An Associated Press story on MSNBC.com reported that billionaire investor Warren Buffett said that the economy ? which he already believed was in a recession ? is getting worse. Buffet bases his opinions on data from Buffet’s Berkshire Hathaway subsidiaries showing that the economy is weakening.
Berkshire Hathaway owns a variety of companies in the business of insurance, clothing, furniture, jewelry, candy, restaurants, natural gas and corporate jets. It is also a major investor in companies such as Coca-Cola and Wells Fargo. Buffet thus saw a large cross section of the economy in arriving at his conclusions.
“Everything connected with construction and with consumer, I see weakness, and if anything, it’s accentuating a little bit,” Buffett said. Buffett also said he thinks that inflation is picking up, especially in steel and oil. Encouraging the Fed to make and keep fighting inflation a priority, Buffet advised, “I think the Fed has to be careful not to do anything that signals that they regard inflation as a secondary goal and something they’ll worry about later.”
He believes that supply and demand, not market speculation, is what is driving oil prices to new heights. “In my adult lifetime, up until the last year or two, there’s been a huge amount of excess supply available,” Buffett said. “We don’t have excess capacity in the world anymore, and that’s why you’re seeing these oil prices.”
When the Oracle of Omaha is pessimistic, the rest of us had better be prepared for the worst.
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