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The Dow Jones Industrial Average jumped about 1,100 points on Monday, and Warren Buffett’s rule for this moment in time is 18: “So if you wait for the blackbirds, spring will be over.” He wrote it in the New York Times on October 17, 2008, a month after the Lehman Brothers bankruptcy, in an article titled “Buy American. I Am.” The preceding sentence said what he meant: “What is likely, however, is that the market will rise, perhaps substantially, well before sentiment or the economy recovers.” »
Monday was the rule. The Dow rose more than 2% to around 52,400 points. The S&P 500 index fund rose 2.4%, its biggest gain since April 8, and the Nasdaq-100 fund rose 3.5%. That came three trading days after the S&P 500 fund fell 4.4% on Thursday, its worst day since April 2025, and one trading day after stocks closed their worst week since the April 2025 tariff week. The concerns that drove last week’s sell-off were not resolved over the weekend. The main change on Monday was the drop in oil prices.
Monday’s 1,100 points are a warning about the cost of waiting for the green light: The rebound came while the concerns that caused the sell-off were still there, which is what the Buffett rule expects. It’s also a day, and a day says nothing about whether last Thursday was the lowest.
Take a retired couple ages 66 and 63 with $1.8 million: $1,250,000 in a rollover IRA, $400,000 in a brokerage account, and $150,000 in a Roth. They hold 65% in an S&P 500 index fund, $1,170,000 as of Friday’s close, as well as $630,000 in bonds and a money market fund. Social Security pays them $4,800 a month, $57,600 a year, and they spend $118,000, so they take $60,400 a year out of the portfolio, or 3.4 percent of it. On Friday afternoon, after a week of headlines, he typed out an order to move $600,000 from the IRA’s index fund to cash, the money market fund, until things calmed down. He didn’t send it. If you typed something like that, here’s what the order would have cost at Monday’s close, what the Buffett Rule cost the people who followed it in 2008 before they paid them, and the one number that should decide this for you instead of the Dow.
What the order would have cost by Monday
Their clutch of shares was worth $1,239,695 at the October 6 S&P 500 record. On Thursday, he withdrew $53,799 in a single session. It closed Friday at $1,170,000 and Monday at $1,197,607, a one-day gain of $27,607, and is still $42,087 below the record.
The $600,000 that was almost in the money market fund would have missed out on Monday’s $14,158 gain. It’s a day. The highest cost is the one described in Buffett’s phrase. If you sell until it stabilizes, you need a signal that it has stabilized, and the usual signal is the index returning to its all-time high. The S&P 500 fund’s record is 6.0% higher than Friday’s close, so $600,000 waiting for that signal buys back $566,268 worth of Friday’s shares, or $33,732 less, and only if the record is the first sign of calm. In exchange, the money market fund would pay you about 4.17%, or the rate on 3-month Treasury bills: $25,020 per year, or $2,085 per month.
What the rule cost Buffett first
Buffett was careful to clarify what the rule does not do. “Let me be clear about one thing: I cannot predict short-term movements in the stock market,” he wrote, and he was right to be cautious. It released on October 17, 2008 with the S&P 500 fund at $93.21. It continued to decline for five months, reaching $68.11 on March 9, 2009, a loss of 26.9% after the publication of his article. If you had bought that week because of this, you had lost more than a quarter in the spring.
Then the robins arrived late, just as he said they would. The recession ended in June 2009, but the National Bureau of Economic Research didn’t announce it until September 20, 2010, and by that day the fund was up 67.7% from its low. A year after the article appeared, the fund was up 17.8% from where it was published. Five years later, 85.8%. Today, it is 8.07 times the price on the day it was released, price only, dividends excluded: $100,000 held for the entirety, that’s $807,467. The same $100,000 transferred into 3-month Treasury bills since that day amounts to $129,634. His other sentence in the article was about this choice: “Today, people who hold cash equivalents feel comfortable. They shouldn’t.”
Why the best days hide next to the worst
The reason the rule works lies in the S&P 500 fund’s timing of daily closes since 2000. Of its 20 best days during that period, 12 occurred within 10 trading days of one of its 20 worst days. The two largest, those of October 13, 2008 (+14.5%) and October 28, 2008 (+11.7%), landed in the middle of the worst period of the crisis. The third largest, that of April 9, 2025 (+10.5%), occurred three trading days after the drop in customs duties which marks yet another last week worse than the one which has just ended.
This grouping is what a sell and hold order buys you. $100,000 placed in the fund on January 3, 2000, and left alone, was worth $517,501 on Monday, or 6.31% per year, price only. If you missed the best 10 days, you have $224,552, or 3.06% per year. If you missed the top 20, you have $131,516, or 1.03% per year, less than the $169,619 that 3-month Treasuries brought in during the same period. Those 20 days are less than one per year, and most of them fall in the weeks you most wish you were away.
Where the rule is weak
The rule says that the recovery arrives before the green light. It doesn’t say when, nor does it say Monday was the start. In 2008, the fund fell another 26.9% after Buffett’s writing, and the 1,100 points gained by the Dow on Monday left the S&P 500 fund 3.4% below its record and the Nasdaq-100 fund 10.6% below its record. If you withdraw $60,400 a year, you can’t wait five years to receive the blackbirds with the money you’ll need next year, and Buffett was writing about his personal account, which he said until then only held Treasury bonds.
That’s why the decision for this couple belongs to a different number than the Dow Jones. Their $630,000 outside actions cover 10.4 years of draws at $60,400 per year. The drop from 2007 to 2009 took the S&P 500 fund 5.4 years to repair, from its peak in October 2007 to the first close above that level in March 2013, and the drop from 2000 to 2002 took 7.2 years. A reserve that covers a decade means no stock has to be sold in a bad year, which is the only thing the Friday order was trying to buy, at a price of $14,158 on the first day. If your real concern is the mix, that 65% in stocks is more than you can sleep with at 66, change it once, inside the IRA where it costs you nothing in taxes, and pick the day in your plan that doesn’t care what the Dow did on Monday.
The essentials
The Dow rose about 1,100 points on Monday, the S&P 500 fund had its biggest day since April 8, and the worries that caused last week’s selloff were still present when it happened. This is the moment that Buffett’s 2008 rule describes: the market moves first, the news catches up later, and those who wait for blackbirds miss spring. His rule cost his supporters 26.9% in the five months after it was written and paid them 85.8% within five years. For a couple with $1.8 million, the $600,000 order that was never sent would have missed out on $14,158 on Monday and $33,732 worth of stock if they had waited for the record to redeem. The number that should fix it for you is 10.4 years, their bond and cash draws already cover it, and that number was the same Thursday night as it is tonight.
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Gn bussni
