WORLD> America
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WORLD> America
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Buffett sees tough times ahead before recovery
(Agencies)
Updated: 2009-05-05 11:13 OMAHA-- Billionaire Warren Buffett remains optimistic about the US economy, but he says it's difficult to predict when the recession will end because American consumers changed their behavior significantly.
"In the short term, things are going to be tough for a while. We see no real pickup in a whole variety of businesses we have, but they'll be doing fine in a few years," Buffett said Monday in an interview with CNBC. Among Berkshire's more than 60 subsidiaries, there are furniture, brick, manufactured home, carpet, utility, insurance and jewelry companies, so Buffett gets a good sense of the health of the economy by looking at his internal reports. On the positive side, Buffett said he sees residential real estate prices stabilizing in important parts of the country like California, although a huge oversupply of houses remains in southern Florida.
"I am enormously optimistic about the future of this country over time," Buffett said. Economists say the recession began in December 2007. Buffett said the shift in American consumer behavior makes it hard to predict when the economy will recover. He said many Americans who still have the same jobs, same savings and same homes responded to the financial turmoil by changing their spending and buying habits dramatically. "I think the American public generally is in a different mood than a year ago or two years ago or three years ago. In fact, I know they are by their buying habits," Buffett said in an interview with Fox Business News. At the shareholders meeting Saturday, Buffett and Munger said they believe the US government has generally done the right things to help the economy recover. Buffett and Berkshire board member Bill Gates reinforced that notion in a joint interview on Monday. Gates, who co-founded Microsoft, said the US$700 billion Troubled Asset Relief Program Congress passed last fall may have been flawed because its designers didn't predict how negative factors would work together, but it was necessary. "It's not going to be perfect, but they've been doing the right things," Gates said to Fox Business. "There wasn't anybody to count on except for government in late September." Gates said he enjoys calling Buffett and talking about what's going on in the economy because of all the turmoil. Buffett's company did have a rough year in 2008, but Berkshire still beat the S&P 500 index that Buffett measures his performance against. Berkshire's Class A stock lost 32 percent in 2008, and Berkshire's book value -- assets minus liabilities -- declined 9.6 percent to US$70,530 per share. That was the biggest drop in book value under Buffett and only the second time its book value has declined. The Standard & Poor's 500 index fell 37 percent in 2008. Berkshire reported a 2008 profit of US$4.99 billion, or US$3,224 per Class A share. That was down 62 percent from the previous year, but better than many companies. Berkshire plans to release its first-quarter results on Friday afternoon. |
