Buffett Rules Out Double-Dip Recession Amid Growth
“I am a huge bull on this country,” Buffett, Berkshire’s chief executive officer, said today in remarks to the Montana Economic Development Summit. “We will not have a double-dip recession at all. I see our businesses coming back almost across the board.”
Berkshire bought railroad Burlington Northern Santa Fe Corp. for $27 billion in February in a deal that Buffett, 80, called a bet on the U.S. economy. The billionaire’s outlook contrasts with the views of economists such as New York University Professor Nouriel Roubini and Harvard University Professor Martin Feldstein, who have said the odds of another recession may be one in three or higher.
“I’ve seen sentiment turn sour in the last three months or so, generally in the media,” Buffett said. “I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”
The world’s largest economy grew at a 1.6 percent annual pace in the second quarter, exceeding the median forecast of economists surveyed by Bloomberg News, revised figures from the Commerce Department showed on Aug. 27. U.S. economic growth will slow to 2.5 percent next year from a projected 2.7 percent this year as unemployment above 9 percent tempers consumer spending, according to the median forecast of economists surveyed by Bloomberg News this month.
‘Signs of Life’
Buffett built Omaha, Nebraska-based Berkshire into a $200 billion provider of insurance, energy and luxury goods and services over four decades. The company cut about 20,000 jobs last year as demand for its products declined.
The economy is still recovering and isn’t likely to slip back into recession as “signs of life” appear in the U.S., Bank of America Corp. CEO Brian Moynihan said today at an investor conference.
Buffett, who spoke via video connection to an assembly in Butte, Montana, said U.S. banks were ready to boost lending and encouraged entrepreneurs to seek financing for their business ideas. Berkshire is the biggest shareholder of Wells Fargo & Co., the top U.S. home lender.
‘Night and Day’
“It’s night and day from a year, year and a half ago,” Buffett said. “I know Wells Fargo, they would love to have $50 billion more of loans now. Go in and talk to the banker.”
Buffett amassed the world’s third-biggest personal fortune through decades of stock picks and takeovers. Berkshire’s stake in San Francisco-based Wells Fargo was valued at about $8.2 billion at the end of June. Buffett’s firm also owns $5 billion of preferred stock in Goldman Sachs Group Inc. and more than $1.5 billion of shares in U.S. Bancorp, according to data compiled by Bloomberg.
Berkshire gained $1,023, or 0.8 percent, to $125,000 at 4 p.m. in New York Stock Exchange composite trading. The stock has climbed 26 percent this year, compared with a decline of 1.8 percent for Wells Fargo and an 8.6 percent drop for Goldman Sachs.
The U.S.’s “central challenge” will be to speed growth, General Electric Co. CEO Jeffrey Immelt said at the conference. Immelt, 54, called for an increase in exports of manufactured goods to help compete globally. Expansion will be further bolstered when smaller businesses and consumers regain confidence in banks and are able to borrow more, Immelt said.
“We need people to be able to feel like they’re going to get loans, the process is going to work and that they understand the rules,” Immelt said. Signs across the world show growth improving as evidenced by a rise in GE’s orders, he said.
GE is the world’s biggest maker of jet engines, power-plant turbines, locomotives and medical imaging equipment.