When then-President-elect Barack Obama met with his Transition Economic Advisory Board fthree days after election, billionaire Warren Buffett joined in by speakerphone: With David Bonior, Roel Campos, William Daley, William Donaldson, Roger Ferguson, Jennifer Granholm, Anne Mucahy, Richard Parsons, Penny Pritzker, Robert Reich, Robert Rubin, Eric Schmidt Lawrence Summers, Laura Tyson, Antonio Villaraigosa and Paul Volcker. ( Chicago Tribune photo by Zbigniew Bzdak)
by Mark Silva
When Warren Buffett says things are bad, things are bad.
And Buffett says the economy is ":in shambles.''
Buffett, the 78-year-old multibillionaire from Omaha with the Midas touch of an investor who has made millionaires of his followers with investments in his Berkshire Hathaway, reports in his annual letter to shareholders that "the economy will be in shambles throughout 2009 - and, for that matter, probably well beyond.''
Buffett, an informal adviser of President Barack Obama, sees consequences of he broken housing bubble "reverberating through every corner of our eonomy,'' as Bloomberg News reported of his investor's letter this weekend. "The credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. Fear led to business contraction, and that in turn led to even greater fear."
Buffett himself turned in his worst quarter ever at the end of 2008, a fourth-quarter in which the nation's Gross Domestic Product fell by 6.2 percent. Yet in Buffett's case, that meant profits were off - way off - with net income down 96 percent, to $117 million, the firm reported.
The book value of its stock slipped 9.6 percent last year, the worst performance since he took control of the company in 1965, turning a failing textile maker into a broad-based and wildly successful holding company.
Berkshire's shares have plunged 44 percent in the past 12 months. The stock closed Friday at $78,600 per share.
But anyone who can scrap together the $78,600 for a share might be well advised to follow Buffett's advice that this is a good time to buy.
.. . "Though the path has not been smooth, our economic system has worked extraordinarily well over time,'' Buffett says in his letter to investors. "It has unleashed human potential as no other system has, and it will continue to do so...
" I like buying quality merchandise when it is marked down,'' says Buffett, who has disclosed increased holdings in Posco, Asia's third-largest steelmaker and Sanofi-Aventis SA, France's biggest drugmaker.
He sold $4.77 billion of equities in the fourth quarter to help fund private deals for preferred shares in Goldman Sachs Group Inc. and General Electric Co. The sales included shares of Johnson & Johnson, Procter & Gamble Co. and ConocoPhillips, holdings that, Buffett wrote, "I would have preferred to keep."
Buffett supports the government's efforts to invest in failing financial institutions.
""Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown," Buffett wrote to investors. "Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat."
Yet, he allows that the bailouts are likely to have "unwelcome after-effects," including inflation. "Major industries have become dependent on federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won't leave willingly."
Comments
Illegal alien infiltration has turned Los Angeles into a waiting time bomb. Mayor Antonio Villaraigosa has giving welfare aid to anybody who slips across our distressed border. The mayor has halted his police department from questioning anybody about their legal status, thats why thousands of Angeleno's have been massacred on the dirty streets of a once shiny city. Now firmly implanted illegal alien gang members have never been convicted to the full extent of the law by prosecutors. How many faceless victims have been indiscriminately murdered, such as an innocent young men as Jamiel Shaw. Bacca and Bratton have been involved in cover ups, just as San Francisco Libertarian Mayor Gavin Newsom. His city is being sued for cold-blooded deaths of 3 members of Bologna family. Deaths on the highways and streets of LA are a foregone conclusion because the insane state policy of a "Sanctuary city"
Under such lax voting in Los Angeles and the rest of the country, without showing any government ID. There is definitely a likelihood of illegal alien voter fraud. It is estimated that just in LA County their are 3.7 million foreign nationals imitating legal residents. However this number of illegal population doesn't hold water. One only has to frequent a supermarket, to realize that English is all but a dead language. This invasion can be placed at the feet of Villaraigosa, a member of the pro-illegal immigration elected officials, whose corrupted Sacramento with their big business stance. Giving cheap labor a priority over American Workers. You cannot convince pro-sovereignty advocates that the 47 billion deficit, is spending on welfare for illegal immigrants who cannot survive in LA without handouts. A chance came along with proposition 187, but it was intentionally engineered never to reach the Supreme court. Villaraigosa has done nothing but grandstanding and even his personal life is questionable. He, like half the state assembly and perhaps even the Governor have genuflected to corporate greed, for appetite of illegal low income workers.
Villaraigosa must be thrown out of office, because he has cost the city billions of dollars for creating government welfare for illegal aliens and their large families. Hopefully the Federal government will enact a mandated E-Verify, because this will dislodge from the workplace illegal workers. Because E-verify was killed by majority Democrat Harry Reid of Nevada and his partners. This pattern of rampant corruption survives all over the country. Even Mayor Villaraigosa and his thrall has given AMNESTY in LA . Even though he took the oath of office, to serve the American people. He committed a traitorous act because he is serving illegal settlers from foreign countries. We need a new face who will protect Americans, such as Walter MOORE.
Posted by: Brittancus | March 1, 2009 11:43 AM
Brit-I did a post on one of my blogs a couple of years ago entitled "the high price of cheap goods". Another one described the unsustainable housing bubble called "Irrational Exuberance Home Edition" a little before that. I can't be bothered to blog on a formal basis anymore but if I were to post anything relative to today, I'd recommend adding both gold and lead in direct proportion to where you live to your portfolio.
Posted by: Rob | March 1, 2009 12:21 PM
Brit-I did a post on one of my blogs a couple of years ago entitled "the high price of cheap goods". Another one described the unsustainable housing bubble called "Irrational Exuberance Home Edition" a little before that. I can't be bothered to blog on a formal basis anymore but if I were to post anything relative to today, I'd recommend adding both gold and lead in direct proportion to where you live to your portfolio.
Posted by: Rob | March 1, 2009 12:21 PM
Dear Mr. President:
1. Please do not transfer any more taxpayer wealth to private corporations or other legal entitities.
2. Please do not empower any private organizations to make decisions regarding wealth transfers between private corporations or other legal entitites and individual taxpayers, such as employees, without regard for the democratic protections of secret-ballot elections among those employees. Accordingly, please reject the undemocratic Employee-Free Choice Act, which would empower private unions to extract wealth from employees and their employers for political contributions and other distribution decisions of those private unions.
3. Unions have a romantic appeal to generalists like politicians and others who have not examined their activities with specialized expertise. Before you empower them to collectivize employees (for their supposed best interests), please bring together all the Regional Directors of the National Labor Relations Board and ask these career professionals what they think of the Employee-Free Choice Act.
Posted by: No more bail outs for Big Business; no more sell-outs to Big Labor | March 1, 2009 1:41 PM
I apologize if this strays off-topic. Every time one of those housing tracts with even bigger houses and higher prices went up around here, I wondered who could afford such enormous homes. The people who bought them couldn't and now many sit abandoned. Not only is it an impact on the housing market in the area, this also brings me to the impact these large home tracts have on the environment. One year the site is unbuildable because it is on a flood plain. Then if you talk to the right person in the village, they give you permission to fill it in with dirt...the extra water has to go somewhere. If you live south of a project built like that, you need to be prepared for flooding in your area, even though you don't live on a flood plain. The old "trickle down" effect from putting up too many parking lots.
Posted by: lochnessmonster | March 1, 2009 2:59 PM