Not as bad as 2008 or 1987.
That’s what Warren Buffett said about the current coronavirus, oil shock market maelstrom.
“If you stick around long enough, you'll see everything in markets,” Buffett said. “And it may have taken me to 89 years of age to throw this one into the experience, but the markets, if you have to be open second by second, they react to news in a big time way.”
In an interview with the Berkshire Hathaway (BRK-A, BRK-B) CEO in his Omaha headquarters on Tuesday, Buffett called the recent market shock “a one-two punch” with coronavirus and the plunge in oil prices, but indicated that the October crash of 1987 which he called a “financial panic” was worse.
As for the market collapse in the the fall of 2008, he said that was “much more scary, by far, than anything that happened yesterday [Monday of this week.]”
Among the many things going wrong during the financial crisis, money market accounts suddenly seemed much more risky than assumed. One massive money market fund “broke the buck,” meaning customers were suddenly losing value in their accounts.
“You had 35 million people on September 1 that weren't worried at all about their money-market accounts. On September 15 or 16, they were all panicked,” Buffett recalled.
“You literally had $3.5 trillion in money-market accounts which people regarded as the equivalent of cash or a bank deposit,” he added. “That was half the amount of all the insured bank deposits in the country, but these weren't insured.”
“Literally, I remember it because all my friends had money-market accounts,” he recalled. “I didn't have one. But I was at... a birthday party, and that's all they talked about. I suddenly became very popular. I was like a sports hero or something for a very brief period of time.”
Buffett credited then-Treasury Secretary Hank Paulson for employing extraordinary measures to stem the run on the short-term funding markets.
“Everything had come to a stop. And that was much more scary, by far, than anything that happened [on Monday],” he said.
Market volatility has exploded in recent weeks with the spread of COVID-19. The S&P 500 (^GSPC) has plunged 19.4% from its Feb. 19 high of 3,393.52 to its March 9 low of 2,734.43, that P/E has come down sharply.