Monday, March 9, 2009

Warren Buffett on CNBC

Some highlights of his economic comments - I'll try to post his investment stuff similarly soon:

...ever since we talked in September, we talked about [the economy] being an economic Pearl Harbour and how--what was happening in the financial world would move over to the real world very quickly. It's fallen off a cliff, and not only has the economy slowed down a lot, people have really changed their behaviour like nothing I've ever seen.... had 11 trillion of residential mortgage debt built on this theory that who was borrowing it, what their income was really wasn't that important because the house itself had to go up in price. And when that tumbled and houses which might've been worth 22 trillion at the peak are worth maybe four or five trillion's a huge amount out of people's net worth. It's the biggest asset most people have....
When people get scared, they change their buying habits. When they quit buying as much, people lay off. We are in a very, very vicious negative feedback cycle....

...we are doing things now that are potentially very inflationary...if you look at this bill ...on the back it says, "In God we trust,"....And on the front it says, `In the Federal Reserve, we trust,' is paper money, and if you keep issuing more of it...that is inflationary. The more of these you have out compared to the economic activity, the less it's worth....
Everything will be all right. We do have the greatest economic machine that man has ever created, I believe. We started with four million people back in 1790 and look where we've come and it wasn't because we were smarter than other people, it wasn't because our land was more fertile or we had more minerals or our climate was more favourable. We had a system that worked. It unleashed the human potential. Didn't work every year, we had six panics in the 19th century, in the 20th century we had the Great Depression and World Wars, all kinds of things. But we have a system, largely free market, rule of law, equality of opportunity, all of those things that cause the potential of humans to get unleashed, and we're far from done....
...there was a week where 200 billion...poured out of the money market funds, which had about 3 trillion in them, the money was just gushing out when Reserve broke the buck. That meant that the commercial paper market was disappearing. You know, the blood was being drained from the American economic body and we had some very prompt, wise, action. Chairman Bernanke, the Fed, I mean, they stepped in and said the commercial paper market is going to work...They said the same thing about money market funds we should now say about the whole banking system. ....The president of the United States has to say it very clearly that you just don't have to worry about that.
we need banks to get back to banking. But we need to get through this situation...Banking has never been better in one sense. I mean, the banks are getting their money very cheaply, deposits are coming in, spreads have never been wider, all the new business they're doing is terrific. They will earn their way out of it, in most cases...
the domestic auto industry has a lot of legacy costs. They did some dumb things in the past because they had a business model in mind that doesn't exist anymore. The union bargained for those things, you know, they feel entitled to them, they made a deal, you know, and they've got hundreds of thousands of retirees dependent on it and all sorts of things. So you need a new business model somewhat. You also need a recovery. It isn't just the business model. And I would say net I would come down on--if they modify the business model to adapt to the reality of a 13 million car a year and we'll do better than that in the future in some years. If they adapt, have a business model that works with that I would get them through this period.


  1. Are you waiting for feedback for the next installment? :)

  2. Nah. I've had an interview and been away for a few days.

    Gonna do one on unemployment and welfare once I've done the in-Laws tax.

  3. hope the interview went well. :)

  4. It did, thanks.

    I wrote another one!