Editor’s note: This article was first published in October 2012, as news summarizing a CNBC interview, and its outlook on the slowing global economy, the euro crisis, the upcoming US election and Bernanke’s monetary policy reflects that moment. The Spanish company picks are the author’s 2012 views, and Dia later went through a deep financial crisis.
It had been a while since Warren Buffett shared his views with a financial outlet, but he has now given an interview to CNBC explaining where he thinks we stand.
The global economy is slowing down, above all because of Europe’s problems and the slowdown in Asia. On Europe, he declined to say whether he thinks the euro will end up disappearing or will pull through. He simply argued that Europe still has many problems to solve, and that is why his investment vehicle, Berkshire Hathaway, is still staying away from Europe.
As for the United States, Buffett believes a very slow, gradual and modest recovery is under way, and that a rebound in real estate prices can already be seen. He says the US is beginning that recovery process and that, whoever wins the coming election, Bernanke’s monetary policies will bear fruit. He did insist once again, though, that American businesses would do much better if political leaders sorted out the country’s fiscal problems.
Buffett is betting on banks, although he warns that, even though they are a good business, investors should bear in mind that banks will not reach the price peaks they hit during the boom. At least, he thinks he probably won’t live to see them get back to those levels. We have already published the 10 stocks picked by top investors to weather this crisis.
Buffett said he has a possible large acquisition in hand worth around $6 billion, although he gave no clues because he is still evaluating it.
Once again he advised investors that, when choosing a stock, what matters is not so much liking the share price as liking the company, and above all analyzing a company’s competitive advantages. In other words, its ability to sustain its earnings against competitive pressure over the long term. We should pick a company we like, one that opens new markets during a recession and whose business is not easy for a competitor to take. Coca-Cola, Amazon and McDonald’s are examples.
In Spain, examples might be Inditex, Día or Grifols.
Reading between the lines, Warren Buffett has basically sent Europeans a message: we still have a long way to go before our problems are solved.
Further reading
- Warren Buffett’s keys to financial success
- The 5 best books on financial education
- Why the poor keep getting poorer and the rich keep getting richer
Featured image: shannonpatrick17 ., CC BY 2.0, via Wikimedia Commons.
