Buy American. I Am. By WARREN E. BUFFETT

October 17, 2008
Op-Ed Contributor
Buy American. I Am.
By WARREN E. BUFFETT
Omaha

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This dXXXXXn leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

The World's Billionaires 2008

by Luisa Kroll

The number 13 has long been considered unlucky by superstitious people around the globe. How fitting, then, that Bill Gates' reign as the world's richest person ends after his 13th year at the top.

Despite being worth $58 billion, $2 billion more than last year, Gates is now just the world's third-richest person, ceding the top spot ranking to his good friend and partner in philanthropy, Warren Buffett, whose net worth jumped $10 billion to $62 billion. (All stock prices and net worth valuations were locked in on Feb. 11.) Ranked No. 2 is Mexican telecom tycoon Carlos Slim Helú, whose fortune has doubled in just two years to $60 billion.

It is certainly a dawning of a new era. But not just because of Gates' fall. The 22nd annual rankings of the World's Billionaires reflects all sorts of upheavals in the list's makeup. Two years ago, half of the world's 20 richest were from the U.S. Now only four are. India wins bragging rights for having four among the top 10, more than any other country.

For the first time ever, the number of billionaires Forbes could identify crossed into four figures, reaching 1,125. The total net worth of the group is $4.4 trillion, up $900 billion from last year. Despite the turbulence in the U.S. markets, Americans account for 42% of the world's billionaires and 37%, of the total wealth; those shares are down two and three percentage points, respectively, from last year.

Sixteen years after the collapse of the Soviet Union, Russia, with 87 billionaires, is the new No. 2 country behind the U.S., easily overtaking Germany, with 59 billionaires, which held the honor for six years.

The rankings include 226 newcomers. Seventy-seven of the new faces come from the U.S., half of whom made their fortunes in finance and investments, including John Paulson and Philip Falcone, both of whom became wealthy shorting subprime debt. Another third of the new billionaires comes from Russia (35), China (28) and India (19). Two of the most noteworthy new entrants are South Africa's Patrice Motsepe and Nigeria's Aliko Dangote, the first black Africans to make their debut among the world's richest. Dangote is also the first-ever Nigerian billionaire.
It is also a record-breaking year for young billionaires, with Forbes finding 50 under the age of 40, 25 of whom are new to the list. Sixty-eight percent of these under-age-40 tycoons built their 10-figure fortunes from scratch, including Google co-founders Sergey Brin and Larry Page; former Enron trader John Arnold, who now runs a hedge fund; India's Sameer Gehlaut, who started online brokerage Indiabulls; and, last but not least, Facebook founder Mark Zuckerberg, who at age 23 might just be the youngest self-made billionaire in history.

Zuckerberg is probably destined to be the most talked about newcomer of the year because of his age and ingenious social-networking site, but there are fascinating entrepreneurs of all ages climbing into the ranks. Some of the more notable ones include China's Gao Dekang, who is one of the world's biggest makers of down jackets and vests; Portugal's Americo Amorim, who turned his grandfather's small cork operation into the world's largest; and Brazil's Eike Batista, who built and lost a gold mining fortune, before hitting it big in iron ore. He is now the world's richest mining billionaire.

With all the rosy news of the past year and the overall gains, it is easy to lose sight of the volatility that has been wreaking havoc on these fortunes on a daily basis for months. For instance, Hong Kong's richest person, Li Ka-shing, lost $5.5 billion of his net worth, all tied to publicly held stocks, in the 37 days between Jan. 4 and Feb. 11.

Meanwhile, mainland China's richest person, 26-year-old Yang Huiyan, fell from $17.3 billion in September to $7.4 billion in the rankings. Google co-founder Sergey Brin's fortune touched $25.5 billion in the past year but is now down to $18.7 billion. Others were hit much harder, falling off the list entirely, including Lehman Brothers chief Richard Fuld and Bear Stearns ex-chief James Cayne (he was sacked), both victims of the world's credit crunch, and Pulte Homes' William Pulte, whose stock collapsed along with the housing market.

What will happen in the next 12 months as we continue our wealth watching? There will likely be some big losers, some big winners and a lot of ups and downs in between. The only certainty is change itself.

Warren Buffett declares America in recession

Suzy Jagger and Dearbail Jordan

Warren Buffett, the billionaire investor, today declared that the United States was in a recession as he withdrew an offer to bail out the increasingly troubled bond insurance industry.

Mr Buffett, the world's third-richest man, said that "from a commonsense standpoint right now we're in recession", despite the fact America had yet to report two consecutive quarterly falls in gross domestic product, the technical definition of a downturn.

He conceded that the economic environment was "nothing like '73 or '74", when the US was in recession and inflation reached 12.1 per cent, but he said that investors should not rule out the possibility of a severe downturn.

Evidence that the recession in residential construction has spread across America's entire building industry emerged today after official numbers showed a sharp slowdown in public and corporate projects.

