Warren Buffett is Wrong
And that's a hard thing to write. But he's wrong. From Bloomberg:
Billionaire Warren Buffett said he is wagering on continued economic expansion and doesn’t expect a second recession.
“I would bet very heavily against that,” Buffett told Bloomberg Television’s Betty Liu on the “In the Loop” program today after data showed slowing U.S. job growth. “How fast the recovery will come, I don’t know. I see nothing that indicates any kind of a double dip.”
The unemployment rate unexpectedly climbed to 9.2 percent in June, the highest level this year, and hiring by companies was the weakest since May 2010, Labor Department data showed. U.S. employers added 18,000 jobs last month, less than the 105,000 median estimate in a Bloomberg News survey.
“It means that we’re still a ways off from getting to where we should be,” Buffett said in the interview, in Sun Valley, Idaho. “We’re seeing growth around the world, but it’s not mushrooming.”
Even genius billionaires can be wrong. Where's this growth "around the world?" Where's this growth at home? As Mollie notes below, the job report today is miserable. Unemployment actually increased to 9.2%.
And as usual, there's the familiar media trope about how all of this was unexpected, from the WSJ:
Nonfarm payrolls rose 18,000 last month, far fewer than expected, as small gains in the private sector were just enough to outweigh continued government-job losses....
Ever since Obama took the oath of office, we've been in a "recovery." A recovery with rising unemployment and stagnant growth, but somehow, someway, it's always been called a "recovery." A "sputtering" recovery. An "anemic recovery." A "slow" recovery.
That's like saying the Great Depression was a Great Recovery. Or a Drifting Recovery, Energized by World War.
Maybe the reason all of these bad economic numbers are so "surprising" and "unexpected" is because people keep insisting, in a fog of self-delusion, that is a recovery.
It's not. Warren Buffett is wrong. It's the start of a double-dip recession.
Now, everyone in the media, go back and look at the numbers with that in mind.
Not so unexpected now, are they?
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Jun '10
Re: Warren Buffett is Wrong
Warren may be right in the long run. But what he describes ain't happenin' now.
Jul '10
Re: Warren Buffett is Wrong
If the economy under President Bush was "in a deep recession, the worst since the Great Depression," is Obama's GDII?
May '10
Re: Warren Buffett is Wrong
Did we or did we not repeat the manipulation of the housing market that triggered this mess? If subsidizing homes for people with bad credit or insufficient income got us in trouble the last time, why won't it get us in trouble this time?
And who really believes the President when he says he's willing to seriously cut back spending?
May '10
Re: Warren Buffett is Wrong
To be fair to the "Wall Street Journal," the concept of "expected" is more objective than simply a liberal media trope. It represents an average published by all the investment banks with publishing economists making the forecast. So it really is the market being surprised not some kind of rhetorical feint engineered by the White House.
Re: Warren Buffett is Wrong
Okay, but then how do you explain that they're always taken by surprise by bad news? The unemployment numbers are always unexpected.
May '11
Re: Warren Buffett is Wrong
Rob Long
Okay, but then how do you explain that they're always taken by surprise by bad news? The unemployment numbers are always unexpected. · Jul 8 at 7:49am
Because they are economists.
Aug '10
Re: Warren Buffett is Wrong
Since Buffet put his support behind Obama in 2008 I think he may be trying to prop him up to make himself look better. I mean, if you're the wizard of Omaha and you supported someone for president who is as bad an economic train wreck as Obama that's got to sting the 'ol ego just a bit, don't you think?
Re: Warren Buffett is Wrong
Southern Pessimist
Rob Long
Okay, but then how do you explain that they're always taken by surprise by bad news? The unemployment numbers are always unexpected. · Jul 8 at 7:49am
Because they are economists. · Jul 8 at 7:54am
Ah. Yes. Excellent point.
May '11
Re: Warren Buffett is Wrong
Rob Long
Okay, but then how do you explain that they're always taken by surprise by bad news? The unemployment numbers are always unexpected. · Jul 8 at 7:49am
I think they just have it in a macro on their computers, hit "F8" and "Unemployment number rise unexpectedly...."
When Bush was in the white house, if the unemployment dropped by 0.2% then the narrative was "The drop of only 0.2% in unemployment was unexpected"
I mean really, can anyone honestly stand there with a straight face on the main stream media and continue to say these things? Rob you should nominate some of these talking heads for "Best acting in a propaganda film" if they give out Oscars for that...
Re: Warren Buffett is Wrong
Maybe Warren Buffett is so optimistic because he made a big bet on a politically connected investment bank, openly admitting he was counting on the government to bail that bank out. And they did and now he's cashing in on his bet.
Or so I learned from today's Washington Examiner.
Aug '10
Re: Warren Buffett is Wrong
Southern Pessimist
Rob Long
Okay, but then how do you explain that they're always taken by surprise by bad news? The unemployment numbers are always unexpected. · Jul 8 at 7:49am
Because they are economists. · Jul 8 at 7:54am
Oh, I don't know. Hubby's an economist, and he's not surprised -- in fact, he expects it to get worse. And I haven't noticed Thomas Sowell being particularly optimistic lately.
Maybe economists working at investment banks are more prone to over-optimism?
