Oracle of Omaha unveils a bleak future for US

New York, August 22: Warren Buffett has said the US economy is unlikely to improve before 2009, and there was a “reasonable chance” that Fannie Mae and Freddie Mac shareholders would be wiped out though the companies themselves are too big to fail.

Speaking on Friday on CNBC television, Buffett, the billionaire investor, said some businesses in his Berkshire Hathaway Inc insurance and investment conglomerate were struggling as the economy suffers from past excess in making credit available.

“You always find out who’s been swimming naked when the tide goes out. We found out that Wall Street has been kind of a nudist beach,” said Buffett, who was called the world’s richest person by Forbes magazine.

Referring to credit deterioration, Buffett said, “Right now the situation is still getting worse, and I would say that I don’t see any early end to that.” He also said Federal Reserve Chairman Ben Bernanke “does not have any magic wand” to bolster an economy facing weak growth and mounting inflation.

Buffett said he was supporting Barack Obama, the presumptive Democratic nominee, in November’s US presidential election, but admires Republican rival John McCain. Buffett said US stocks were broadly “more attractive” than they were a year ago, adding that Berkshire has no currency bets against the US dollar. The Omaha, Nebraska-based company bought $3.98 billion of stock in other companies in the second quarter.

Buffett spoke on CNBC in connection with the national roll-out of the documentary ‘I.O.U.S.A.’, which argues that the nation might face an economic disaster if it doesn’t come to grips with its mounting debt levels. Buffett is interviewed in the movie.

Since 1965, Buffett has transformed Berkshire from a failing textile company into a $180-billion conglomerate with about 76 businesses.

On Fannie Mae and Freddie Mac , Buffett said, “They're too big to fail. That doesn’t mean that the equity can’t get wiped out, and it almost has. In a practical sense, as institutions, they don’t have any net worth.”

Buffett forecast that “you’ll see some action fairly soon” to support the companies, but that he had not been approached to assist in any bailout. He said “nothing is going to happen” to investors in the companies’ insured mortgages or debt, but “the equity and preferred stock is another question”. Buffett also said he had made a mistake selling 61 per cent of Berkshire’s stake in Anheuser-Busch Cos for about $61 to $62 per share, ahead of the US brewer’s July agreement to be taken over by Belgium's InBev NV for $70 per share.

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