Dow rebounds as Warren Buffett writes off chances of a double dip in US
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Thursday 07 June 2012
While all around may be losing their heads, Warren Buffett kept his, declaring emphatically that the chances of a double-dip recession in the US, the world's largest economy, were "very low".
The 81-year-old investment guru (pictured) was all smiles and optimism in a speech to the Economics Club of Washington, and his relatively sunny outlook for the world's largest economy seemed to touch a chord because the Dow Jones Industrial Average rebounded strongly yesterday as investors switched money out of save-haven assets like US government bonds.
Investors had entered a defensive crouch last week amid disappointing numbers on monthly jobs growth in the US and the ebbing of confidence in the eurozone, but buying Treasuries was not going to reap rewards over the long term, Mr Buffett said.
"The average person who just consistently buys equities – which to me are by far the most attractive investment choice around – at the end of 20 or 30 years, they'll do very well," he said.
The US will escape a recession "unless events in Europe develop in some way that spills over here big-time", Mr Buffett said, and although he reeled off a list of challenges facing the US – from a looming fight on Capitol Hill over expiring tax cuts, to the ever-rising national debt – he said that economic challenges had been overcome before and could be again.
"We're not smarter than the people in 1930, we don't work harder than the people in 1930, we just have a system that works and has been working since 1776 and will keep working," he said.
Mr Buffett is the second-richest man in the US, after Microsoft's Bill Gates, having built his company, Berkshire Hathaway, into a giant conglomerate spanning insurance, railways, utilities and, recently, local newspapers.
His homespun wisdom is sought so often by investors, the media and the general public that he has become known as the Sage of Omaha, where he grew up and still lives.
In the past few years, he has been outspoken on the need for the richest Americans to pay more in taxes to share the burden of reducing the nation's $13trillion debt. President Barack Obama has even named a tax proposal after him; the "Buffett Rule" would impose a minimum 30 per cent tax rate on individuals earning more than $1m a year.
"I couldn't get a disease named after me, so I settled for a tax," Mr Buffett joked.
The chief who's tops for value
Warren Buffett is the chief executive who has provided the most value for money, according to an analysis of the 50 biggest publicly traded finance companies in the US.
With a salary of just half a million dollars for running Berkshire Hathaway, Mr Buffett ranked 50 out of 50 in terms of his take-home pay last year, while Berkshire stock returned 19 per cent to shareholders over the past three years.
The analysis, for Bloomberg Markets magazine, ranked chief executives on value for money by dividing annual compensation by the three-year investor return.
The league table also provided a new ranking of the highest-paid bosses on Wall Street, with private equity tycoons taking the top slots. Henry Kravis and George Roberts, two of the three founders of KKR, were first and second, respectively, with take-home pay of $30m and $29.9m. John Strangfeld, the chief executive of the life insurer Prudential Financial, was paid $23.7m, while Jamie Dimon, the chief executive of JPMorgan Chase, was fourth with $23.1m.
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