Sep '10
Re: Warren Buffett is Wrong
Warren Buffet is right. We are a long way from negative GDP growth. The economy has been hurt by the President's economic policies in countless ways and we are seeing a japan-like stagnation caused by policies that prevent markets from clearing in things like house prices and by the financial repression that the Fed is doing to savers but we are seeing growth in manufacturing, retail sales are rising, and large public corporations are mostly highly profitable and awash in cash.
Jul '10
Re: Warren Buffett is Wrong
Midget Faded Rattlesnake
Southern Pessimist
Rob Long
Oh, I don't know. Hubby's an economist, and he's not surprised -- in fact, he expects it to get worse. And I haven't noticed Thomas Sowell being particularly optimistic lately.
Maybe economists working at investment banks are more prone to over-optimism? · Jul 8 at 8:19am
Maybe economists working at investment banks realize that nobody likes a doomsayer.
In early 2007, the lead economist for Wachovia Bank told the home-building company I worked for that the housing market would turn around in the 3rd Quarter.
When he left, I said that the market wouldn't turn around for five years and more likely ten and that we should drop our options on land for new $500,000 houses and concentrate our efforts on the less-glamorous and less-profitable low-end rental business.
They fired my gloomy self six months later, kept going full-bore on their vanity projects and promptly found themselves with empty developments they couldn't finish - while the waiting list in their trailer parks grew daily.
Meanwhile, Wachovia went out of business.
Edited on Jul 8, 2011 at 8:37amMay '10
Re: Warren Buffett is Wrong
Rob Long
Okay, but then how do you explain that they're always taken by surprise by bad news? The unemployment numbers are always unexpected. · Jul 8 at 7:49am
Midget Faded Rattlesnake
Maybe economists working at investment banks are more prone to over-optimism? · Jul 8 at 8:19am
Midge has it right.
Investment banks very rarely tell investors to sell. There is a bias on the part of those employed in jobs making recommendations to investors to be optimistic. This is not a liberal media conspiracy. This is salesmanship. Jobs numbers actually do beat expectations on occasion which is why the market rallied so strongly on the ADP numbers from yesterday and why the sharp contrast with today's government numbers constitutes a "surprise."
Not disagreeing with your conclusion mind you, but there is just as much self-interested pessimism in your double-dip forecast as there is self-interested optimism in Wall Street's predictions of job growth.
Dec '10
Re: Warren Buffett is Wrong
The real insight on this comes from Frozen Chosen and Mollie Hemingway. Buffet enjoys an undeserved reputation as the folksy Sage of Omaha when he is really a very cynical and manipulative financier. He is closer to a Soros than a Forstmann. In addition to using the government (i.e. you and me) to guarantee his investments he's a predator on others. Here's a multi-billionaire who makes a fetish out of not only keeping the estate tax but raising it. Why? It's part of his business model. One of his strategies is to prey on family businesses where the owner was too focused on creating value than estate planning. When the patriarch dies the family can't afford the estate tax. In walks Buffet who buys the business at a fire sale price so the heirs can afford to pay the government. Nice, huh! I've got nothing against a man using guile to succeed in the marketplace even of taking advantage of every legal loophole or the failure of others. But, to advocate for rules that sucker the productive is cynical in the extreme and is not in the spirit of a true capitalist.
Jul '10
Re: Warren Buffett is Wrong
Absolutely spot on, Alan. Few people know what you know about Buffett. The man is a predatory rent-seeker.
Feb '11
Re: Warren Buffett is Wrong
I think one has to realize that Buffet's wealth is tied to Berkshire Hathaway investments. Many of the the investments are multinational companies which allows his holding company do diversify and minimize its investment risk. Hence his optimism regarding growth outside the US. He and his investors will weather this economic downturn. I do agree that since he endorsed Obama he is trying to shore up the value of his "investment". I think that the myth of the Oracle of Omaha is beginning to crack. Scandal hit him earlier this year when one of his CEO's who was also a contender to succeed him was caught in insider trading. Buffet backed him up and was publicly embarrassed when the investigation found the CEO culpible. His aura of always having good judgement is now being questioned and his continued support for Obama will not help.
Edited on Jul 8, 2011 at 9:33amJan '11
Re: Warren Buffett is Wrong
Those predictions are always attempts at self-fulfilling prophecies. And the more they're used that way, the less effect each prediction carries.
To quote Woody Allen, I think what we have here is a dead shark.
May '10
Re: Warren Buffett is Wrong
According to NBER, the last recession ended in June of 2009, hence we've got growth. Its simply not enough however to reduce unemployment which is distinct from growth. Economic growth can and does occur in the absence of falling unemployment.
May '10
Re: Warren Buffett is Wrong
I don't think it can crack because it's exactly what you describe - a myth, therefore unreal. I generally admire Buffet's overall record, but his politics can be downright horrifying. The other thing to remember is that his record has not been an unbroken string of success. USAir was a disaster, Salomon Brothers was a constant millstone around his neck, and those are just two examples.
Anyway, Rob's conclusion could be incorrect. Maybe there is an argument to be made that, strictly speaking, we're not headed into a double dip recession as economists would describe it. The problem I have with Buffet's quote is that he may be trying to use the argument against a double-dip recession to put a shiny patina on an laggard economy. If that's the case, the problem is not necessarily that he's wrong but that he's misleading. And why would he do that? Who knows, but I think the suspicion that politics are involved is, at the very least, fair.