyway, because they hung on through the stretch when he looked wrong.

When the headlines get scary again, I'd rather keep buying the S&P 500 in steady amounts than wait for the economy to look better first. Sure, the next drop might last longer than 2008's did, and the recovery could take more patience.

Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.