Fortune Watch

The US is already in a recession and it will be longer as well as deeper than many people expect, US investor Warren Buffett said. Warren Buffett said the economy is still in a recession and unlikely to improve before 2009 but that stocks appear better valued than a year ago.

He said in an interview the US was “already in recession” and added: “Perhaps not in the sense that economists would define it” with two consecutive quarters of negative growth. “But the people are already feeling the effects,” said Buffett, the world’s richest man. “It will be deeper and last longer than many think.”

“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 in March was called the world’s richest person by Forbes magazine.

But that is just part of a market system. And you know, if I had to pick the chances that we are going into a recession, I would say they are fairly significant, but I don’t know anything that you don’t know.

However he said that won’t stop him from investing in selected companies and said he remained interested in well-managed German family-owned companies.

“If the world were falling apart I’d still invest in companies,” he said.

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• You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.

• We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.

• When Berkshire buys common stock, we approach the transaction as if we were buying into a private business.

• Wide diversification is only required when investors do not understand what they are doing.

• Never invest in a business you cannot understand.

• Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

• The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.

• Risk can be greatly reduced by concentrating on only a few holdings.

• Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.

• Buy companies with strong histories of profitability and with a dominant business franchise.

• Be fearful when others are greedy and greedy only when others are fearful.

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Stock futures pointed to a higher open Monday as investors remained cautiously upbeat about the recent downturn in oil prices, which dipped further below $114 a barrel even as Tropical Storm Fay headed for Florida.

Light, sweet crude slipped 42 cents to $113.35 a barrel in premarket electronic trading on the New York Mercantile Exchange, after rising in earlier trading.

Despite some worries in the market about Fay disrupting supplies from the Gulf of Mexico, oil remains near its lowest levels since early May, thanks to the dollar’s rebound and growing signs that developed economies around the world are slowing. Russia’s statement Monday that its troops have begun withdrawing from the conflict zone in Georgia also appeared to alleviate concerns about supplies from that region.

Dow Jones industrial futures rose 41, or 0.35 percent, to 11,704. Standard & Poor’s 500 index futures rose 3.20, or 0.25 percent, to 1,302.90, and Nasdaq 100 index futures rose 7.25, or 0.37 percent, to 1,972.75.

Last week, the Dow finished lower, but the S&P and the Nasdaq composite index ended up.

In earnings news on Monday, Lowe’s Cos. posted a nearly 8 percent drop in second-quarter profit. The results were better than expected, but the home improvement retailer also issued a disappointing outlook.

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Bolstered by falling oil prices and a rising dollar, US stocks could extend their modest gains next week, even in the face of still troubling consumer- and housing-related data.

Wall Street could extend gains next week if financial results from market bellwethers and data suggest the U.S economic slowdown isn’t as dire as once feared.

A slide in energy prices is a welcome boost in an economy hamstrung by the housing slump and mounting mortgage losses in the financial services sector. In the near term, consumers and business should feel some respite as energy costs recede, boosting prospects for a range of market constituents, including airlines, retail, industrial and technology sectors.

Oil’s downward trend helped boost consumer spending slightly in the past month, with crude hitting a three-month low below $114 a barrel on Friday. But its path remains volatile, prompting some investors to remain cautious about the market.

The dollar’s recent jump suggests to some that the health of the US economy could improve. The US economy began weakening before others and now that investors are seeing poor economic data from Europe and Asia, some think the United States is closer to a recovery than others.

“For the past two years, crude has followed the dollar almost lock-step.”

“The strength we’ve seen in the dollar is almost certainly helping bring crude down. At this point, as you move backward, it actually acts as a stimulus on the economy.”

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I read with amazement a story by Gary Simpson . It concerned a couple in their early 30’s from Western Australia who won AUD $793,151.87.

Their lotto dream was realized just two years ago. Lucky people huh?

OK. Nothing too amazing about that – so far. Reading on I was shocked to learn that this story is news now because, despite their massive windfall, this couple had never stopped claiming social security benefits. Greedy huh?

That welfare money is meant to be available to disadvantaged people who are in financial difficulty. Essentially it is “survival” money.

But the story gets worse, much worse…This couple spent ALL that money in just seven weeks! Gone. Vanished. Seven weeks! It hardly seems possible. So, what does that tell you?

The first thing that struck me was how utterly irresponsible this pair was. How do you spend $113,307.41 each week for seven weeks? I have great difficulty comprehending that.

What if this pair had spent just the $93,151.87 having “fun” and put the $700,000 into an interest bearing term deposit for three months at 6.00% interest while they got some decent financial advice? At the end of the three months they would have accumulated another $10,500 to play with (less tax, of course).

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“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” If you can grasp this simple advice from Warren Buffett, you should do well as an investor. Sure, there are other investment strategies out there, but Buffett’s approach is both easy to follow and demonstrably successful over a period of more than 50 years. Why try anything else?

For anyone who is not an accountant, annual reports of companies are dull things indeed. Once you know how much money a company has made (and you don’t need the annual report for that), there isn’t anything much that’s worth reading. However, there is one company in the world whose annual report is eagerly awaited for the interesting reading material that it has and that’s the American company Berkshire Hathaway.

The reason? The annual letter to shareholders that is written by the great investor (and Berkshire Hathaway’s Chairman and CEO), Warren Buffett. Buffett is perhaps one of the most respected businessmen of the world. His ideas on business and investing are full of a simple wisdom that would have sounded naive and unworldly had it not been for Buffett’s fantastic track record. Buffett’s 2007 letter, which was released on February 29, is as interesting to read as any of the earlier ones.

