Buffett says U.S. in recession, stocks not cheap

Billionaire investor sees slowdown in consumer spending

The Associated Press

updated 11:31 a.m. ET March 3, 2008

NEW YORK - Billionaire Warren Buffett said Monday that the U.S. economy is essentially in a recession even if it hasn’t met the technical definition of one yet.

Buffett said in an interview with cable network CNBC the reports he gets from the retail businesses his holding company owns show a significant slowdown in purchases.

The chairman and CEO of Omaha-based Berkshire Hathaway Inc. said millions of people have also lost equity in their homes because home prices have dropped.

“I would say, by any commonsense definition, we are in a recession,” Buffett said on CNBC.

But Buffett said it’s not clear how far the recession will go because that is difficult to predict.

The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation’s gross domestic product.

On Thursday, the Commerce Department reported that the gross domestic product increased at a low 0.6 percent pace in the quarter that ended Dec. 31.

In the July-September quarter, the economy grew at a brisk 4.9 percent.

Gross domestic product measures the value of all goods and services produced in the United States and is the best barometer of the country’s economic health.

A survey released last week by the National Association for Business Economics showed that 45 percent of economists are predicting a recession in 2008.

But Buffett said the U.S. economy will be fine in the long run.

“Over time, my children are going to live better than I do, although they don’t believe it,” Buffett said.

Buffett’s appearance on television came on the heels of his annual letter to shareholders, which he released Friday along with Berkshire’s 2007 financial report.

In the letter, Buffett predicted that the insurance industry will see lower underwriting profit margins in 2008 because premium prices are down, and the industry’s luck will certainly change.

“It’s a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008,” he said. “Prices are down, and exposures inexorably rise. Even if the U.S. has its third consecutive catastrophe-light year, industry profit margins will probably shrink by 4 percentage points or so.

“If the winds roar or the earth trembles, results could be far worse.”

Buffett said Berkshire’s insurance group, which includes GEICO, reinsurance giant General Re and several other firms, generated $2.2 billion net income from insurance underwriting in 2007. That’s down from the previous year when it posted a $2.5 billion underwriting profit.

When Berkshire’s shareholders aren’t worrying about insurance profits, they’re likely fretting about who will run Berkshire after Buffett is gone. The 77-year-old Buffett offered a few new clues in his annual letter and during the CNBC interview.

To replace Buffett, Berkshire plans to split his job into three parts — chief investment officer, chief executive officer and chairman.

Buffett wrote in his letter that over the past year he identified four investment managers outside Berkshire who could take over managing the company’s $75 billion stock portfolio and investing its $44.3 billion cash.

Buffett said on CNBC that none of the four CIO candidates is a woman and that very few women applied for the job.

Buffett has previously said that Berkshire’s board had three outstanding internal candidates for chief executive. And Buffett’s son, Howard, who already serves on Berkshire’s board, will become chairman after Warren Buffett’s death.

Buffett also said on CNBC:

That he doesn’t agree on everything with his favorite presidential candidates, Democrats Hillary Clinton and Barack Obama, and he wouldn’t want either one to succeed him as Berkshire’s chief capital allocater. “I would certainly appoint either one of them to run a business, but running a business is a little different than my job.”

On why the U.S. trade deficit is a long-term problem. “Over time, it’s like eating an extra 100 calories at every meal. You don’t sit down at the table and get up and everybody says ’My God, you’re fat.’ But if you keep doing it over time, pretty soon they’ll say, ’My God, he’s gotten fat.”’

On stock bargains now: “Certainly, I find more things to look at now than I did six months or a year ago. But I would say it’s changed more dramatically in the fixed-income market than it has in the equity market.”

On the cause of the credit crisis: “The mistake was in lending unwisely. There were a lot of dumb lending practices.”

Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: http://www.msnbc.msn.com/id/23445729/

Warren Buffet afirma que la economía de EU ya está en recesión

El multimillonario inversor piensa que darse cuenta de ello "es una cuestión de sentido común".

Agencias / La Jornada On Line
Publicado: 03/03/2008 11:43

Nueva York. El millonario inversor Warren Buffett, el segundo hombre más rico de Estados Unidos, afirmó este lunes que la economía estadunidense está ya, de hecho, inmersa en una recesión.

En una entrevista con la cadena especializada CNBC, señaló que independientemente de los debates técnicos que sostienen analistas y expertos sobre si la economía ha llegado o no al punto que se considera recesión, Buffett afirmó que ya se está produciendo.

De acuerdo a la teoría económica, una recesión se da por hecha cuando se registran dos trimestres con crecimiento negativo en la economía, y esto aún no ha sucedido en Estados Unidos.

El presidente George W. Bush dijo la semana pasada que si bien se ha producido una desaceleración, la economía no había entrado, de momento, en recesión.

Según los expertos y viendo lo que ha pasado en ocasiones anteriores, las recesiones se anuncian "oficialmente" un par de meses después de que se hayan producido.

"Yo diría, bajo cualquier definición de sentido común, que estamos en recesión", señaló el director general y presidente de Berkshire Hathaway. No obstante, afirmó que es difícil predecir hasta dónde llegará y cuál será su alcance.

El también conocido como Oráculo de Omaha, sede de su compañía que agrupa a más de 60 firmas, señaló que los reportes que maneja, especialmente de negocios minoristas, deja claro el mal momento por el que atraviesa la economía estadunidense.

Asimismo, y sobre las turbulencias en los mercados financieros, sobre todo en Wall Street, que lleva varios meses atenazado por la alta volatilidad y la caída de índices, Buffett señaló que "las acciones no están baratas".

Por otro lado, anunció que retiró la oferta que hizo el pasado 12 de febrero de 800 millones de dólares para reasegurar bonos municipales de firmas como MBIA, Ambac Financial Group y FGIC, aseguradoras de bonos en problemas tras el estallido de la crisis hipotecaria y creditica.

Su oferta incluía una fuerte prima pero excluía la deuda de alto riesgo, como los activos relacionados con las hipotecas "subprime", causantes de esta crisis.