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Monday, April 21, 2008

Fortune: What Warren thinks...

by Calculated Risk on 4/21/2008 09:23:00 PM

From an interview with Warren Buffet in Fortune Magazine: What Warren thinks...

Q: Are we a long way from turning a corner?

Buffett: "I think so. I mean, it seems everybody says it'll be short and shallow, but it looks like it's just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain. And the consequences kind of roll through in different ways. Now, I don't invest a dime based on macro forecasts, so I don't think people should sell stocks because of that. I also don't think they should buy stocks because of that."
Buffett talks about not timing the market based on macroeconomics, but he did time the housing market perfectly. He bought a Laguna Beach, CA house in 1996 for $1.05 million (at the market bottom), and sold in 2005 for $3.5 million. It's not like he needed the money.

Here was Buffett's comment at the time:
"People go crazy in economics periodically. Residential housing has different behavioral characteristics, simply because people live there. But when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences."