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warrior bodhisattva
Super Moderator
Location: East-central Canada
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U.S. economy will be in shambles all this year: Buffett
So the DOW is below 7,000, and now Warren Buffett has weighed in:
Quote:
Dow below 7000 on Buffett’s dire warning
Stephen Gunnion
Iconic investor’s ‘shambles’ remark rattles markets hit by AIG, HSBC losses
Markets Editor
WALL Street’s Dow Jones index plunged below the 7000 level for the first time since October 1997 yesterday, after US insurer American International Group (AIG) reported a record $61,7bn loss for the fourth quarter of last year and billionaire investor Warren Buffett said the US economy would be in a shambles all of this year.
Last night, the Dow closed 4,24% down at 6763,29.Worries that financial firms would need more capital also hit sentiment as the US prepared to give AIG a further $30bn in new capital, on top of the $150bn the insurer has already received.
The share price of Europe’s largest bank by market value, HSBC, fell as much as 24% after it said it was raising £12,5bn from shareholders to shore up its capital as it posted a 70% drop in net profit for last year.
Mitsubishi UFJ Financial Group, Japan’s biggest bank, retreated 6,8%. Asian and European markets fell 3,5%-5,5% on the renewed worries.
However, despite a further 5% slump in banking share prices, the JSE ended the day just 0,5% lower at 18387 as gold and platinum stocks rallied on higher precious metals prices.
Spot gold rose briefly to $958/oz, while platinum traded at high as $1096,50/oz.
The rand slumped to R10,52/$ in early evening trade as global risk aversion grew. Worse than expected trade data released on Friday also weighed on the currency.
“The problem is that no one yet has a feel that the recession will end this year,” said John Wilson, chief technical strategist at Morgan Keegan. “The depth and duration of the recession is up for question, and until people determine that I think the market will have a tough time making a lot of progress.”
Buffett said in his keenly awaited annual letter to investors on Saturday that his insurance and investment company, Berkshire Hathaway, had its worst year last year.
The grim news came a day after the US government said gross domestic product for the fourth quarter shrank at an annual rate of 6,2%.
Buffett said he was sure “the economy would be in shambles throughout this year and, for that matter, probably well beyond, but that conclusion does not tell us whether the stock market will rise or fall”.
The credit crisis and recession have now halved the Dow Jones’s average’s value since it hit a record high of more than 14000 in October 2007.
Standard Online Share Trading’s Simon Brown said HSBC’s poor results followed bad news from Citigroup in the US and Lloyds in the UK last week.
This continued to put pressure on shares in local banks. Although Standard Bank had provided guidance to the market, he said investors were still nervous ahead of results from SA’s largest bank on Thursday and from life assurers Old Mutual and Sanlam tomorrow and on Thursday.
“It’s really just banks that have held us (the JSE) down today,” Brown said.
Once the earnings season was over globally and all the bad news was in the system, Brown said, the markets might settle, although a quick recovery was unlikely. Meanwhile, manufacturing data released in SA, Europe and the US pointed to a deepening global recession.
Euro-zone manufacturers had their worst month in at least 12 years last month. US factory activity also contracted, though at a slower rate. SA’s purchasing managers index fell to a record low of 39,2 last month. With Bloomberg, Reuters
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Business Day - News Worth Knowing
Where is bottom? It's still all speculation.
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Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön
Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot
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