Famous investor says US in recession

March 4, 2008

Dear friends,

As correctly predicted by earlier this year based on the SAMVA USA chart, concerns about a recession in the USA are hanging like a dark cloud over the US financial markets and keeping them volatile. Now the respected investor Warren Buffet is warning of a further decline.

Best wishes,

Thor

Buffett warns on US recession

FT.com

By Krishna Guha in Washington and Michael Mackenzie in New York

Published: March 3 2008 20:46 | Last updated: March 3 2008 21:08

The US is in recession by “any common sense definition” of the word, the country’s most successful investor said on Monday.

Warren Buffett told CNBC that while the US might not have met the formal tests of recession, “most people’s situation – certainly their net worth – has been heading south for a while now”.

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Meanwhile, Alan Greenspan, the former Federal Reserve chairman, told the Financial Times that “the rate of growth in economic activity is effectively zero”.

The comments from Mr Buffett and Mr Greenspan came as gold and oil hit record highs and the dollar suffered early losses, before all three moderated on profit-taking.

Meanwhile, the ISM manufacturing survey declined to 48.3 in February from 50.7 in January – indicating a decline in manufacturing activity.

However, the index did not fall as sharply as some economists had feared.

Separate data showed commercial construction fell 0.8 per cent in January after a 0.5 per cent decline in December, the first hard evidence that non- residential investment in property is slowing sharply.

Goldman Sachs said: “We expect more and steeper declines”.

Mr Buffett said stocks were “not cheap”. He said the financial markets were experiencing “waves of deleveraging” and warned that the dollar would continue to decline.

He said Ben Bernanke, the Fed chairman, had a difficult task balancing the risks to growth and inflation, but said “it is nothing like 1973, 1974 yet”.

While several other high-profile figures also now argue that the US is now in recession, the economic debate remains open.

The hard economic data suggest the US economy stalled in December and January – neither expanding nor shrinking. Real consumption was flat for two months in a row, industrial production was broadly unchanged and there was a small decline in private employment.

Mr Greenspan said he was still not prepared to call a recession, although he said “the probability that we will experience some negative growth is better than 50/50”.

The former Fed chief said he would define a recession as “the onset of a significant set of discontinuities” in an economy. “We are beginning to see signs of that in the US, but it is not yet fully conclusive,” he said.

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