US Economy: Warren Buffett's Perspective on the Crisis

By: CaraTan   Date: 3 March 2009

About The Author

CaraTan

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Cara Tan, editor

 

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Eugene, OR, 3 Mar. As a disappointing February cascades into an uncertain March, I invite you to take a look at Warren Buffett, one of the world's most successful investors whose career has spanned sixty years or more.

Due to his investing prowess, he is often called the Oracle of Omaha or the Sage of Omaha--a location well off Wall Street. Although his salary as CEO of Berkshire Hathaway is a mere $100,000 a year, in 2008 he was ranked by Forbes as the richest person in the world with a net worth of $50 billion.

Wall Street constantly promotes the idea that astute investors--sometimes called the "smart money"--are sufficiently prescient to sidestep the downturns that plague the rest of us. But the performance history of Berkshire Hathaway demonstrates that even Warren Buffett is not immune.

Berkshire traded for more than $150,000 a share in mid-December 2007. Last week the same stock traded for less than half that. Last year was the worst in the company's history. Superstar investor Buffett suffers along with the rest of us--although admittedly not as much due to his immense store of wealth.

You may recall last October that Buffett wrote in a New York Times editorial that he'd been buying U.S. stocks for his personal account and recommended that other long-term investors do so too. Since then the S&P 500 Index has slumped 22 percent. This supports a well-documented conclusion that no one, not even über investor Warren Buffett, can call the bottom of the market. And he admits as much.

Buffett is also known for his straightforward annual letter to shareholders. His 2008 report was published last week. Buffett told readers that neither he nor Charlie Munger, his long-time partner in running Berkshire Hathaway, "can predict winning and losing years in advance"--and no one else can either.

"We're certain, for example, that the economy will be in shambles throughout 2009--and, for that matter, probably well beyond" predicted Buffett, "but that conclusion does not tell us whether the stock market


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