Buffett: Economy Has "Fallen Off A Cliff"

Decline Following Billionaire Investor's Worst-Case Scenario, But Says Economy Will Heal

(AP)  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.

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.

A little over a week ago, Buffett released his annual letter to shareholders describing the worst of his 44 years at the helm of Berkshire. The Omaha, Neb.-based company reported sharply lower profit because of its largely unrealized $7.5 billion investment and derivative losses.

Overall, Berkshire's 2008 profit of $4.99 billion, or $3,224 per Class A share, was down 62 percent from $13.21 billion, or $8,548 per share, in 2007.

Berkshire's fourth-quarter numbers were even worse. Buffett's company reported net income of $117 million, or $76 per share, down 96 percent from $2.95 billion, or $1,904 per share, a year earlier.

Buffett said he doesn't regret writing an editorial last 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 editorial 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 over time owning stocks will be better 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.

Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility businesses. And it has major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.

[tomadams99]

Folks, the economy bust is not a situation of the immediate...it is not all Bush Jr's. fault, and Obama is just getting started, albeit he is not doing very well. All of us would be wise to take a hard look back to the situation beginning with the old peanut farmer...Jimmy C. and walk through the rest of them, and what is most important is to take a hard look at the Congressional members who hold the purse strings, and begin holding them accountable...throw the bums out...from both parties. If they have been there longer than three terms...they need to go, for it is as if they think it is their right to be there, and no the people are not holding them accountable. Murtha is the perfect example...he makes fun of his own constituents, and the idgits put him right back in office. Okay, that was a brilliant move. It is time to consider the creation of a viable third party to break up the two power house political institutions.

[msmabuse]

noloyalisti

Merrill Lynch executives took off with $3,200,000,000 (3.2 billion) after trashing their company. Bushoccio and the Government of Democratic Pigs gave them this money. And this is just the tip.

[msmabuse]

noloyalisti

What party gave bush the money to spend and what party is still spending like it is not their money?

Fact: A US president has no money to spend until the US congress gives it to him!
Lats two years we have had a dem congress so stop the ball baging, OK?

[msmabuse]

harbinger19

Only if he is not telling the truth!
And I think he is fed up with this wannabe pres!

[msmabuse]

The NakedTrader

It was ok for him to play when Obama ran with mr warrens money for the president.
Now warren gets buyers remores and you dont like it!

[nakedtrader]

What? Still No Apology Mr Buffett?

Pulled from the www.nakedtrader.com archive October 2008. As the article says - "Shame On You Mr Buffett".

Playing Politics With Our Future: Shame On You Mr Buffett.

It seems like there are some very unscrupulous people out there, in these times of confusion, who think that if you say something often enough it becomes a truth. Or at least someone will believe it to be so. Why not? It's a well trodden path.

A moments thought will serve as illustration as to the strength of this tactic. A whole host of dictators ranging from Caesar to Amin and beyond have had enormous success with this method of manipulation.

So, it's rather distressing not to mention disappointing, to find that a man much admired and respected such as Warren Buffett, should start playing politics with a sadly vulnerable public who look at him as a man to be admired and followed; a role model.

Buffett appeared in the press almost everyday last week with his

passive/aggressive market recommendations dazzling us with such philosophical gems as ''Be fearful when others are greedy, be greedy when others are fearful.'' and 'Bad news is an investors' friend'. And the one which gets right to the crux of the matter - "Buy American. I Am." So what's wrong with that?

Well, let's review:

From September 2008, the moment of the demise of Fannie & Freddie, Mr Buffett has wasted no time in acquiring multibillion-dollar stakes in Goldman Sachs and General Electric Co. on behalf of Berkshire Hathaway, the 'philanthropic' arm of the Buffett empire, and has recently closed a deal with Constellation Energy. Nice work if you can get it .

Having taken full advantage of some spectacular deals, no doubt at the expense of other shareholders, what better way to ensure their success than to publicly announce that now is the time to reinvest in the US markets? Although Mr Buffett claims that these are fruits to be reaped at a later time, it can be guaranteed that any temporary market movement to the upside will be taken advantage of in full. A nice bit of nest feathering.

I think that's what used to be known as 'talking your own book', back in the good old days. That's a pretty large book to talk up though. Enough, perhaps, to temporarily sway the markets in an upward direction.

But let's face it, although given enough time economic stability will eventually prevail, right now the fundamentals are rotten to the core and can't be undone with such irresponsible quips as.. 'if you wait for the robins, spring will be over.? Meanwhile, a hard cold winter is upon us. Putting a glossy coat on what is a fundamentally sick animal to give the impression that not only is it alive but healthy is merely a spin on the dead cat bounce. Somebody call the vet.

Taking the more generous tack, one might consider that all Mr Buffett is trying to achieve is to instill a little confidence and direction for the overall good of the economy. Remember, never underestimate the power of the zeitgeist. Except in this case the crowd may not be so easily swayed.

May I suggest that what perhaps what Mr Buffett has sought to achieve came straight from the script of the Wizard of Oz. After all, it worked for Dorothy.

Just close your eyes and repeat after me "there's no place like home, there's no place like home, there's no place like home'...

The NakedTrader

[payasyougo]

I thought Mr. Buffet was advising President Obama?

Warren, not Jimmy.

Maybe he should be seeking advice from Jimmy instead.

[noloyalisti]

Merrill Lynch executives took off with $3,200,000,000 (3.2 billion) after trashing their company. Bushoccio and the Government of Pigs gave them this money. And this is just the tip.

[noloyalisti]

How idiotic is it for the right wingnut failures to blame Obama after 8 years of corporate fascism under Bushoccio? Heil to the Government of Pigs party, the party of death and spending.

[harbinger19]

LOL YEAH...he BETTER say the economy will heal--there are laws against inciting a panic....