The world’s second richest man, veteran investor Warren Buffet, has given a blunt assessment of the state of the United States economy – it’s still in a shambles.
In an interview with US business television channel CNBC, Buffet said that he doubts whether the economy has made much progress since May, when he declared the economy was at war.
“I get figures on 70-odd businesses, a lot of them daily,” Buffet said. “Everything that I see about the economy is that we’ve had no bounce.”
“But in terms of the economy coming back, it takes a while. There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report, I said the economy would be in a shambles this year and probably well beyond. I’m afraid that’s true.”
When asked whether he could see the ‘green shoots’ of recovery that many commentators have been celebrating in recent months, Buffett laughed.
“I looked. I wasn’t seeing anything. I had a cataract operation on my left eye about a month ago and I thought maybe now I’ll be able to see green shoots. We’re not seeing them. Whether it’s retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we’ve never seen it for a simple thing like electricity.
“So it hasn’t happened yet. It will happen. I want to emphasise that. But it hasn’t happened yet.”
In a separate interview with Bloomberg, Buffett also suggested that the US Government may need to consider a second stimulus program in order to prevent rising unemployment, which is widely predicted to hit at least 10%.
“It looks like we’re going to need more medicine, not less,” Buffett said today in a Bloomberg Television interview. “We’re going to have more unemployment. The recovery really hasn’t got going.”
Despite his rather gloomy prognosis, Buffet says that shares remain his preferred investment option.
“I think it’s attractive over the next 10 years compared to alternatives. I think it’s almost certain over a 10-year period that equities will do better than fixed-dollar investments.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
