Warren Buffett says recession may be worse than feared

[HeXploiT]

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett, the world's richest person, said on Monday the U.S. economy is in a recession that will be more severe than most people expect.

Buffett made his comments on CNBC television after his Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research) agreed to invest $6.5 billion in the takeover of chewing gum maker Wm Wrigley Jr Co (WWY.N: Quote, Profile, Research) by Mars Inc in a $23 billion transaction.

"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.

"I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."

He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.

On Wednesday, the U.S. Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.

Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the U.S. Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.

Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.

Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.

Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.

"In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."

Buffett sees no respite from the housing slump.

"I think this is going to be fairly long and fairly deep, but who knows," he said.

In March, Forbes magazine pegged Buffett's net worth at $62 billion, ahead of Mexican tycoon Carlos Slim's $60 billion and Microsoft Corp (MSFT.O: Quote, Profile, Research) Chairman Bill Gates's $58 billion. Gates is a friend of Buffett and a Berkshire director.

(Editing by John Wallace)

Source: Reuters

Well...this Buffet guy did say this is not his specialty.
Probably he doesn't understand what he's saying.

 

[StageLeft]

Who are you going to believe, this idiot or Ben Bernanke? My money is on Bernanke. He said there will not be a recession and I believe him.

 

[Craig234]

I think Warren Buffet has a long history of good commentary and predictions that have been accurate, Bernanke has huge pressures on him to say certain things.

 

[StageLeft]

Originally posted by: Craig234
I think Warren Buffet has a long history of good commentary and predictions that have been accurate, Bernanke has huge pressures on him to say certain things.

I agree, I think BB is asleep at the helm. From Greenspan to buffet and many in between we're getting dire predictions at the moment.

 

[Vageetasjn]

Originally posted by: Skoorb
Who are you going to believe, this idiot or Ben Bernanke? My money is on Bernanke. He said there will not be a recession and I believe him.

I have two questions (although the answer to either one might inherently shed light on the other):
1) Why are you calling Buffett an idiot?
2) What reason do you have for having faith in bernanke's word/analysis?

 

[Craig234]

Originally posted by: Vageetasjn

Originally posted by: Skoorb
Who are you going to believe, this idiot or Ben Bernanke? My money is on Bernanke. He said there will not be a recession and I believe him.

I have two questions (although the answer to either one might inherently shed light on the other):
1) Why are you calling Buffett an idiot?
2) What reason do you have for having faith in bernanke's word/analysis?

It appears he was being sarcastic.

 

[Vageetasjn]

Originally posted by: Craig234


It appears he was being sarcastic.

Touché

 

[brxndxn]

Ben Bernanke said that there was no housing bubble in 2006 and the high prices reflected a growing market with increased wages that added value to the housing market.

Ben Bernanke also said that the dollar lowering in demand against other currencies will only affect things you buy outside of the US.. He actually said that to Ron Paul.

But then again, Alan Greenspan said a bunch of stupid sh1t too - and most people still try to think he's some kind of god of finance that is not in any way responsible for this mess...

 

[Pliablemoose]

Buffet is right.

We haven't seen commercial real estate hit the fan yet, and we haven't seen the bottom of residential real estate.

 

[PokerGuy]

While I have great respect for Buffet and his take on all things financial, his opinion in this matter is (by his own account) not that of an expert. Still, based on what I've observed, I'd have to agree with his assessment.

 

[StageLeft]

Originally posted by: Craig234

Originally posted by: Vageetasjn

Originally posted by: Skoorb
Who are you going to believe, this idiot or Ben Bernanke? My money is on Bernanke. He said there will not be a recession and I believe him.

I have two questions (although the answer to either one might inherently shed light on the other):
1) Why are you calling Buffett an idiot?
2) What reason do you have for having faith in bernanke's word/analysis?

It appears he was being sarcastic.

Yeah, it was a bit too subtle, I will admit

 

[CADsortaGUY]

Well, according to the numbers just released - we aren't even in a recession so....

 

[Wreckem]

People complain about the cost of food, but ag can seriously bust quickly, more so with tight credit markets.

With the cutting of $1billion worth of commodity payments and disaster relief programs, farmers will be seriously fvcked if they have a single bad season. With a tight credit market, many farms will go under with a single bad season. Farmers rely heavily on loans to get thier crops into the ground, and produced to market. With tight credit markets ag in general will produce less and prices will be higher. Right now most ag commodities are over priced simply because speculators are looking at cuts to farm programs which will further drive up prices. Less credit out there, cuts to farm programs, high fuel prices, commoditiy traders are banking on things getting worse so they can make more and more money, while farmers and consumers get screwed.

 

[rchiu]

Buffet is one guy I have great respect for, both his financial sense and humanity. I see his points, there are so many negative factors in the economy, and I have to wondering why the economy indicators still not indicating we are in recession. (a few qtr's of negative GDP growth). Below is the last few qtr's of real GDP growth in 2000 USD. 0.6% isn't good, but that's not negative territory yet. And the last wave of corporate earnings are not too bad either. So I am still not convinced we are in recession yet.

2007q1 0.6
2007q2 3.8
2007q3 4.9
2007q4 0.6
2008q1 0.6

 

[seemingly random]

Originally posted by: Perry404
...
Well...this Buffet guy did say this is not his specialty.
Probably he doesn't understand what he's saying.

Yeah, Buffet doesn't know what he's talking about. :disgust:

 

[LegendKiller]

Originally posted by: seemingly random

Originally posted by: Perry404
...
Well...this Buffet guy did say this is not his specialty.
Probably he doesn't understand what he's saying.

