Warren Buffett’s Investment Advice for You

March 4, 2010 by · Leave a Comment 

Buffett Says Consumer Behavior May Be Forever Changed by Recession

By Katie Escherich and Bianna Golodryga

Billionaire investor Warren Buffett believes that the U.S. will emerge from the current economic recession “stronger than ever,” but he said the behavior of the American consumer may be forever changed.

“We were on a binge before,” the CEO of Berkshire Hathaway told “Good Morning America” in an exclusive interview. “I mean, we are not saving extraordinary sums now but the savings behavior has changed. … I don’t necessarily think that we will go back to behaving the way that we were two years ago.”

The man known as the “Oracle from Omaha” because of his history of successful investments, shared his top three pieces of advice for average Americans who want to grow their savings and keep their money safe.

Number one: “If it seems too good to be true, it probably is.”

Number two: “Always look at how much the other guy is making if he is trying to sell you something.”

Number three: Don’t go into debt.

“Stay away from leverage,” he said. “Nobody ever goes broke that doesn’t owe money.”

The “binge,” he said, was fueled largely by over-borrowing by both individuals and companies.

“The U.S. public as a whole has gotten into problems from leverage, financial institutions have gotten into problems through leverage,” he said. “A long, long time ago a friend said to me about leverage, ‘If you’re smart you don’t need it, and if you’re dumb, you got no business using it.’”

At a time when many college graduates face uncertain futures and are struggling to find jobs, Buffett said he still believes that “investing in yourself is the best thing you can do. Anything that improves your own talents. And I always advise students to do that, high school students, college students and obviously investing in your children is, in some ways, investing in yourself.”

No matter what happens in the economy, “if you have true talent yourself, and you have maximized your talent, you have a terrific asset.”

Warren Buffett on Budget Deficit

Buffett showed some support for the idea of a second economic stimulus package, but cautioned that it should be handled differently to restore the American public’s confidence.

The number of earmarks included in the bill were “part of what has affected the American psyche,” he said. “When we go on and we talk about earmarks and that sort of thing, and then we get the kind of behavior we’ve got, I mean, that is not reassuring to the American public.”

He called the first stimulus “like taking half a tablet of Viagra and having also a bunch of candy mixed in, you know, as if everybody was putting in enough for their own constituents.”

He also cautioned that the American public will have to be patient and give the economy time to recover, particularly when it comes to the surplus of houses on the market that resulted from overbuilding.

“The American public will get disappointed, but it is going to take time to work through the overhang of houses, for example,” he said. “You can’t cure that in a day or a week or a month, so a stimulus doesn’t cure that.”

Buffett also expressed confidence in Federal Reserve Chairman Ben Bernanke, and dismissed rumors that the Fed chief may not return once his current term is up at the end of the year.

“Well, I think he should keep his job,” he said. “And as to what people say, well they are going to say something, they have always talked about Fed chairmen when their terms are coming up. But taking Bernanke out of the lineup would be like if you had the Ryder Cup, taking Tiger Woods out of it. It just doesn’t make any sense.”

Buffett acknowledged that the actions taken by the government will lead to an even bigger budget deficit. “It will happen and I worry about it, but I would worry more if we weren’t doing anything right now.”

He compared the current situation to “a friend that is sinking in quicksand.”

“You throw them a rope and they tie it around themselves and a car pulls them out, they may dislocate a couple of shoulders but it’s still the right thing to do. And we are doing things which will have negative consequences down the road, but they are still the right thing to do to get us out of this particular economic quicksand that we are in.”

Warren Buffett on Health Care Reform

Asked if he agreed with President Obama that passing health care reform would help limit the ballooning budget deficit, Buffett replied, “I really don’t think that I’m an expert on health care,” but said the system needs to be drastically changed.

“I think it’s a moral imperative that everybody have access to health care,” he said. “It’s a terrible problem.”

Despite the pressing economic concerns, he said he would be in favor of the government devoting resources to devising a plan for health care reform “if there’s a well-thought-out program that actually promises to bring down the cost of health care.”

“We are spending 2 trillion plus on health care a year,” he said. “If we could come up with something that even maintains the present cost and promises not to have a greater-than-inflation rate of gain in the future, and brings health care to the people that aren’t getting it now, then I think that will be a huge improvement. I don’t think that is an easy task.”

In anyone’s lifetime, “you will see many recessions, some bubbles,” he said, but he’s optimistic about the future.

