Buffett on the Economy - This Movie Has a Happy Ending

Warren Buffett spoke today, to the fabulous Julia Boorstin of CNBC (what great hair she has!). I don't particularly care for Buffett's politics and his ideas on taxation, but when it comes to economics and business prospects Buffett is without match, as his investing record shows.

I agree entirely with him about the outlook for our economy the next few years. He makes the statement: "I don't know if the movie is 2 or 4 hours long, but I know it has a happy ending". What a positive point of view. More of us should share that perspective.

I am piggy-backing on many of Buffett's trades since late 2008 owning: GE, WFC, USB and GS. These are all global franchises that for the most part came through the crash without much damage (GE is much healthier than its stock price suggests and is a raging bargain).

Regarding the housing crisis and home building, Buffett makes the point that the housing crisis precipitated our economic crisis (but he did not lay the blame properly at the feet of a laissez faire Congress that eliminated the regulatory protections needed and cheerled the mortgage industry into the ground). His medicine: don't build any more houses; a little simplistic, but maybe tongue in cheek. We need to work off the inventory we already have. I think that is pretty obvious and goes without saying. But he said it by way of making the case that excess housing is the root of our problems and our economy won't truly mend until housing inventories are once again in balance.

Without saying any more, here is the interview.

Disclosure: No Positions

Comments

[twitee:]

As long as they can manipulate the equities with tax payer money GS, USB and WFC will be rising.......this can only go on for so long...the reality will hit them eventually.
Regarding Mr. Buffet, he has investing advantages that an average investors can only dream of, so be careful of what you are betting on!

Since August 2008, Buffet shares are down 35% even with all the advantages..

Jul 10 11:47 AM

[whidbey:]

Windbag Warren was vaccinated by Greenspan naivete on the power of the government to keep his play pen neat for him. As a BRK holder I am not impressed with our leader or his knowledge of the economy, he does throw a nice party each year, but down 30% and he just passes out the chow and the BS.

We need to follow our own insights and not follow the great ones gently into the night. PS that includes the current President.

Jul 10 11:57 AM

[richjoy403:]

We should all have WB's long term investing record!

Though I clearly respect Mr. Buffet, I do recognize that he has not performed well recently -- which doesn't suggest he won't return to his former glory.

(and whidbey refers to him as a 'windbag'!)

Jul 10 12:31 PM

[Mr. Morbid:]

You people need to learn to look at the bright side. All we really need to deal with the extra housing inventory is a return to good old-fashioned arson. Think about it, recent college graduates can start exciting new careers as arsonists, we get rid of excess housing inventory, and insurance payouts and rebuilding provides new jobs for construction workers! We don't need fancy predictions, just more arsonists! Problem Solved!

Jul 10 02:35 PM

[richjoy403:]

Maybe Mr. Morbid doesn't realize that he is not the first to think of the arson angle...for years, residents of Detroit torched thousands of homes just before, during, and following Halloween. Unfortunately, they still have a housing glut.

Jul 10 04:52 PM

[a fat panda:]

"I am piggy-backing on many of Buffett's trades since late 2008 owning: GE, WFC, USB and GS. " Actually you are piggy-backing on the taxpayer so you ought to be grateful for government. Not only has the government provided your companies cheap capital, but protected them (particularly GS) from counter-party risk at AIG.

Jul 10 10:13 PM

[a fat panda:]

I would love to know what you want from Buffett. BRK.a has outperformed the S&P in the 1, 2, and 5 year periods. Maybe you ought to sell you Berkshire, and put your money in the XLF. The financials have thrown a great party as well, only it is for the CEOs instead of the shareholders.

On Jul 10 11:57 AM whidbey wrote:

> Windbag Warren was vaccinated by Greenspan naivete on the power of
> the government to keep his play pen neat for him. As a BRK holder
> I am not impressed with our leader or his knowledge of the economy,
> he does throw a nice party each year, but down 30% and he just passes
> out the chow and the BS.
>
> We need to follow our own insights and not follow the great ones
> gently into the night. PS that includes the current President.

Jul 10 10:21 PM

[Ferdinand E...:]

Thanks. It's lovely to hear some optimism instead of the pessimism that, at bottom, is disgust with Democratic voters because they did not give Sarah Palin an opportunity to become vice president.

Jul 11 09:29 AM

[Brian McMorris:]

Hey Fat Panda, one thing I learned long ago as an investor it is to "follow the money" (which is why all of us spend time on Seeking Alpha, after all). The government is passing out the money, so I am following it and hoping some sticks. Same for Warren, why not follow a master? If he is a little off his game, as a contrarian, there is no better time to buy.

On Jul 10 10:13 PM a fat panda wrote:

> "I am piggy-backing on many of Buffett's trades since late 2008 owning:
> GE, WFC, USB and GS. " Actually you are piggy-backing on the taxpayer
> so you ought to be grateful for government. Not only has the government
> provided your companies cheap capital, but protected them (particularly
> GS) from counter-party risk at AIG.

Jul 12 11:49 AM