Over the past several weeks, stock traders have been bidding up the prices of financial shares (among others), on the view that the worst is over for banks and brokers and most or all of the bad news is priced in.
That is despite the fact that developments continue to suggest such assertions are baseless (e.g., the Fed's recent move to expand its support operations for the financial sector -- see "Is the Credit Crisis Really Over? Minsky Would Say No" at Naked Capitalism for more on this).
Anyway, it will be interesting to see what these smart money-types -- I use that term very loosely, by the way -- make of comments by the "Sage of Omaha," as detailed in the following report from MarketWatch, "Buffett Sees More Losses for Banks."
Banks will suffer more losses over the next few years from the real-estate crisis, despite the Federal Reserve's successful efforts to prevent contagion in the financial system, Berkshire Hathaway Chairman Warren Buffett said on Sunday.
"The action of the Fed in terms of Bear Stearns prevented contagion where there may have been more bank runs on the investment banks," he said during a press conference. "That doesn't mean the losses are over by a long shot. There's going to be more pain."
"We've looked at several of the investment banks where it's clear more losses are to be taken," he added.
The size of future losses depends on the outlook for the economy and the housing market, he explained.
Listings of homes for sale in some areas of the country, such as Broward County, Fla., are up a lot from last year, Buffett noted.
"That will work its way out," he said, but stressed that it's difficult to know how long that will take.
Berkshire owns a big stake in Wells Fargo, one of the largest mortgage lenders in the U.S., and holds shares in other banks such as US Bancorp.
"Wells Fargo is going to have above average losses as will other banks on things that relate to real estate over the next few years," Buffett said.
Berkshire is not selling its Wells Fargo shares though, he noted.
usb (USBank) is one of the best banks to own out there right now. little to no toxic waste on
it's balance sheet, and a hefty divident to boot!
Posted by: dano | May 05, 2008 at 03:22 AM
I'm pretty sure Buffet was in the subprime-is-contained camp originally (though I forget the exact quote from him). He's a great investor, but he's still human and makes mistakes.
Posted by: FB | May 05, 2008 at 04:00 AM