“If we sat down here [at the] start of the 20th century, and I said there is going to be the panic of 1907, there is going to be a world war. It will be followed by a Great Depression with 35 percent unemployment, and then we will have another war that it looks like we are going to lose, and then we are going to have a nuclear bomb like no one has ever seen … by the time I got through, you’d be crying. But the Dow went from 66 to 11,497 during that same century, and the average person’s standard of living went up 7 to 1. We have a system that unleashes human potential like nobody has ever seen, and it has done it in the past, it will do it in the future. So I’m a huge bull on America — it does let people like you and me do far more than we could have done 200 years ago.”

12-10

Obama to Investment Guru Buffett: Hi Cuz

December 22, 2009 by · Leave a Comment 

By Deborah Charles

WASHINGTON (Reuters) – President Barack Obama, who won political support and has sought advice from investment guru Warren Buffett, may now feel even closer to the world’s second richest man.

According to their family trees, the two men who at times shared the stage together during the 2008 presidential campaign are seventh cousins three times removed.

Genealogists at ancestry.com announced Tuesday that Obama and Buffett are related through a 17th century Frenchman named Mareen Duvall.

According to the online genealogists, Duvall — who immigrated to Maryland from France in the 1650s — is Obama’s 9th great grandfather and Buffett’s 6th great grandfather.

The discovery was made by accident when the same team of genealogists who had researched Obama’s family tree went on to investigate details about Buffett’s relatives.

“We recognized the name Duvall and it made us wonder if this was a connection,” said Anastasia Tyler, the lead researcher on the project. “So we started focusing on Duvall.”

“We’re always looking for a way to show how interesting family history is. Like this, when you start finding similarities in family trees,” Tyler said in an interview. “The tree leads you in directions you don’t expect.”

The family tree shows Obama related to Duvall through his mother Stanley Ann Dunham while Buffett is linked to Duvall through his father Howard Buffett.

Tyler called Duvall’s life a “rags-to-riches” story. He arrived in America as an indentured servant but by 1659 he had bought property in Maryland and became a planter and merchant and was considered a “country gentleman.”

“It’s quite an achievement,” Tyler said of Duvall’s rise in society. “You can see similarities to him in both (Obama’s and Buffett’s) lives.”

During the presidential campaign, Lynne Cheney said she found while tracing her family roots that her husband, then Vice President Dick Cheney, was a distant cousin of Obama’s.

Obama has also been found to have had German roots through his sixth great grandfather, and a connection to Ireland through his third great grandfather.

(Editing by Mohammad Zargham)

Buffett: US Debt Threatens Economy

August 20, 2009 by · Leave a Comment 

WASHINGTON–Investor Warren Buffett said the US economy has avoided a meltdown and appears on a slow path to recovery, but Congress must deal with enormous debt that might erode US purchasing power.

In an opinion column published Wednesday by the New York Times, Buffett wrote that he “resoundingly applauds” actions by the Federal Reserve and the Bush and Obama administrations to pump trillions of dollars into the financial system.

But the “gusher of federal money” has run up a high level of debt that could fuel inflation, he said.

“The United States economy is now out of the emergency room and appears to be on a slow path to recovery,” Buffett wrote.

“But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

Buffett, who runs insurance and investment company Berkshire Hathaway Inc, likened the economic threat of “greenback emissions” to the environmental threat of greenhouse gas emissions, leaving the United States with a deficit of $1.8 trillion or 13 percent of gross domestic product this year.

In July, the government posted a $180.68 billion monthly budget deficit, a record for July, marking only the third time in the past 30 years that the government ran a deficit for 11 months in a row.

Buffett said a revived economy will not be able to generate enough revenues to bridge the gap between outlays and receipts, so changes in taxes and spending will be required.

Politicians will not likely have the will to raise taxes or slow spending, so they may opt to quietly let inflation increase, a move that will “confiscate” wealth and allow the United States to evolve into a “banana republic economy”, he said.

“Our immediate problem is to get our country back on its feet and flourishing — ‘whatever it takes’ still makes sense,” Buffet said in the paper.

But once recovery is gained, Congress must end the rise in the debt-to-GDP ratio and keep its growth in obligations in line with its growth in resources, he wrote.

“Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress,” he said.

Last month, in a newspaper column of his own, Federal Reserve chairman Ben Bernanke, said the huge amounts of money the U.S. central bank has pumped into the economy will not undercut its ability to push borrowing costs higher when the time is ripe.

Stressing that the weak U.S. economy will likely warrant exceptionally easy monetary policies for a long time to come, Bernanke outlined in a Wall Street Journal opinion article how the Fed could raise interest rates even with cash flooding the financial system.

“At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road,” Bernanke wrote.

The outline of the Fed’s “exit strategy” from the extraordinary monetary policy easing it has undertaken in the past two years to deal with the global financial crisis was the subject of testimony to Congress by Bernanke in his twice-a-year economic report on July 21.

Reuters