Construction spending overall in January dropped 1.7 per cent, far worse than Wall Street's expectations of a 0.7 per cent decline. However, for the first time in two years, non-residential and public sector building - which includes new hospitals and office blocks - shrank 1.2 per cent.
The grim construction data suggests that the credit crisis which erupted last summer has hit company spending, spilling over from the financial sector across corporate America as a whole.
Manufacturing data published yesterday also showed another sharp slowdown in February with output at its lowest since April 2003.

Wall Street is expecting another half a percentage point interest rate cut this month, which would see the cost of borrowing fall to 2.5 per cent.

Meanwhile, Mr Buffett also confirmed that a deal to reinsure $800 billion (£403 billion) worth of government-issued bonds, known as municipal bonds, was "not on the table" any longer.
The bonds had been underwritten by MBIA, Ambac and Financial Guaranty Insurance and a deal would have provided a significant boost to the industry. It is feared that insurers will not have sufficient funds to pay billions of dollars worth of claims on toxic investments.

It is understood that Mr Buffett had offered to reinsure the bonds but only at a steep premium which was rejected by the three insurers. However, Mr Buffett had kept his offer on the table until today.

Last week his company, Berkshire Hathaway Investments, revealed an 18 per cent fall in fourth-quarter profit as income from insurance underwriting fell. Full-year profit rose by 20 per cent to $13.21 billion.

Berkshire Hathaway invests in 76 businesses including Tesco, the UK's largest supermarket, of which it owns 2.9 per cent.

Warren Buffett On PetrolChina And His Strategy

This is an interview regarding the investment of Warren Buffett on China Petrol company - PetrolChina and the reason of why he sold off all the stake of PetrolChina in year 2007.

Buffett's bond insurer looks to expand to Rhode Island

Reuters Photo: Berkshire Hathaway Inc's Warren Buffett in a file photo.

NEW YORK (Reuters) - Warren Buffett's new bond insurer is looking to expand to Rhode Island after hearing that the state's treasurer wanted it to apply for a license to operate in the state, according to a Buffett spokeswoman.

"Rhode Island, here we come," the spokeswoman quoted the billionaire investor as saying in an e-mail on Thursday after reading about state Treasurer Frank Caprio's appeal.

Caprio sent a letter to Buffett last Friday after Berkshire Hathaway Inc (NYSE:BRK-A - News) announced plans to start a new insurer that would help state and local governments lower their borrowing costs.

The new venture, Berkshire Hathaway Assurance Corp, is entering the $2.5 trillion U.S. municipal bond market at a time when established rivals are suffering from a loss of confidence because of exposure to faltering subprime mortgages.

Berkshire received an operating license from New York state's insurance department on December 28, and is expected to expand into California, Florida, Illinois, Texas and Puerto Rico, which are among 10 largest municipal bond issuers.

Caprio said he hoped Berkshire Hathaway would move quickly to seek necessary licensing to do business in Rhode Island.

"At a time when a number of existing bond insurers are facing extensive losses due to their decisions to insure mortgage-related bonds, Berkshire Hathaway's entry into this market would be a very positive development for the state and all of Rhode Island's cities and towns," Caprio said in a letter to Buffett, according to a statement released earlier this week.

Rhode Island and its local governments sold $1.4 billion of bonds last year, according to Thomson Financial.

Caprio welcomed Buffett's plans to insure only municipal bonds and stay away from the mortgage sector, which could cost large bond insurers such as MBIA Inc. (NYSE:MBI - News) and Ambac Financial Group Inc (NYSE:ABK - News) their top-notch ratings.

"When it comes to seeking bond insurance, I would welcome arrival of an insurer who is not only committed to maintaining a strong capital ratio, but is serious about avoiding unnecessary risk simply to expand its business," Caprio said.

States, cities and towns sell bonds to finance schools, roads and other public projects. They often insure their debt to reduce the perceived risk of holding bonds and thus reduce their borrowings costs. About half of outstanding municipal bonds are insured.

Municipal bonds insured by MBIA, Ambac, FGIC, a unit of Blackstone Group LP (NYSE:BX - News), XL Capital Assurance, a unit of Security Capital Assurance (NYSE:SCA - News), and others have dropped in value in recent months on fears that insurers could lose their top ratings. Bonds insured by Dexia's (Brussels:DEXI.BR - News) Financial Security Assurance have not been affected because that insurer's ratings are not vulnerable to downgrades.

"In this turbulent financial environment, I know state and local issuers across the country will be looking for a reliable partner to help them insure bonds on a range of crucial projects," Caprio said.

Berkshire has "triple-A" ratings and expects the new unit to earn the same rating. Moody's Investors Service and Fitch Ratings declined to say whether the new insurer has applied for a rating.

(Reporting by Anastasija Johnson; Editing by Dan Grebler)

Berkshire Hathaway stock price as at 4th Jan 2008