Wednesday, November 16, 2011

Buffett on Europe: Investing While Uncertain

On CNBC this past Monday, Warren Buffett said what may be Europe's fundamental flaw "is that they can't print money. And when you have a loss of confidence, that begins a run, which has occurred to some degree on both sovereign debt and banks over there." 

He also said what resolved the mess in 2008 was "belief that the authorities would do whatever it took, and we did believe that, and it led us out. But it's not clear who can say, 'We'll do whatever it takes'."

Buffett is very concerned about Europe yet that has not throttled him when it comes to making investments.

The fact is he has been making purchases hand over fist, certainly more so than any time in recent (and maybe even not so recent) memory.

The most recent 13F-HR, along with the $ 20 billion plus of investments that he made last quarter, is pretty clear evidence that this Europe thing isn't slowing him down on the investment front.

So how can his view of Europe and aggressive buying coexist?

Some might expect he'd be a net seller with this view that Europe could end up in some kind of free fall.

Not at all.

Continuing with Buffett's views on Europe.

Buffett said it "used to be when you had a run on banks, you know, that the tellers started paying out slowly and they piled up gold in the teller window. But now you do it electronically..."

Then later:

"It's very, very tough to stop a run. It takes—it takes a belief, widespread belief, that the people in authority will do whatever it takes to stop it and they have the ability..."

He went on to say that time works against you when "the world is seeing the line getting a little longer."

In these situations, people end up acting with emotion and the problem is emotion becomes reality. Then he added...

"...Europe's got all kinds of strengths. I mean, Europe is not going to go away. Ten years from now we will be selling more goods and buying—to Europe and buying more goods from Europe, and they will have more GDP per capita. But getting from here to there may be a problem."

Much later in the conversation that morning on CNBC, he explained how he handles all this uncertainty and how it affects what he is buying or selling. Buffett said there is always uncertainty but the question is "what do you do with your money?"

More on investing with uncertainty in a follow up post.

Adam

Related posts:
Buffett on Europe: Investing While Uncertain - Part II
Buffett Doubts Euro Survival, Views European Stocks Favorably
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