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Warren Buffett: Economy Fell Off Cliff

From an elated Associated Press:

Warren Buffett says economy fell off a cliff

By Josh Funk, AP Business Writer Mon Mar 9

OMAHA, Neb. – Billionaire Warren Buffett said unemployment will likely climb a lot higher depending upon how effective the nation’s policies are, but he remains optimistic over the long term.

Buffett said the nation’s leaders need to support President Barack Obama’s efforts to repair the economy because fear is dominating Americans’ behavior and the economy has basically followed the worst-case scenario he envisioned.

"It’s fallen off a cliff," Buffett said Monday during a live appearance on cable network CNBC. "Not only has the economy slowed down a lot, but people have really changed their habits like I haven’t seen."

He predicted that unemployment will likely climb a lot higher before the recession is done, but he also reiterated his optimistic long-term view: "Everything will be all right. We do have the greatest economic machine that man has ever created."

Fear and confusion have been driving consumer and investor behavior in recent months, Buffett said.

The nation’s leaders need to clear up the confusion before anyone will become more confident, and he said all 535 members of Congress should stop the partisan bickering about solutions.

Buffett said he believes patriotic Republicans and Democrats will realize the nation is engaged in an economic war.

"What is required is a commander in chief that’s looked at like a commander in chief in a time of war," Buffett said.

Whatever the government does to help the economy will likely benefit some people who made poor financial decisions, but Buffett said Americans should realize that everyone is in the same boat.

"The people that behaved well are no doubt going to find themselves taking care of the people who didn’t behave well," Buffett said.

The current efforts to help revive the economy are likely to produce inflation that could be worse than what the country suffered through in the late 1970s, Buffett said.

But even though the nation will have to pay for current policies with future inflation, Buffett said, the U.S. government still needs to act.

"We’re in a big war, and we’re going to use money to fight it," he said.

Maintaining faith in the nation’s banking system will be important to restoring the economy’s health, Buffett added. He said President Barack Obama needs to make it very clear that consumers won’t lose money in banks even if more fail…

Buffett said he doesn’t regret writing a commentary in the fall encouraging people to buy U.S. stocks, but he joked that in hindsight he wishes he’d waited a few months to publish the piece. Since that commentary appeared on Oct. 17, the Dow Jones industrial average has fallen from 8,852.22 to close at 6,626.94 on Friday.

Buffett stands by his overall advice that owning stocks over time will profit people greater than so-called safe investments.

"Overall, equities are going to do far better than U.S. government bonds at these prices," he said.

Buffett said he doesn’t regret investing $8 billion of Berkshire’s money in investment bank Goldman Sachs Group Inc. and conglomerate General Electric Co. last fall. Both companies gave Berkshire preferred shares paying 10 percent interest that Buffett said he doesn’t think he could get now

As the article mentions, this is the same Warren Buffet who was supposed to give us confidence last fall, when he invested 8 million dollars in Goldman Sach’s.

But it is sure hard to see how his current colorful comments will help the market now.

Furthermore, it is difficult to reconcile his optimism with his comments about how Americans need to support Mr. Obama’s approach to the economy.

"Everything will be all right. We do have the greatest economic machine that man has ever created."

For isn’t that the very thing that Mr. Obama is hell bent on destroying?

(Thanks to BillK for the heads up.)

This article was posted by Steve on Monday, March 9th, 2009. Comments are currently closed.

24 Responses to “Warren Buffett: Economy Fell Off Cliff”

  1. BillK says:

    FoB Warren Buffett talking up the economy, from an adoring Associated Press:

    Warren Buffett: Economy Has ‘Fallen Off a Cliff’

    OMAHA, Neb. — Billionaire Warren Buffett said the economy has “fallen off a cliff” over the past six months and consumers have changed their habits in remarkable ways.

    Buffett said Monday during a live appearance on CNBC that current economic turmoil has basically followed the worst-case scenario he envisioned.

