Buffett Says Bet on Natural Juices of Market
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A), said investors should bet on the “natural juices” of capitalism in the U.S. even as lawmakers struggle to narrow the budget deficit.
People tend to “focus too much on what the government’s done, and to give them either credit or blame,” Buffett said in an interview conducted by the chief executive officer of Business Wire, the Berkshire subsidiary that distributes press releases. “The real credit belongs to our system.”
Buffett, 82, has used annual letters to shareholders and public appearances to highlight the prospects for the world’s largest economy, where most of Berkshire’s operations are based. He’s also called for an increase in taxes on the wealthiest individuals to help reduce budget deficits and forestall cuts, an approach that Republicans say would hurt growth.
The U.S. economy “is coming back because of the natural juices of capitalism and not because of government,” Buffett told Business Wire’s Cathy Baron Tamraz in a video interview posted online today. “We have a wonderful system that eventually is self-cleansing and always moves forward.”
Gross domestic product slowed to a 0.1 percent annual pace in the last three months of 2012 as defense spending plunged the most since the Vietnam War era. Congress mandated $1.2 trillion in across-the-board spending cuts, to begin this year and be spread over nine years, as part of a 2011 deal to increase the U.S. debt limit.
The reductions, to be split almost evenly between defense and non-defense spending, were intended to be so onerous that lawmakers wouldn’t let them occur. Democrats led by President Barack Obama have disagreed with Republicans over whether a substitute plan should include new tax revenue.
Buffett, the second-richest person in the U.S., said in a March 1 letter that Berkshire would keep its “foot to the floor” on capital spending as it takes advantage of opportunities in the country. The Omaha, Nebraska-based company spent $9.8 billion in 2012 on plant and equipment as it bolstered railroad and energy units and will probably exceed that amount this year, wrote Buffett, who is chairman and CEO.
“Opportunities abound in America,” he said.
Buffett built Berkshire over almost five decades through stock picks and takeovers into a business valued at more than $250 billion. Its operating units provide insurance for cars and the costliest natural disasters, make paint and bricks, print newspapers, and sell furniture, diamonds and chocolate.
Berkshire gained 0.5 percent to $153,397 at 4 p.m. in New York. The stock is up about 14 percent this year and has gained more than 40 fold in the past quarter century.
The arc of history shows the potential of the U.S. economy, Buffett said in the interview with Tamraz, citing the Great Depression, two World Wars and the Civil War.
“We went from a wooded land to an incredible, absolute abundance of riches” because the U.S. has had a system that can “unleash human potential,” he said. “Never bet against what humans can accomplish if they’re operating in the right soil. And we have the right soil.”
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