BUFFETT: HOUSING IS IN A DEPRESSION
Over the weekend I posted a video by David Rosenberg claiming that we are in the middle of a modern day depression. I don’t exactly agree with that idea and I think that Warren Buffett did an excellent job explaining this on CNBC this morning. Buffett says the U.S. economy is actually incredibly bifurcated. Gauging his Berkshire businesses, Buffett says that much of the U.S. economy is actually very strong and reaching new highs. On the other hand, he says anything related to residential real estate is actually in a depression. With a D. Unfortunately for the U.S. economy, residential real estate happens to be one of the most important industries we have and residential real estate just so happens to be the U.S. consumers largest asset. So, I think it’s accurate to say that this one component of the economy is making the USA feel like it’s in the middle of a depression even though many industries are actually doing quite well.
He covers several other topics in the interview including the outlook for Europe and what he calls a “run on the banks” throughout the periphery countries. How do you stop a run? Well, you need a unified supranational entity in that case as Buffett explains:
“it’s very difficult if you have to stop a run. It takes a belief widespread belief that the people and authority will do whatever it takes to stop it and they have the ability. We believed Bernanke and Paulson would help it. There is no one with comparable authority and getting 17 people to agree on reforms next year is not necessarily a great answer.”
Buffett just summed up the Euro crisis in one paragraph for you. And so you have a massive run on the European economies. And as the leaders kick the can and shuffle the leadership position from bozo # 1 to bozo #2 the depression in Europe worsens. You can see the full interview below:
Source: CNBC
You said ‘bifurcated’.
I need a lesson in TPC spam filter circumvention from you. Just had comment get eaten for the first time EVAH.
Nah, many of my comments get caught by the spam filter (even when I don’t swear) where they get molested. Cullen releases them. And I don’t know why.
To soon for a Sandusky reference?
#AlreadyRegretThis
Completely unrelated.
His housing-related profits are in a depression. The housing market is just overbuilt. When the average age of a home is 100 years old and household size if 5, then maybe it will be a depression. If you’ve ever worked in aerospace, dotcoms, oil etc. we know what a business segment depression feels like (have you ever worked in a business where 90% of your colleagues were fired, in a 50k employee company?), but eventually the industry resizes back to historic metrics. It’s a readjustment not a (generalized) depression.
There’s $10 trillion of US residential mortgages, give or take, which exceeds the total sovereign debt in the Eurozone both in absolute and relative terms. Add to that, the sovereign debt to GDP ratio and fiscal deficit in the US is HIGHER than the Eurozone. No doubt, the current situation is bordering on chaos, but the US is facing a serious problem and sooner than most think.
Buffet was brought out to try and rally the markets today, with the focus on IBM, which given the weight in the Dow can drag the rest of the market with it. Didn’t work.
I think that aside his senility, yes Virgininia 80+ takes a tool even on Buffy, even the most argumentative types would find it hard to dispute that WB’s opinion is VERY FAR for being unbiased and it is VERY HARD for him not to talk his multibillion dollar book. David Tepper went o cash:
http://www.zerohedge.com/news/tepper-full-shrinkage-reduces-95-stock-portfolio-dumps-bank-america-wells-yahoo
Agreed, Buffett is so insulated from the rest of the world he is clueless.
On a different note, doesn’t look like we are going to have an NBA season or a functioning super committee. What are the automatic cuts slated for?
“Buffett is so insulated from the rest of the world…”
Nah, Randall Wray, the ring leader of MMT, wins the award for ivory tower dreaming,
Randall Wray: “Very generally, the idea behind our proposal is that the national government provides funding for a program that guarantees a job offer for anyone who is ready, willing and able to work. We call this the Public Service Employment program, or PSE. What is the PSE program? What do we want to get out of it?
It should offer a job to anyone who is ready, willing and able to work; regardless of race or gender, regardless of education, regardless of work experience; regardless of immigration status; regardless of the performance of the economy”
————-
No doubt, Roche will redefine ‘job’ so the peasants won’t become alarmed into the notion that “I’m a slave!”
How can there be a depression in the MMT Fantasyland?
http://www.worldacademy.org/forum/how-implement-true-full-employment-randall-wray
Then we have Ben Bernanke who on 60 minutes stated Americans should get more university degrees (Take down more loans you sucker peasants) and so what do these crooks do?
They lay off scientists en mass so they can outsource and hand a green card to every foreign educated-in-the-USA engineer to flood the market with cheap labor.
FYI – MMTers aren’t influencing current economic policy so you sound silly when you imply that we are.
Hillbilly sounds silly every time he posts.
Better, or worse, than young people joining the military for whatever war-o’-the-year we’re in for lack of better respectable employment/health insurance?
I’d have agreed that the JG idea was outrageous, except that that’s exactly how I got my start in life back in the late ’90s– selling my body to Uncle Sam.
Although it would be fantastically wasteful, guaranteed full employment would actually be a helpful move in our current situation. Combine that with eliminating the private sector minimum wage (while maintaining it for the government jobs) and allowing individuals to do both if they wish and you could pretty much wipe out unemployment all together. That would kick start our economy and lead to a virtuous upward cycle.
All real estate is local. Las Vegas real estate is a disaster. NYC real estate looks OK. Bubble markets need to come back to earth. US policy has been to try to maintain bubble valuations. It isn’t working. Instead of whining about a depression, Buffet ought to be calling for steps to clear the market so that growth can resume. Take a page from the Reagan play book in the S&L crisis in the late 1980s.
Buffet ought to be calling for steps to clear the market.
Banks don’t want that to happen.
bleh, of course it is. I bought a house in ’08, in the middle of almost nowhere, and the thing is still underwater. It’s a pretty nice old house, too, imo.
At least we got to refi last year, thanks VA IRRRRRRRRL. (how many R’s *does* that acronym have? More than two, probably fewer than five.)
–disclaimer: my husband made this drink and that means it is probably too strong for me. Many apologies, but I just can’t shut up now. Whee!
dang, things are HOPPIN’ down at Devil’s Elbow!
Always!!
You can be in a modern day Depression and still have strong economic growth in certain segments and years there is no contradiction there.
1933-36 were pretty good growth years from the trough to peak.
“it’s very difficult if you have to stop a run. It takes a belief widespread belief that the people and authority will do whatever it takes to stop it and they have the ability. We believed Bernanke and Paulson would help it. There is no one with comparable authority and getting 17 people to agree on reforms next year is not necessarily a great answer.”
I don’t know, in the US in 1907 (granted there was no central bank so thankfully presidents of large banks knew they would need to be the lender of last resort or the system was done for) there were influencial leaders like JP Morgan and Cortleyou who knew what had to be done to save the system and were willing to lock bank executives in a room until they worked things out.
Hell, Roosevelt had to go against a stance he had built his presidency on (application of the Sherman Act whenever even remotely possible) to allow US Steel to buy Tennesse Coal Iron and Railroad Company which essentially restored confidence ‘overnight’
http://www.calculatedriskblog.com/2011/11/hud-report-on-fha-financial-status.html
When you double unemployment and can not reduce it to where it was you are in a depression as far as the ordinary citizen is concerned. It influences everything that people think, feel and do. They do not care what the numbers are saying.