Monday, January 19, 2009

Buffett Flips Again… This time it’s an “Economic Pearl Harbor.”

Wasn't he just talking about what a great buying opportunity this was? Mr. Buffett is doing a flip-flop once again in his role as “good cop, bad cop.” His comparison to Pearl Harbor would imply that no one saw this coming. He couldn’t be more wrong, many people saw this coming, myself included.

I have commented on him before and remind people that I believe him to be an outstanding investor who was excellent at leveraging his returns over long time periods which he did better than anybody during the longest running bull market in history.

He did not, however, understand the underlying math and how bad it truly became, thus he has been uneven in his remarks about the economy. There are very few people who have been CONSISTENT, and it is because they understood what was happening from the beginning and have stuck with their story. Buffett did not have the “vision” in this instance and thus it is my opinion that his opinions on the current state of affairs (like those of most people who don’t understand it) are irrelevant.

In regard to his latest comments, once again he is trying to place blame where it does not lay. This crisis did not come about, nor is it being sustained by negative psychology. Yes, once it is in place it can and will feed on itself, but in this instance the negative psychology is WARRANTED due to the underlying math which is simply horrid. Those who do not understand the math are placing blame where it doesn’t belong and they will not be able to come up with solutions that will last.

Make sure you know who to listen to… I spelled out who has been most consisted in their understanding towards the beginning of my article Wave B... What a Wonderful World!

Bloomberg article

Buffett Says the U.S. Is in Midst of an ‘Economic Pearl Harbor’

By Frank Connelly

Jan. 19 (Bloomberg) -- The U.S. is facing an “economic Pearl Harbor” that has spread fear throughout the country, billionaire investor Warren Buffett told Tom Brokaw in an interview broadcast yesterday on Dateline NBC.

“We have a negative feedback cycle going on right now,” Buffett said, according to a transcript of the interview on CNBC’s Web site. “We have fear which leads to people not wanting to spend, and not wanting to make investments. And that leads to more fear.”

Buffett, the chairman of Berkshire Hathaway Inc., said Barack Obama is “the absolute right commander in chief” to guide the country through the financial crisis. Obama, 47, will be sworn in as the 44th U.S. president tomorrow in Washington.

He can “convey to the American people what needs to be done, not to expect miracles, that it’s going to take time,” Buffett, 78, said in the interview.

Buffett declined to predict how long the economy will remain under duress, except to say that he doesn’t expect a recovery to take five years. He contrasted the current economic crisis with the period “three or four years ago,” when “everybody lent you more and more on a house that kept going up, and you could keep spending money you didn’t have.”

Buffett said the economic slump is the worst since World War II, though not as severe as the Great Depression. He said “it’s never paid to bet against America,” and that the country would come through the crisis. “But it’s not always a smooth ride.”

Pearl Harbor:

Are you scared enough yet to tacitly agree to keep bailing out Buffett’s latest investment in Goldman Sachs?