    “It’s fallen off a cliff,” Buffett said. “Not only has the economy slowed down a lot, but people have really changed their habits like I haven’t seen.”

    Buffett said the changes are reflected in the results of Berkshire Hathaway Inc.’s subsidiaries. He said Berkshire’s jewelry companies have suffered, but more people have been willing to switch to Geico to save money on car insurance.

    He predicted that unemployment will likely climb a lot higher before the recession is done, but he also reiterated his optimistic long-term view: “Everything will be all right. We do have the greatest economic machine that’s ever been created.”

    Fear and confusion have been driving consumer and investor behavior in recent months, Buffett said.

    The nation’s leaders need to clear up the confusion before anyone will become more confident, and he said all 535 members of Congress should stop the partisan bickering about solutions…

    http://www.chron.com/disp/story.mpl/headline/biz/6300828.html

    Of course, given he backed The Chosen One, “stop the partisan bickering” in his case means that Republicans should give Obama everything he wants.

    Here’s a particularly obnoxious quote from Buffett:

    Buffett said he believes patriotic Republicans and Democrats will realize the nation is engaged in an economic war.

    “What is required is a commander in chief that’s looked at like a commander in chief in a time of war,” Buffett said.

    An economic war indeed, Mr. Buffett, and Republicans are fighting for the right for people to achieve anything anywhere near your wealth.

    Buffett’s a typical rich liberal – now that he has his money, he wants Socialist reforms to “keep out the riff-raff.”

    • proreason says:

      Buffet: “We do have the greatest economic machine that’s ever been created”

      This is what is beginning to amaze me.

      What makes Buffet or any other commentator think that this statement still applies?

      The issue isn’t the resiliency of the “economic machine”, the issue is that the MACHINE IS BEING DELIBERATELY DESTROYED by people who have siezed the country to loot it

    • Colonel1961 says:

      We have the greatest economic machine in the history of the world – hard-working Americans busting their collective ass in a relatively free capitalistic framework in the hopes of advancing their station in life. Now, as PR so succinctly noted, get BHO the hell out of the way and let us do it. We’ve been through worse, we’ll be through worse again, and we’ll succeed each and every time – provided that we have the incentive to so do, i.e., I am not busting my ass to pay my neighbor’s mortgage.

  2. U NO HOO says:

    Look at the Dow, it peaks in early 2007. When Obama, Clinton, and McCain announce their candidacy for POTUS the Dow starts to decline.

    Keeps going down and then goes over the cliff when McCain suspends for the first bailout and all the pundits said Obama was a shoo-in.

    It is Obama’s Depression, as if Obama cares.

    A depressed Dow PROVES we can’t privatize social security.

    You can look it up.

  3. U NO HOO says:

    Hillary: January 20, 2007

    Obama: February 10, 2007

    McCain: April 25, 2007

    http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1235163600000&chddm=8602&q=INDEXDJX:.DJI&ntsp=0

    OK, I exaggerated a little.

  4. oldswimcoach says:

    Buffet is a pretty smart guy, so I beleive he’s correct about the coming inflation. I’m out of the stock market – and by chance just prior to the crash (I wish I could claim I saw it coming, but I was just lucky with my timing), however, I am still heavy into real estate, and very leveraged.

    High levels of inflation? BRING IT ON!!!!!

    • proreason says:

      I was highly leveraged in real estate in 1981. As you know, high inflation and the tax code made that a great business. The Reagan tax changed the depreciation rules without grandfathering the old rules. Soon as the law passed, my tax assessment went down 25%. Inflation went back down. After years of agony, I sold out after losing a fortune.

      No sure thing, coach. No sure thing.

  5. U NO HOO says:

    I tend to trust those “pundits” on Fox, Kudlow is OK.

    • Consilience says:

      Kudlow was a pro-TARP I guy who ate crow a week or two back. He’s smart, but he is prone to herd-think.

  6. proreason says:

    Buffet may or may not be the greatest investor of all time (if a million monkeys roll dice 10 times, won’t one of them roll heads every time?),

    But there is no question he has been used as a puppet to advance the The Moron’s handlers.