The central tenet of Buffett’s investment philosophy is that one should not invest in anything that one does not understand and that one should be unremittingly focused on long-term value. Buffett is also deeply skeptical of financial engineering and ‘innovative’ financial instruments. In today’s situation, when volatility rules and people are investing day-to-day and sometimes hour-to-hour, it’s worthwhile to take a cool look at what people like Warren Buffett have achieved and how they’ve achieved it.

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Gold prices plummeted to 8-month lows on Tuesday as the dollar’s rally triggered a massive sell-off, hitting oil and industrial metals as well.

Spot gold touched $801.90 an ounce, its lowest level since late December, and was at $816.50/817.45 at 1433 GMT compared with $819.25/820.85 late in New York on Monday.

The precious metal is down more than 20 per cent since hitting a record high of $1,030.80 on March 17.

“The speed and severity of the dollar’s run higher has resulted in some long liquidation,” said Daniel Hynes, analyst at Merrill Lynch.

“At the moment it is hard to see an end to it, but we still have some supportive factors such as inflation, geopolitical tensions and falling mine supply.”

Prices of the metal attempted a recovery earlier on Tuesday after the dollar slipped on profit-taking. Also under heavy selling pressure was industrial metal platinum used to make autocatalysts. Investors have been selling their holdings on concern about falling demand from car makers.

The bulk of the world’s platinum is used by automakers in autocatalyst systems that scrub exhaust fumes of dangerous and environmentally damaging chemicals.

Spot platinum fell to $US1,462.50 an ounce, the lowest since the middle of December, and was last at $US1,492/1,512 from $US1,517/1,537 an ounce on Monday.

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Oil was unlikely to fall below $100 per barrel as strong demand from emerging economies such as China and India put a floor under prices, a member of Kuwait’s top oil council said in remarks published on Sunday.

Crude prices on the international market are unlikely to drop below $100 a barrel in the near term despite shedding almost $33 per barrel in a month, oil market experts said on Monday.

They say they don’t anticipate a full-blown collapse in crude prices despite a slowdown of the US economy, the world’s biggest oil importer. Neither do they see a major spike in crude prices due to the latest geopolitical tensions erupting between Russia and Georgia, which has led to Russia resorting to airstrikes and pounding Georgia’s capital, Tbilisi.

“The oil market doesn’t seem to be very perturbed by the happenings in Georgia. There is a downward bias in the oil market that will continue for a little while,” said Dalton Garis, associate professor of Economics at the Petroleum Institute in Abu Dhabi.

On Monday, in early trade, Brent crude futures on the ICE in London were trading a shade above $114 a barrel. In contrast, on the New York Mercantile Exchange, the Nymex crude oil futures for September delivery in the US were trading close to $116.50 per barrel.

“The crude prices in the near-term look like trading in a range of $100-$120 a barrel,” said an oil analyst, who didn’t want to be identified.

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ATM machines have been around forever. They are convenient to those of us on the run however pose a great element of risk. Using an ATM machine in a safe manner requires awareness. Just because an ATM machine is available 24-hours a day doesn’t mean it is safe to use it at all hours of the night.

Most ATM robberies occur at night between 8:00 PM and midnight. ATM robbers are usually males under 25 years of age and usually work alone. ATM robbers usually wait nearby for a victim to withdraw cash. Most ATM robbery victims are women and were alone when robbed.

Most claim that they never saw the robber coming. Most ATM robbers use a gun or claim to have a concealed weapon when confronting the victim and demanding their cash.

Here are some tips that can make the ATM process safer:

Use ATM machines in well-lit, high-traffic areas. Don’t use ATM machines that are remote or hidden behind buildings, pillars, walls, or away from public view. Beware of obvious hiding places like shrubbery or overgrown trees. ATM robbers like to have the element of surprise and no witnesses.

Robbers like good escape routes such as nearby freeway on-ramps or high-speed thoroughfares.

Choose an ATM that looks and feels safe, even if it is a couple of miles out of your way. Try and limit your use to daylight hours. Try to rake someone with you if you have to go after dark. When you drive up to an ATM, look around the area for any suspicious persons. If you see anyone suspicious standing nearby or sitting in a car, drive away. When you approach an ATM on foot be prepared and have your access card ready.
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In less than a month crude oil, which some saw hitting $200 a barrel by year-end, has plunged $32 but a rebound could happen, for example, over the Iranian nuclear crisis, analysts say. From a record-high $147.27 on July 11, the New York futures contract slid to about $115 on Friday, losing almost 22 per cent in the course of four weeks.

In its wake, most other commodity prices, which were driven higher by the oil market surge, have fallen from their peaks.

An ounce of gold has dropped to $800 from $1,000; farm commodity prices are between 25pc and 40pc lower and petrol prices have dropped about 6pc.

“Oil is at a tipping point. It is an exaggeration to cry that a bubble has burst. It is a break, Oil market was not in a bubble.”

For James Williams at WTRG Energy, the law of supply and demand reins.

“The market is simple reflecting the fundamentals of supply and demand. Markets participants are considering the world slowdown, the deterioration in expectations for the growth worldwide,” Williams said.

The slowdown in economic growth has a significant impact on energy consumption, analysts say.

A case in point is US drivers, known as huge consumers of petrol, drove a third less in May compared with a year ago. Motor fuel consumption fell more than 2pc.

This trend is expected to extend to the emerging market countries where the increasing weakening of fuel subsidies is going to force consumers to fill up their tanks less.

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