Professor Buffett's Safety Lesson

NEW YORK (TheStreet.com) -- Traditionally, Warren Buffett is the type of person who practices what he preaches. Acting on one of his most recognizable lessons -- buy when others are scared -- Buffett proclaimed in a New York Times op-ed piece from earlier this year that he still felt comfortable buying stock in American companies. This was at a time when most people were running scared as Bear Stearns, Lehman Bros. and the U.S. markets in general were taking a dive.

However, now that the market appears to be on the rebound he seems to be stepping back from his message.

As it turns out Berkshire Hathaway(BRK.A Quote) has recently been shedding shares of stock and, in return, buying up corporate and government issued debt. In fact recently the company's sales outnumbered its buys. The investor's decision to alter his investment mindset shows just how much further we still have to go as the U.S. markets work towards recovery.

Like all of Buffett's decisions, it is likely that his choice to take a more conservative approach was preceded by intense and thorough research on the present and future of the U.S. financial markets. While huge money bled out of the markets during the most recent economic crisis, Buffett personally lost an estimated $25 billion dollars. Berkshire followed the rest of the market, shedding close to a fifth of its value during last year.

Perhaps the most public example of Buffett's conservative swing is his 2% stake reduction in Moody's(MCO Quote). Last week an article stated that in July the company sold 8 million shares of the Moody's. Buffett's decision to cut his company's exposure to the ratings agency was likely due to the fear that its involvement during the economic crisis had damaged the company's ratings' reputations. Interestingly, even with this huge shedding, Berkshire still remains the largest shareholder in Moody's with 39.2 million shares.

Buffett's decision to decrease his exposure to stocks can be seen as an attempt to steer clear of taking the same beating as he did during the worst of the recession. However, though he did get hit hard, this does not mean that he didn't also have his share of success throughout the past year as well. In fact, his bold investment choices have helped to make him one of the biggest winners throughout the whole ordeal.