    Look at his inane comments now:

    – “people that behaved well are no doubt going to find themselves taking care of the people who didn’t behave well”
    – “What is required is a commander in chief that’s looked at like a commander in chief in a time of war” as a supporter of The Moron
    – “he doesn’t regret writing a commentary in the fall encouraging people to buy U.S. stocks”
    – “stands by his overall advice ”
    – “doesn’t regret investing $8 billion of Berkshire’s money”

    He is obviously clueless that the game has just been smashed to smeetherines by the new ruling class.

    The man has clearly become senile.

  7. DGA says:

    Economy fell off a cliff? No, it was pushed by the left, knowing that they could blame Bush for doing it, and would cement their imposter-for-a-leader into place.

    • catie says:

      They’ll blame Bush for it until they start shoveling dirt over their faces. Our Dear Leader is an absolute disgrace who knows absolutely nothing about the economy or much else for that matter. All that is important to him and his minions is getting their communist agenda pushed down our throats.
      OT but BTW, Geitner our esteemed head of the IRS is auditing that guy who came up with that Tax Cheat stamp. Hell hath no fury like a liberal scorned. If it wasn’t so sad, I’d be lmao.

  8. VMAN says:

    As far as I am concerned Warren Buffet is so far out of touch with normal people it’s absurd. I watched part of the CNBC interview and emailed them asking them to interview some real people. You know the kind, average working people or small business people. People with “skin in the game” as they say. Buffet could lose more money than most of us make in a lifetime and never feel it. If people want to think he’s a genius well great. I think he’s just another elitist boob!

  9. JohnMG says:

    …..”We do have the greatest economic machine that man has ever created……”

    Let’s see. Doctors used to purportedly heal people by blood-letting, too. Today, we know enough not to let too much of that red stuff leak out.

    Is there a lesson here, or what??!!

  10. xdannyh says:

    Something is rotten in Denmark! Buffet backing GE at 20 something was noted by me so when GE hit 14 i started buying, well I have lost my ass. Now if you want to known as genius in the $ world you can’t be that wrong!! Now the oracle of Omaha is shilling for the biggest socialist/communist ever to dupe the American sheeple, He must think he can ride the beast! I gotta go puke.

  11. Rusty Shackleford says:

    One of Obama’s more recent (and telling) remarks to the NYT:

    OBAMA: You know, I have more than enough to do without having to worry about the financial system.

  12. chestnutt says:

    Thanks, but I’ve had enough of “taking care of those who’ve behaved badly”!

    We’re hunkering down, have 6 months of provisions and taking a “hiatus”. Not going to contribute my tax dollars to this nonsense.

    Those “who’ve behaved badly” can fail on their own dime now, or any other suckers who want to keep producing for their cause.

    Count me out, but not down!

  13. wardmama4 says:

    In 1998 I worked on the Census (actually all the pre-work to make sure their maps etc were up-to-date) but it was interesting to see how many people lived ‘under the radar’ so to speak. Small (some very, very small) home, obviously no credit cards, junker car etc to keep from throwing up any red flags. Both of my neighbors live like that and we are close (one last credit card to pay down) – that is what these fools are going to accomplish.

    Those of us who know how to live, what my mom use to call frugally, will do it in spades. And the investing is going to take even more of a dive – as people won’t want to ‘risk’ their money in a place that the Administration is demonizing daily – funny during Reagan the Dems protested some idea/statement Reagan made with the comeback – But the people are behind Wall Street – the Dems can’t help lying to save their lives, it obviously is just they way they are.

    So me and mine will survive – we are having a good year – but we know how to survive on much, much less. We will just make do with what we have until the 1411 dark days of The One ™ are past and we can once again walk in sanity, rationality and the light.

  14. A Mad Pole says:

    Right on, Wardmama.

