Buffett a huge bull on the American Economy

I am a trend trader, as mentioned hundreds of times, but I listen when Mr. Warren Buffett speaks! Below are the most logical statements I have heard in a long time. He makes much more sense than the predictions we are bombarded with by the talking head media and so-called “experts”. The so-called experts barely take home a six figure salary (if half of that), many stuck in the rat race but are qualified by major networks and media outlets to educate the masses (or sheep as I like to call them).

I’ll pass on the information from all the talking-heads and listen very attentively when the second richest man on the planet and greatest investor of all-time speaks. I am also bullish on the United States over the long term as nations and markets work in cycles. I am not a believer in doomsday predictions, authors, books or religions. Like Warren Buffett and William O’Neil, I am long the United States for the rest of my life until something shows me the trend has ended. The past several years (dating back to 2000) are a small pimple on the ass of this great country.

“I am a huge bull on the American economy,” said Mr. Buffett, in an exclusive interview with the National Post.

Financial markets around the world have been heaving amid fears that banks will have restrain lending and damage other areas of the economy in order to shore up their capital and rebuild their balance sheets.

But Mr. Buffett says the United States has survived such turmoil before.

“We’ll always get through,” he said. “I’m a bull on the United States. Just think about how silly it would have been to be anything other than a bull on the United States since 1790. It is not a smart thing to sell the United States short over the years — or Canada for that matter. The world does get better. People get more productive. More human capacity is unleashed over time.”

“He said the banks will be able to work out their troubles without government assistance but may not be the “best investments.”

“They’re going to be around,” he said. “The ones that have taken the big write-offs, they’re not going out of business but they’re selling a lot of new shares in the process so they’re diluting future earnings. They’re paying a price.

“I think most of the very big ones and I won’t name names, I think five or 10 years from now people will have made money on them but I think they’ll have made money on other things too. I don’t think necessarily they’re the best investments, but they have not been permanently crippled.”

He sees no need for any government bailouts in the financial sector, similar, to the government rescue of U.S. banks during the savings and loans crisis in the early 1980s. U.S. banks have enough money to handle the extra cost.

“They can handle it and they’re paying a price for it,” he said. “Somebody has to bear those losses. Is it better that the XYZ bank bears it or is it better to socialize it for the American public. I’d rather have the XYZ bank pay for it.”

Mr. Buffett, who was in Toronto to promote the launch of Business Wire in Canada, a corporate news release company, said he sees no problem with foreign countries — through so-called ‘”sovereign wealth funds” — buying up big stakes in U.S. financial stocks.

“It’s the inevitable consequence of our trade deficit,” he said. “If we’re going to consume US$2-billion a day more of foreign goods than we sell to the rest of the world we have to ship them something in exchange. Initially we may ship them American dollars but those get converted into American assets of one sort or another. The United States is fueling the sovereign wealth funds. We’re making deposits in their wealth funds in effect.”

“We actually went through a rolling credit crunch of sorts and we’re still in it to some degree, but what we’ve really done is seen credit cut off to a lot of things that should have been cut off and we’ve seen credit that was mispriced get repriced,” Mr. Buffett said.

“The money is there …we do not have an unavailability of credit to people who’ve got reasonable credit demands and it’s not expensive. We’re not in a credit crunch for those who have sound deals. I went through 1982 when short-term money cost 21%. This is not a tough period.”

Eventually the excess demand in the housing industry will be sopped up by a population that is expanding at about 1% a year.

“Demand does soak up excess supply but it can take a while to do it … but you do not have the problem that if you have excess supply it just sits there forever.”

No economic bailout necessary, says Buffett
FP exclusive interview

Jacqueline Thorpe, Duncan Mavin and Carrie Tait, Financial Post
Published: Thursday, February 07, 2008

Original Article:
http://www.financialpost.com/creditcrunch/story.html?id=290358

Listen when Mr. Buffett speaks! As for the rest, ignore them.