Thursday, June 4, 2009
Buffett Is Less Bullish on U.S. Than You Think: Alice Schroeder
une 4 (Bloomberg) -- To the unschooled ear, Warren Buffett’s reassuring words that “America’s best days lie ahead” and that he’s buying U.S. stocks sound prescient, not preposterous.
But fair warning -- he’s not as bullish as he sounds.
Buffett has been right so often that what his words mean, and whether he is right now, are important questions. His skill as a forecaster has a lot to do with his psychology: a buoyant optimism tempered by extreme caution that let him score killings on stocks such as Geico and American Express Co. while steering clear of speculative bubbles, leverage, subprime mortgages, and trying to figure out a rescue for his pal Hank Greenberg’s company American International Group Inc.
In temperament, he could be the son of Woody Allen and Doris Day.
His reputation as a seer took a hit in the public’s mind last October when the market tanked after his New York Times op- ed, “Buy American: I Am.”
Was he just talking his book?
It doesn’t really matter. As much as he loves money, Buffett loves his reputation a whole lot more. He never risks going on the record unless he is pretty sure he won’t be found wrong later.
What makes him so certain? He has explained his ebullient view of the economy using historical analogies instead of economic data. He has said that trying to call the bottom of the market is futile; buy into fear. The U.S. has surmounted worse troubles before, and it will survive this, too: “Your children and grandchildren will live better and better” than you.
Buffett seems to hearken back to mid-20th century America, when each decade brought us a higher living standard. The concern has been whether he is extrapolating from his own experiences rather than analyzing the future.
There’s evidence, though, that Buffett is awake to America’s problems. He says there will be no quick rebound in consumer spending, the economy has “fallen off a cliff,” and we are now “fighting a war.” Berkshire Hathaway Inc.’s real- estate arm just estimated that the backlog of unsold houses is double the official figures.
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