Warren Buffett goes bargain hunting - in the United States
Less than a year ago, billionaire Warren Buffett seemed enthralled by all things European. He went on a whirlwind tour looking for deals on the continent even though the euro was trading at a huge premium against the dollar. Now as the worldwide economy continues to weaken, the greatest investor in history has turned his attention back to the United States.
Buffett raised eyebrows a few months ago when he said he was buying American stocks for his personal account and that ''if prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities." Now, he is taking his "buy American" push a step further by adding more U.S. companies.
"The way things are going, there's a lot of things that may be happening in the United States," Buffett told Bloomberg TV, adding "the odds favor" a domestic deal for his Berkshire Hathaway Inc. (BRK.A).
With both the Dow Jones industrial average and S&P 500 down more than 20 percent this year and the Nasdaq Composite Index off by about 13 percent, Buffett has the chance to find unprecedented bargains, particularly if predictions of a turnaround in 2010 are true. He already has been busy making deals that have helped reduce Berkshire's cash position to $25.5 billion.
In July, Buffett agreed to buy $3 billion in Dow Chemical Co, (DOW) preferred shares, paying 8.5 percent and helping fund the takeover of Rohm & Hass. He also spent $8 billion on preferred shares of Goldman Sachs Group Inc. (GS) and General Electric Co. (GE), which pay 10 percent. Of course, he hasn't ignored Europe entirely, doing a $2.6 billion convertible note deal with Swiss Reinsurance Co.
Judging from his TV appearances, Buffett seems to be an optimist at heart. He comes across like everyone's favorite uncle. But unlike your relatives, he knows what he is talking about. They don't call him the Oracle of Omaha for nothing.
In his company's annual report, Buffett noted that Americans had survived worse economic time: "In the 20th century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21 1/2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges."
Buffett appears to be following his own advice of investing to be greedy when others are fearful.