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Tags: Buffett | Buying | US | Stocks

Warren Buffett: I'm Buying U.S. Stocks Despite Global Market Tumble

Monday, 07 May 2012 07:46 AM

Legendary investor Warren Buffett says he's buying U.S. stocks despite a global selloff stemming from the European election results.

In France, voters ousted President Nicolas Sarkozy in favor of socialist Francois Hollande, while in Greece, the country's traditional political parties lost ground to far-left and far-right groups in parliamentary elections, sparking a global market tumble.

"It really doesn't make any difference to us," Buffett tells CNBC.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

"We were buying stocks on Friday and we'll buy the same stocks today."

The selloff is actually good for U.S. stocks, who will see their share prices fall amid the selloff to the point they'll be ripe for bottom fishing.

Buffett adds he's buying two stocks in particular although he would not say which ones.

Europe, meanwhile, will survive its debt crisis but not without some pain along the way as the policymakers from 17 countries work to pay down debts while fostering growth at the same time.

"It's going to be very, very difficult. Not only are there problems with having 17 countries but you've got problems with getting the constituencies in those countries behind and coordinating in some way so it's a really tough problem," Buffett says, adding he's not surprised with the results.

"You tell people to tighten their belts and then you give them a chance to vote on it," he said.

"If you're going to have a common monetary unit, you have to have somewhat of a common fiscal policy."

Expect some pain along the way but eventually, light will appear at the end of the tunnel for Europe.

"There will be a lot more episodes but on the other hand, 10 or 20 years from now Europe will be producing more goods per capita. Europe is not going to go way, it's a huge market, people have lots of skills, you've got factories, you've got wonderful companies over there," Buffett says.

"It isn't like it's the end of the world but it can be one very messy process in getting from here to there."

The U.S., meanwhile looks fundamentally solid, thanks in part to a decision to bolster the banking system in wake of the Lehman Brothers collapse in late 2008.

"The United States is on a different path. We addressed the problems with our banks three years ago very decisively, and we put lots of capital in them and they've retained lots of capital and they've cleaned out a significant percentage of their bad loans."

Turning to gold, which often shines amid market volatility and weakening paper currencies, Buffett says investors are correct to show concern with volatile foreign-exchange markets but reiterates his stance that gold is an unproductive asset that shoots up amid times of fear.

"They want everybody to be so scared they run to a cave with gold. Caves might be a better investment than gold. At least they're not producing new caves all the time," Buffett says.

The election results in Greece and France reflect anger among voters at austerity measures like tax hikes and layoffs they see as thrust upon them by Germany, the motor of the European economy.

France's Hollande, meanwhile, says his victory represents "a fresh start," adding "austerity need not be Europe’s fate," according to the New York Times.

Analysts point out the political landscape is quickly changing in Europe.

"This shows that politics is getting out of control in Europe, the gap between politicians and voters is widening, that's what you see in Greece, that's what you see in France," says Steen Jakobsen, chief economist at Saxo Bank in Copenhagen, according to Reuters.

"Clearly, voters across Europe have started to send the message: 'we are not ready to do the reforms', and that's worrying."

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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Monday, 07 May 2012 07:46 AM
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