Monday, March 3, 2008

Bad News

Wow, well Warren Buffet is making news again. He thinks the economy may be in recession right now.

He is also backing off of his offer to reinsure the muni bond market. It might indicate that he thinks that the continuing weakness in the housing sector will hurt local governments (most of which get money from property taxes... and with home values stagnating or falling, you can see where that's going) to the point that there is increased risk of muni defaults. Considering that I didn't think it was likely that they would ever split their business anyway I don't see this as too big of a deal.

Still, he doesn't like where the economy is going, and that's reason for concern. Others probably have more insight into macroeconomic models, but you can't really find anyone that knows the market better than him, a knowledge that is part macro ecnonomics, part psycology, part valuation. When he starts making comparisons to the '74 economy people get nervous.

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