Buffett: ‘I’m a Huge Bull on the American Economy’
Thursday, Feb. 7, 2008 1:59 p.m. EST
No bailout needed, says billionaire investor Warren Buffett.
The investing legend said this week that he thinks the U.S. economy can fix itself soon enough, and without a federal stimulus plan.
"I am a huge bull on the American economy," Buffett told Ontario daily The National Post.
A recession is looming, but Buffett says the United States has overcome worse and come out ahead.
"It is not a smart thing to sell the United States short over the years -- or Canada for that matter,” Buffett said. "The world does get better. People get more productive. More human capacity is unleashed over time.”
Buffett said that the financial institutions who got wrapped up in sour mortgage loans can and will sort out those bad investment vehicles without government help.
"The ones that have taken the big write-offs, they're not going out of business but they're selling a lot of new shares in the process so they're diluting future earnings. They're paying a price,” Buffett said.
The banks might not be great investments for a while, even for a few years, but they are not "permanently crippled” by all those subprime loans.
In any case, a government-led bailout simply won’t be necessary, Buffett said. The banks took the risks, and they should take the losses, not American taxpayers, he said.
"Somebody has to bear those losses. Is it better that the XYZ bank bears it or is it better to socialize it for the American public?” Buffett asked.
"I'd rather have the XYZ bank pay for it,” he said.
Buffett also spoke in relative favor of the investments made by foreign countries, often using U.S. dollars from their exports or from high-priced crude oil.
He said the rise of sovereign wealth funds was the "inevitable consequence” of the U.S. trade deficit.
"If we're going to consume US$2 billion a day more of foreign goods than we sell to the rest of the world we have to ship them something in exchange,” Buffett said.
What they get is dollars, which inevitably find their back to the United States in the form of investments here.
"The United States is fueling the sovereign wealth funds. We're making deposits in their wealth funds in effect,” Buffett said.
As for the housing crunch, Buffett says he does not see a major credit problem ahead, or at least not enough to seriously damage the U.S. economy.
"I went through 1982 when short-term money cost 21%. This is not a tough period,” Buffett said.
© NewsMax 2008. All rights reserved.
No bailout needed, says billionaire investor Warren Buffett.
The investing legend said this week that he thinks the U.S. economy can fix itself soon enough, and without a federal stimulus plan.
"I am a huge bull on the American economy," Buffett told Ontario daily The National Post.
A recession is looming, but Buffett says the United States has overcome worse and come out ahead.
"It is not a smart thing to sell the United States short over the years -- or Canada for that matter,” Buffett said. "The world does get better. People get more productive. More human capacity is unleashed over time.”
Buffett said that the financial institutions who got wrapped up in sour mortgage loans can and will sort out those bad investment vehicles without government help.
"The ones that have taken the big write-offs, they're not going out of business but they're selling a lot of new shares in the process so they're diluting future earnings. They're paying a price,” Buffett said.
The banks might not be great investments for a while, even for a few years, but they are not "permanently crippled” by all those subprime loans.
In any case, a government-led bailout simply won’t be necessary, Buffett said. The banks took the risks, and they should take the losses, not American taxpayers, he said.
"Somebody has to bear those losses. Is it better that the XYZ bank bears it or is it better to socialize it for the American public?” Buffett asked.
"I'd rather have the XYZ bank pay for it,” he said.
Buffett also spoke in relative favor of the investments made by foreign countries, often using U.S. dollars from their exports or from high-priced crude oil.
He said the rise of sovereign wealth funds was the "inevitable consequence” of the U.S. trade deficit.
"If we're going to consume US$2 billion a day more of foreign goods than we sell to the rest of the world we have to ship them something in exchange,” Buffett said.
What they get is dollars, which inevitably find their back to the United States in the form of investments here.
"The United States is fueling the sovereign wealth funds. We're making deposits in their wealth funds in effect,” Buffett said.
As for the housing crunch, Buffett says he does not see a major credit problem ahead, or at least not enough to seriously damage the U.S. economy.
"I went through 1982 when short-term money cost 21%. This is not a tough period,” Buffett said.
© NewsMax 2008. All rights reserved.
If Warren Buffet is bullish on the American economy, who am I to argue? Actually, I've felt the same way. Yes, there are people who are hurting right now, but someone suffers during any change in the economy. Remember 9/11? Everyone was suffering in some way because we were hit so hard, emotionally as well as financially. Will it get worse. Possibly, but it will also get better.
I've lived through recessions before and will live through more. I'll cut back on personal spending where appropriate, change my plans for doing some remodeling in my condo, and wait to buy a new car, but I'm not going to worry needlessly about something I can't control.
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