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Thursday, June 23, 2005

Buffett on Housing: Some people may regret recent purchases

by Calculated Risk on 6/23/2005 10:24:00 PM

Warren Buffet was interviewed on CNBC today. Here are a few of his comments as reported by Dow Jones:

On The Real-Estate Bubble:

Lending practices, low interest rates, and "the psychology that ensues when an asset class moves year after year and people feel 'why didn't I get into it before?'" is creating a precarious situation in some of the real estate markets, Buffett said.

At the high end of the market, Buffett said people may regret recent purchases.
On the Dollar and the Trade Deficit:
Buffett said the trade deficit was "a deeply embedded structural problem."

The investor cited Federal Reserve Chairman Alan Greenspan in 2002, saying that countries who experience similar trade-deficit trends in the past, "invariably have run into problems."

"Eventually the current-account deficit will have to be restrained," Buffett said.

"We've gone from being a country that owned more of the rest of the world than they owned of us to a country probably $3 trillion in the hole right now in terms of our net worth position," Buffett said. "So it will have had a effect, it may be a month from now, it may be five years from now."

As a consequence of such imbalances, Buffett warned that the dollar will continue its downdraft "at some point," and indicated that he expects the dollar to be weaker five years from now.
On China:
Buffett said he doesn't subscribe to the view that China is engaging in a trade war with the U.S. He said Chinese corporate takeovers, such as CNOOC Ltd's (CEO) recent bid for Unocal Corp. (UCL) were an "inevitable" consequence of the U.S. trade deficit. He noted that the U.S. imported far more goods from China than it sold to the nation.

"If we're going to consume more than we produce, we have to expect to give away a little bit of the country," said the "Oracle of Omaha."