Reuters
April 28, 2008
SourceNEW YORK (Reuters) — Warren Buffett, the world's richest person, said Monday that the U.S. economy is in a recession that will be more severe than most people expect.
Buffett made his comments on CNBC television after his Berkshire Hathaway (BRKA, BRKB) agreed to invest $6.5 billion in the takeover of chewing gum maker Wm Wrigley Jr (WWY) by Mars in a $23 billion transaction.
"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.
"I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."
He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, house for a half-century, despite being worth an estimated $62 billion.
On Wednesday, the Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2% rate in the quarter.
Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.
Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico, but it owns more than 70 businesses.
Many of those businesses are tied to the housing market, including Acme Brick, insulation maker Johns Manville and the real estate brokerage HomeServices of America.
Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.
"In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."
Buffett sees no respite from the housing slump.
"I think this is going to be fairly long and fairly deep, but who knows," he said.
In March, Forbes magazine pegged Buffett's net worth at $62 billion, ahead of Mexican tycoon Carlos Slim's $60 billion and Microsoft Chairman Bill Gates' $58 billion. Gates is a friend of Buffett and a Berkshire director.
Copyright 2008 Reuters Limited.