Yeah, Buffet doesn't know what he's talking about. :disgust:

Buffet clearly stated that his expertise isn't in gauging macro-economic movements. He is very good about picking long-term investments with strong companies which he feels have the management and products to deliver long-term returns.

He is not an economic prognosticator and can be wrong. To consider somebody infallable, especially outside of their core competence, is not very smart.

 

[aldamon]

Jewelry had a bad Christmas

There's a silver lining to all this after all.

 

[Jaskalas]

Originally posted by: CADsortaGUY
Well, according to the numbers just released - we aren't even in a recession so....

Not everything happens instantly. The Fed's 500 billion spent to save the economy has had some short term positive effect, the long term is completely screwed.

 

[Vette73]

Originally posted by: Jaskalas

Originally posted by: CADsortaGUY
Well, according to the numbers just released - we aren't even in a recession so....

Not everything happens instantly. The Fed's 500 billion spent to save the economy has had some short term positive effect, the long term is completely screwed.

Yep we are just using 1 credit card to pay another. The end result will be worse then the orignal problem.

Maybe the Fed can "bears" us out of that one to. Just need to print more money... right?

 

[seemingly random]

Originally posted by: LegendKiller

Originally posted by: seemingly random

Originally posted by: Perry404
...
Well...this Buffet guy did say this is not his specialty.
Probably he doesn't understand what he's saying.

Yeah, Buffet doesn't know what he's talking about. :disgust:

Buffet clearly stated that his expertise isn't in gauging macro-economic movements. He is very good about picking long-term investments with strong companies which he feels have the management and products to deliver long-term returns.

He is not an economic prognosticator and can be wrong. To consider somebody infallable, especially outside of their core competence, is not very smart.

We'll see - I happen to think we're in for a long, rough ride.

I didn't claim that anybody was infallible - that would be arrogant. I would claim to trust buffet's gut instinct over just about any macro-economist though. buffet has quite a bit of data available that an independent economist doesn't have.

 

[CADsortaGUY]

Originally posted by: Jaskalas

Originally posted by: CADsortaGUY
Well, according to the numbers just released - we aren't even in a recession so....

Not everything happens instantly. The Fed's 500 billion spent to save the economy has had some short term positive effect, the long term is completely screwed.

I understand nothing happens instantly, however we are not yet in a recession and none of the "relief" has had a chance to work(not saying it will but...)

But anyway, we've had tons of talking the economy down the last 6-9 months but yet the numbers just released say we aren't in a recession - that's all I was really pointing out with my statement.

 

[LegendKiller]

Originally posted by: seemingly random

Originally posted by: LegendKiller

Originally posted by: seemingly random

Originally posted by: Perry404
...
Well...this Buffet guy did say this is not his specialty.
Probably he doesn't understand what he's saying.

Yeah, Buffet doesn't know what he's talking about. :disgust:

Buffet clearly stated that his expertise isn't in gauging macro-economic movements. He is very good about picking long-term investments with strong companies which he feels have the management and products to deliver long-term returns.

He is not an economic prognosticator and can be wrong. To consider somebody infallable, especially outside of their core competence, is not very smart.

We'll see - I happen to think we're in for a long, rough ride.

I didn't claim that anybody was infallible - that would be arrogant. I would claim to trust buffet's gut instinct over just about any macro-economist though. buffet has quite a bit of data available that an independent economist doesn't have.

But less data than *all* economists have.

 

[LegendKiller]

Originally posted by: Jaskalas

Originally posted by: CADsortaGUY
Well, according to the numbers just released - we aren't even in a recession so....

Not everything happens instantly. The Fed's 500 billion spent to save the economy has had some short term positive effect, the long term is completely screwed.

1. The loans created by the Fed aren't perm. they are term facilities that are either rolled or paid off.

2. They will have a long-term effect in that they have kept liquidity in the market and prevented it from freezing up.

3. This wasn't "printed" money, it was money they had in their reserves.

 

[seemingly random]

Originally posted by: LegendKiller

Originally posted by: seemingly random

Originally posted by: LegendKiller

Originally posted by: seemingly random

Originally posted by: Perry404
...
Well...this Buffet guy did say this is not his specialty.
Probably he doesn't understand what he's saying.

Yeah, Buffet doesn't know what he's talking about. :disgust:

Buffet clearly stated that his expertise isn't in gauging macro-economic movements. He is very good about picking long-term investments with strong companies which he feels have the management and products to deliver long-term returns.

He is not an economic prognosticator and can be wrong. To consider somebody infallable, especially outside of their core competence, is not very smart.

We'll see - I happen to think we're in for a long, rough ride.

I didn't claim that anybody was infallible - that would be arrogant. I would claim to trust buffet's gut instinct over just about any macro-economist though. buffet has quite a bit of data available that an independent economist doesn't have.

But less data than *all* economists have.

Sometimes less is more. I suppose that bill gross can't make any predictions either since he's just a bond trader. :disgust:

 

[Genx87]

Originally posted by: CADsortaGUY

Originally posted by: Jaskalas

Originally posted by: CADsortaGUY
Well, according to the numbers just released - we aren't even in a recession so....

Not everything happens instantly. The Fed's 500 billion spent to save the economy has had some short term positive effect, the long term is completely screwed.

I understand nothing happens instantly, however we are not yet in a recession and none of the "relief" has had a chance to work(not saying it will but...)

But anyway, we've had tons of talking the economy down the last 6-9 months but yet the numbers just released say we aren't in a recession - that's all I was really pointing out with my statement.

6-9 months? The media has been on this "bad economy" storyline since summer of 2004.