Despite the numerous experts’ forecasts, Warren Buffet – a billionaire and one of the most successful investors in history – is convinced that the US won’t see another financial crisis in the near future. In the annual speech in front of the shareholders of his investment company Berkshire Hathaway Inc. Mr. Buffet outlined a strategic investment plan for 2011, which includes big-scale investments in the US economy - $38B from the reserves of Berkshire Hathaway.
Forecast: why do analysts feel pessimistic?
Politicians and financial experts are unanimously sure that the global financial crisis started in 2008 is over and that the global economy is recovering slowly but surely reaching the pre-crisis levels.
· However more and more experts start mentioning the 2nd wave of the global economic crisis. Even Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), shares the same idea. Growing unemployment and protectionist barriers in the field of international trade and finances cause tension and may result in another wave of the global crisis.
· To some extent the analytic forecast about the forthcoming global food crisis comes true.
· Inflation in the EU has reached the highest levels since the beginning of the global recession.
According to experts, the most problematic economies are the US and Chinese one. If another “credit bubble” bursts in any of the two countries the wave will hit the entire world.
Howard Friend, chief economist for MigBank (a Forex broker), points out that the Fed Res is currently pumping into the US economy hundreds of billions of dollars which is used by the banks to speculate with the stocks of mining companies (oil, gold, silver etc). In summer when the Fed Res will stop pouring the money into the economy the bubble may burst.
At the beginning of the year Bloomberg agency interviewed international investors on the situation in China. 45% of the respondents assume that the financial crisis will hit China within the next 5 years. 40% of them think the crisis will hit China later, after 2016. And only 7% of the investors assume that China will avoid financial shocks.
The USA restores the national economy.
The crisis in the US started arising in 2002-2006. During the period the US housing market saw a price boom. The prices and mortgage interests grew 50% e year even though previously the annual growth didn’t exceed 10%.
· The price bubble grew together with the prices in the form of the so-called security assets (i.e. the process when the lent loans are used to issue securities, which are sold, and the revenues are used to lend new loans).
· Later the securities were used to buy derivatives. In a couple of years the US financial market turned into a complicated tangle with hundreds of billions of dollars. Nobody could make out anything. More and more investors relied on ratings rather than common sense.
The US economy is still weak after the recent crisis, Howard Friend says.According to him, any relatively significant price hike may result in another economic recession:
· The US authorities do their best to prevent it – they reduce numerous public programs, cancel tax rebates for big companies. Barack Obama urges international investors to invest in the US economy at least 2 trillion dollars.
· In order to reduce the balance-of-trade deficit showing growth in the recent years Washington is trying to get the US production back to the country, which will help to reduce the deficit and will create millions of new jobs. Such giants as Caterpillar and General Electric have already supported the initiative.
Should one trust Warren Buffet?
Warren Buffet assumes the considerable foreign investments may save the US economy:
· The main stimulus for foreign investors is opportunities: he likes to repeat that money always flow toward opportunities. The US has always had such opportunities to offer.
· According to Mr. Buffet another crisis may be caused only if the commodity markets undergo some shocks. The stocks of the commodity companies may collapse, but this is a chance for foreign investors to make big profits in the near future.
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Should Warren Buffet’s words be trusted? His investment fund called Berkshire Hathaway is on the list of the USA’s 10 most influential companies. It is engaged in investment and insurance. Berkshire Hathaway controls more than 40 companies (financial services, everyday products, jewelry, construction materials, production of foodstuffs etc.) The company’s portfolio includes the stocks of Coca-Cola, Wells Fargo, American Express, Exxon, Moody's etc.
The 80-year old billionaire himself is a legendary personality. He is one of the world’s richest people. He is modest and unpretentious (he still eats fast food and lives in an old house bought in 1958 for $31,5K). Buffet sticks to the long-term investment strategy of buying the undervalued stocks with high potential.
Each dollar invested in his company Berkshire Hathaway in 1965 at the moment of its creation now costs more than $5000.
Market Leader notes: Mig Bank is a Swiss investment bank specializing in providing its clients from over 120 countries of the world (5 continents) with high-quality Forex broking services. The company is one of the key subjects in the sector of Forex services. Moreover the bank is one of the fastest-growing Swiss Forex brokers.
It is headquartered in Newshatel (Switzerland – the country that is famous for its financial security, stability, legislation and banking privacy). The broker’s activity is regulated by FINMA, an independent Swiss supervisory authority, which helps to preserve the stability and quality of the provided broking services. Moreover, the company has an international ISO certificate, which means that it provides premium-quality service.
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