On Monday the billionaire investor Warren Buffet declared that the economy won’t backslide. He told the Montana Economic Development Summit that he saw “our businesses” coming back almost across the board. In addition, Buffett gave his Montana audience some banking advice.
He stated that more people were employed this month compared one or two months ago. “Our businesses” consisted of insurer Geico, See’s Candies, Dalton-headquartered flooring maker Shaw Industries, International Dairy Queen, and the Ben Bridge jewelry chain.
His outlooks contrast with the views of Professor Nouriel Roubini and Harvard University professor Martin Feldstein. They have thought of another recession.
During the subprime crisis of 2007–2008, Buffett\’s Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008. Buffett made a bet on the U.S. economy by buying railroad Burlington Northern Santa Fe Corp. for $ 27 billion in February. He proposed merger with the Burlington. The deal was valued at nearly $ 34 billion.
Buffett said March 2008 “by any common-sense definition we are in a recession”. Amid unraveling markets and economy, he suggested buying stocks for the long term. Following his advice, investors who endured a drop of 26% and continued to hang on, today they gain up 19% almost two years later. However, some sold at the lowest prices of the bear market.
He pronounced the U.S. economy had “fallen off a cliff” on March 9, 2009. In the long interview with CNBC, he reiterated his long-term optimism about the economy.
The stock market gained momentum from Buffet’s optimism, rallying broadly. Prices had eight successive sessions of gaining. The Standard & Poor’s 500 Index jumped 1.1%. In August, double-dip worries were fueled by a stretch of weak economic reports; the S&P had been down 4.7%.
The world’s largest economy expanded 1.6 percent in the second quarter. This annual pace exceeded the median forecast of economists surveyed by Bloomberg News. Unemployment rate jumped to above 9 percent, which tempers consumer spending.
It is unlikely that the economy will be back into recession as “signs of life” appear in Bank of America Corp. U.S. banks got prepared to boost lending and encouraged businesses to seek financing for their ideas.
Economics is the study of our lives,our jobs, our homes, our families and the little decisions we face every day. Thus, I am keen on reading and studying economic issues.