Weekend Edition: Warren Buffet Sees No Double Dip in the US

Many pundits have been screaming about a coming collapse with some of them going so far as inviting people to exit the system by growing your own food and stacking up on supplies in a strong hold far from the city. While I believe all of this material makes great Hollywood fiction stories, yesterday was an opportunity for all of the doomers to repeat their dire warnings following dismal employment numbers in the US.

However, Buffet captured the day yesterday with the following statement on Bloomberg TV when he was asked if he expects a second recession:

“I would bet very heavily against that, how fast the recovery will come, I don’t know. I see nothing that indicates any kind of a double dip.”

While he didn’t deny the recovery has been slow he did emphasize that there’s growth around the world and that it will show up in the US once the construction sector starts to heal.

Billionaire Buffet is wagering on continued economic expansion with no double dip in sight. I as well add my voice to yours Warren, we cannot afford not to grow. It will take time, it will be slow but in the end the economy will grow.

Am I too optimistic? Maybe, but at least I am not alone….

Economic roundup:

Housing Prices: No Rebound in Sight

Where the jobs are: Energy savers

Service Industries in U.S. Expand at Slower Pace

How America Ceded Capitalism’s Bastion to Germany

Fed’s Massive Stimulus Had Little Impact: Greenspan

Weekly blog roundup:

Nature Versus Nurture (Invest it Wisely)

Portfolio Addition: Power Financial Corp. (PWF)   (The Passive Income Earner)

Why You Should Stay Away From Airline Stocks (Buy Like Buffet)

High Yield Dividend Portfolio Example Giving 8% Dividend Payout! (Dividend Guy Blog)

Dividend Income Update (101 centavos)

Step 7: Finish Big (Dividend Monk)

My simple stock selection rules of thumb (My Own Advisor)

Will the U.S. Default? (DIY Investor)

Have a Great Weekend!

17 comments to Weekend Edition: Warren Buffet Sees No Double Dip in the US

  • I really hope that he is right. His opinion is always worthwhile, plus he has some insight in transports with the BNSF investment. Right now, though, I simply have a hard time seeing where growth will emerge.

    • Mich

      I am hoping with India and China running at +9% GDP growth rates would positively impact the world economy. US export have been rising since the dollar lost ground…but I hear you, it’s tough for the US right now.

  • Thanks for the mention. I echo cashflowmantra…I hope Buffett is right. My worry is state and local governments. They came into the downturn seriously bloated and are cutting back sharply.

    • Mich

      that’s a problem, I doubt the private sector will be able to replace the government jobs that fast which will keep job creation at neutral..but the cuts r necessary unfortunately, the government bodies are too bloated.

  • I second that. So far, I see the world market is in acceleration — especially in the asia region. As you may know, we are not in sum zero game so one region improvement means other region improvement.

    • Mich

      You are right Dana, we are in a world economy today and thankfully other countries in Asia and Latin America are doing just fine!

      hopefully they will support world growth…

  • Unfortunately, I think the US economy is on the edge of a knife. Go one way (austerity) and you end up taking the road of a severe depression which is needed in order to correct central bank asset bubble blowing. Then there will be rioting in the streets.

    Go the other way (QE) and the dollar plunges in value and hyperinflation will destroy people’s savings and wages. Then there will be rioting in the streets.

    But I agree with Buffet that there will be no “double dip”, but for me is only in the sense that the so-called recovery has been nominal and not real: in other words, we are still very much in the first “recession” and have never come out of it. Sure, asset prices are up from the bottom, but they are up in nominal dollars. The so-called “recovery” has been a head fake. It isn’t real, because there are no jobs in it, because there are ever more people sucking at the teat of the state (food stamps, etc.), and payrolls at the US federal government sector have grown in size, sucking the life out of the private sector. And when the private sector finally breathes its last, the government sector will die just like every parasite that kills its host. It is a debt death spiral (see link): and it must come to an end: pick your poison, (1) austerity and deflation (allow it to correct) or (2) QE and hyperinflation (continue to ease the quantity of money).

    I recommend Monty Pelerin’s explanation of the Debt Death Spiral: http://www.economicnoise.com/2009/11/28/spiraling-to-bankruptcy/ It is as he explains a mathematical reality.

    • Mich

      There has to be a way out PWD or else what? what will be the end result? Qe after QE?

      • I do believe that the way out is there–but there is no painless solution. The way out is for the US government to live within its means, which at current revenues means downsizing its spending by about half and paying off debt. But the politicians won’t do what it takes, and instead there will be hyperinflation. But it is not going to be business as usual.

  • If I’m not optimistic, I shouldn’t be investing at all! I think this is a good time to accumulate. Stocks are a plenty and on sale! I would rather have an economy as it is now that at the time of retirement.

    People forget, this is not the first recession we’ve had. The going could get even more choppier, but I’ll bet on a recovery.

  • I agree with PWD, I feel that we aren’t clear out of the recession yet and things are still shaky.

    I think if the interest rates rise, and the economy is still going strong, then we are clear. But the Bank of Canada keeps on stalling on its interest rate hikes, so that’s got to be at least saying something, no?

    But then again this is the opinion of someone who has not taken an economics class in her life! :)

    • Mich

      Y&T, the BOC doesn’t have a choice but to stall for now until the US economy improves. If not, the interest rate differentials with the US will rise to a point where our exports to the US will dry. Let’s wait and see how the US pulls out of this economic morass.

  • Since election season is coming up, and politicians care the most about getting re-elected, we could get a lot of spin and Sturm und Drang about recovery. Also, given that Buffett is a fan of the current administration, suspect that his opinions might have political overtones.
    Perhaps we’ll have more sideways movement. Perhaps cities and states in the US will start defaulting on debt one at time, or several together.
    Or perhaps not.

    • Mich

      This debt thingy is such a headache but but but in hindsight, if the market overreacts it might provide some nice buying opportunities for the long run.

  • Hey Mich,

    Sometimes I think the survivalists have a point, but for the most part they are just being silly. If things really do get that bad, the countryside will NOT be safe.

    I believe that a stagnation is not only more likely but bad enough as it is. No need to talk about guns & ammo, just a dragged-out recovery is painful in its own way.

    Thanks for the mention!

    • Mich

      I don’t mind a dragged out recovery, we need a semblance of growth and job creation. That’s way better than economic contraction!

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