Warren Buffett on Monday said the U.S. economy is in recession and that "stocks are not cheap."
Speaking on CNBC television, Buffett also said he is no longer offering to guarantee $800 million of municipal bonds backed by MBIA Inc (MBI.N), Ambac Financial Group Inc (ABK.N) and FGIC Corp, three large bond insurers.
Buffett said that "from a common-sense standpoint right now, we're in a recession," though the U.S. economy has not yet recorded two straight quarters of declining gross domestic product, a traditional indicator of recession.
He said, though, that the environment is "nothing like '73 or '74 yet," referring to a deep economic downturn also marked by rising oil prices and falling stocks. Buffett said investors should not rule out the possibility of a significant economic downturn.
On Friday, Buffett's insurance and investment company Berkshire Hathaway Inc (BRKa.N) (BRKb.N) reported an 18 percent decline in fourth-quarter profit.
This stemmed in part from weakness in businesses linked to housing, including units that make bricks and carpet, and that offer real estate brokerage services.
Bond insurers, which normally insure relatively safe municipal bonds, came under pressure in late 2007 after they also guaranteed billions of dollars of riskier debt, often tied to subprime mortgages.
On Feb 12, Buffett offered to reinsure $800 billion of municipal bonds, but only at a steep premium. The offer didn't include the riskier debt. Bond insurers rejected the offer, and have been seeking new sources of capital or possibly breaking themselves up.
Buffett on Monday said his earlier offer is "not on the table." In December, Buffett started its own bond insurer, Berkshire Hathaway Assurance Corp.
No comments:
Post a Comment