    Coming from a post-communist Poland, my wife and I are used to frugal living and can tell the difference between the wants and the needs and spend our money accordingly. We believe that material possesions do not denote a person’s worth and keeping up with the Joneses is not our way of living. We do not need things to make us happy, nor we need gadgets and gizmos to fill a void in our life together.

  15. Right of the People says:

    “Everything will be all right. We do have the greatest economic machine that man has ever created.”

    A machine our fearless leader has inserted a gigantic monkey wrench into. I love my country but I fear my government.

    10-7

    • JohnMG says:

      …..”A machine our fearless leader has inserted a gigantic monkey wrench into…..”

      I do believe he’s inserted something into it……..but I’ve never heard it referred to as a “monkey wrench” before.

    • Rusty Shackleford says:

      Uh-oh…someone said the “m” word…..Al Sharpton’s radar will most assuredly pick up on that and claim racism. Why not call it a “non-specific primate wrench”? That would definitely be safer and plenty more acceptable to all who are offended by words.

      (the preceding is a completely smart-aleck, sarcastic comment intended to raise the ire of all liberal democrats…especially a certain type thereof)

  16. proreason says:

    oh oh. Mainstream conservative thinkers starting to pay attention to proreason:

    From American Thinker:

    “I think I have it figured out, roughly. And I’m ready to assign blame. If my narrative is not exactly true, it is a hypothesis that appears to fit the facts. This particular hypothesis is conspiracy-free, although I still think something is really fishy about the timing of the financial crisis, peaking as it did just when McCain started leading in the polls. But until we see some smoking guns, no conspiracy theory from me.”

    http://www.americanthinker.com/2009/03/heres_whats_happening_to_the_e_1.html

    The article discusses root causes of the economic “crisis”, not PR’s Soros explanation for the otherwise multiple once-in-three-lifetime “coincidences” of Sept / Oct 2008. The author’s (Randell Hoven’s) anaylsis is clear and compelling, given that mainstream journatists have never asked a single question about the most important series of events to impact our country since the World Wars and Great Depression. (I say mainstream journalists, because Hoven and other conservative pundits have no access whatsoever to the key players. Only mainstream journalists have the necessary access.)

    Here are Mr. Hoven’s key points:

    “What we have is a four-tiered avalanche.

    Tier 1. The US housing market was a bubble that burst, which can be blamed mostly on Democratic politicians.

    Tier 2. That led to a global financial crisis because so many investment and insurance firms around the world traded in mortgage-backed derivatives that no one understood. The blame for this part is complicated; more below.

    Tier 3. That financial crisis led to an over-reaction on the part of politicians. The TARP legislation in the US in particular provided the double-whammy of being largely ineffective in its own right, and signaling to investors everywhere that it is time to panic. Blame this on just about everyone in charge or wanting to be in charge: Treasury Secretary Paulson, Fed Chairman Bernake, President Bush, both presidential candidates and both parties in Congress (but mostly Democrats).

    Tier 4. And that led to the political meltdown in the US, in which a socialist agenda is being implemented as quickly as possible, in the name of crisis management. Blame this one on the Democrats and the people who vote for them.”

    My only argument with his thesis, is that he seems unaware that Tier 2 (mortgage backed derivatives) was also pushed by liberals who encouraged the investment banks to disguise the toxic assets in complex investment packages. Kind of like a shell-game, donchaknow. Like most else with this “crisis”, that was also a conscious, deliberate, criminal action by Democrats in Congress, not a random coincidence.

    There is also one other major factor Mr Hoven has overlooked.

    The Fed under the direction of Alan Greenspan (married to ultra-left loonie Andrea Mitchell) kept interest rates artificially low in the early 2000’s which exacerbated the bad-loan frenzy, and fostered the something-for-nothing climate that helped create the credit bubble. Some observor’s think that was the most important factor. I think it is one of many, but I find it curious that Mr. Greenspan, who the world thought was the greatest financial genius ever (before the Moron, of course), would do something that in retrospect aligned perfectly with ultra-left loonie spread-the-wealth thinking. Maybe that is another amazing coincidence, huh?


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