Buffet: ‘No Magic Bullet’ on Credit System

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In a wide-ranging interview with “Nightly Business Report” on Jan. 22, Berkshire Hathaway chairman Warren Buffett addressed the economy, credit crisis, government stimulus bills, the Madoff scandal and his own investing strategy.

“Well we’ve had to get the credit system partially fixed in order for the economy to have a chance of starting to turn around. But there’s no magic bullet on this,” he said. “They’re going to throw everything from the government they can in. As I said, the Treasury is going all in, the Fed and they have to and that isn’t necessarily going to produce anything dramatic in the short term at all. Over time the American economy is going to work fine.”

Several times during the interview, Buffet spoke about devoting every resource to fixing the economy.

“All you know is you throw everything at it and whether it’s more effective if you’re fighting a fire to be concentrating the water flow on this part or that part. You’re going to use every weapon you have in fighting it. And people, they do not know exactly what the effects are,” he said. “Economists like to talk about it, but in the end they’ve been very, very wrong and most of them in recent years on this. We don’t know the perfect answers on it.”

Buffet called the Madoff scandal “a special case,” adding, “I wouldn’t put my trust in a single individual like that. I would put my trust in a very good business. I would want a business that was so good that if a social guy was running it, it would still certainly do well and there are plenty of businesses that are like that.”

As for his own investment strategy, Buffet says the the current situation “[d]oesn’t change my approach at all. My approach to investing I learned in 1949 or ’50 from a book by Ben Graham and it’s never changed.”

That book, “The Intelligent Investor,” was last published (as a fourth edition) in the early 1970s before being re-released several years ago.

“The most important investment lesson is to look at a stock as a piece of business not just some thing that jiggles up and down or that people recommend or people talk about earnings being up next quarter, something like that, but to look at it as a business and evaluate it as a business,” Buffet said. “If you don’t know enough to evaluate it as a business you don’t know enough to buy it. And if you do know enough to evaluate it as a business and its selling cheap, you buy it and don’t worry about what its doing next week, next month or next year.”

Photo Credit: Amante Gatuno via Flikr

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