Investment icon Warren Buffett says the economy won’t make any headway before next year.
But, ultimately, the economy and stock market will shine, Buffett says in his annual letter to shareholders.
As a result, he will seek new investments for his company, Berkshire Hathaway, throughout the recession. Berkshire stock has plummeted 46 percent over the past year.
“The economy will be in shambles throughout 2009 — and, for that matter, probably well beyond,” Buffett writes.
“Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”
We’re in the midst of a vicious cycle, Buffet points out.
Late last year, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country,” he writes. “Fear led to business contraction, and that in turn led to even greater fear.”
He predicts that the S&P 500 Index will probably gain in 75 percent of the next 44 years, just as it did in the period since Buffett took over Berkshire in 1965.
The index plunged 38 percent last year, the most since 1937.
“We enjoy such price declines if we have funds available to increase our positions,” Buffett says.
And Buffett, of course, has plenty of cash: $25.5 billion in cash as of Dec. 31.
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