Is the worst over or is Buffett right?
Linda says:
Warren Buffett, in an interview on CNBC has commented that ‘my general feeling is that the recession will be longer and deeper than most people think.’ Is the world’s wealthiest man and a legendary investor right?
Certainly he has age and massive experience on his side and an extremely successful record. Markets are looking a lot better than in mid March, and many are saying that the sub prime crisis is about to improve. Others, are far more cautious such as Mr Buffett and George Soros, another billionaire, also in his seventies and a former hedge fund operator.
Certainly, stock markets appear to be recovering, as the real economies of many nations appear to be slowing with falling consumer confidence and rising unemployment in several countries. No stabilization has been achieved in the US housing market with more foreclosures, falling house prices and no bottom yet in sight. And inflation, quiet for so long is becoming a worsening problem. (See our recent article - “Australia’s Inflation Rate Rises to 4.2%”‘ )
Falls in real estate prices are also now being experienced in the UK, Spain and Ireland with some other countries likely to follow. With the price of most people’s main asset still falling or likely to fall, the rise in the stock market may be premature.
If business activity and retail sales fall, the profits of many companies will also be affected and this will cause share prices to fall as a result. Therefore the outlook is still uncertain and the legendary Warren Buffett may be correct in his recession call.
