Looking Into The Crystal Ball
From the floor of the stock exchanges and the desks of billionaire investors to the halls of the Federal Reserve Board and other financial policymakers, no one's 100 percent sure of what will happen next in the stock markets or the economy.
Legendary stock-picker Warren Buffet doesn't mind sharing his views on what's going on and how his investment company, Berkshire Hathaway, is responding to the current investment climate.
"We're not doing a lot of buying. We're buying more planes than we are stocks," said Buffett, at a London news conference called to promote Berkshire's Executive Jet unit.
Asked when it would be a good time to begin buying stocks following recent falls, Buffett said "When businesses sell in the market for less than they're worth."
on the economy and his proposed tax cut.
Dubbed "the sage of Omaha," Buffett became the fourth richest man in the world - behind Microsoft's Bill Gates and Paul Allen, and Larry Ellison of Oracle - through investments he made as head of Berkshire, which holds stakes in companies including Coca-Cola, Gillette and the Washington Post.
He was criticized in recent years, however, for his decision not to invest in technology, which he saw as overvalued and due for a fall in the stock markets.
That move paid off when Berkshire and its so-called "old economy" investments chalked up net profits of 114 percent last year, as tech markets crashed.
In a recent letter to shareholders, Buffett described Berkshire's unfashionable traditional businesses including paint, carpet and insulation as "cutting-edge" industries and jokingly urged shareholders to "control your excitement."
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As for the economy as a whole, Buffett says the U.S. is in the grip of a "sharp" and "significant slowdown" and he would "be surprised if it ends tomorrow."
In an effort to prevent the sluggish economy from slipping into a recession, the Federal Reserve last week slashed interest rates for a third time this year. That boosted the total cuts this year to 1.5 percentage points. Analysts expect the Fed will order additional rate reductions to rev up economic growth.
Federal Reserve chairman Alan Greenspan isn't saying anything about that, but he did indulge in some constructive criticism Tuesday as he spoke to a group of economists in Washington.
Addressing the National Association of Business Economics, Greenspan said economists need to do more to raise the quality of the data that is collected for use in economic forecasts.
The Fed chairman says improving the quality of the data is likely to yield bigger payoffs than trying to build ever-more-complex computer models for economic forecasting.
The U.S. isn't the only place where economists listen when Alan Greenspan speaks.
The Bank of England is also keeping a close ear on the Fed chairman, as well as an eye on U.S. and world economic trends.
DeAnne Julius, a member of the Bank's rate-setting committee, says the Bank of England would be "duty-bound" to lower interest rates if the world growth slowdown begins to affect the UK economy.
She adds that Britain's low inflation and sound economic fundamentals would make rate cuts likely to be more effective in arresting a slowdown than they have been in the U.S.
Julius says the U.K. also has a better chance in avoiding the U.S. situation because of the lower exposure of households to stock market uncertainty, a smaller trade deficit, the economy's comparatively lower vulnerability to oil price hikes, and the fact that household savings in the UK have not turned negative.
By Francie Grace © MMI Viacom Internet Services Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Reuters Limited and the Associated Press contributed to this report