Thursday, January 19, 2006

 

'Big Adjustment Soon, Political Turmoil': Buffett

Warren Buffett is speaking about the economy at Forbes. "Don't count on a soft landing for the country's deficit-addicted economy, Buffett reiterated Tuesday. The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to 'political turmoil,' the decorated investor warned."

"Buffett's bearishness is understandable: Fixing the trade deficit, which soared to a record $665.9 billion in 2004, and is expected to top $700 billion this year, is becoming rather like turning around an ocean liner by dipping a teaspoon in the water."

"Buffett told business students at the University of Nevada that the globe owned $3 trillion more of the U.S. than it owned of them. 'In my view, it will create political turmoil at some point...Pretty soon, I think there will be a big adjustment,' he said without elaborating."

"Fifteen years ago, the U.S. had no trade deficit with China, Buffet opined. 'Now it's $200 billion. If we don't change the course, the rest of the world could own $15 trillion of us. That's pretty substantial. That's equal to the value of all American stock,' he added."

"In the past the billionaire has doubted that an upward revaluation of the renminbi would greatly reduce this number."

Comments:
Great post. Not only is Buffest the worlds smartest investor, but he's also an honest man. He bet big against the USD last year and got killed. I heard him comment recently he thinks he was just early and is making the same bet this year. Also, he's been investing heavy in Wal-Mart and Anheuiser Busch recently, two companies that will beneifit from a recession. He's HEAVY in cash as well. When the whole thing goes to shiit, he'll swoop in and pick up some more companies "on sale" - this is one dude you want to pay attention to what he is doing. He's all the proof I need.
 
Agreed. Personally, I'm betting the farm that he is right.
 
Any thoughts on bearish funds like Prudent Bear (bearx)? I'd rather not put every last cent in metals.
 
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