Buffett Wouldn't Want to Fix U.K. Deficit

By Stephen Foley

Warren Buffett, the Oracle of Omaha, says he won't envy the winner of the May 6 general election in Britain for having to tackle "unpopular" budget cuts

Warren Buffett, the billionaire investor known as the Oracle of Omaha, said he doesn't envy the winner of the UK general election, who will be faced with the need to make "politically very unpopular" decisions to cut the deficit. Speaking after the annual shareholder meeting of Berkshire Hathaway (BRK-B), at which he dispensed nuggets of business wit and wisdom to a crowd of 40,000 faithful, Mr Buffett warned the next occupant of No 10 to fear the bond market, which could turn against the UK if public spending is not brought back into balance over the long term.

"The UK is facing the same or tougher problems than the US," he told reporters last night. "The deficits are huge and, if sustained over time, they have to have important consequences. Those consequences can start to create their own dynamic and then you are getting into the unknown.

"I would not want to be put in charge of tackling that debt."

His comments about Britain echoed those he had made about growing government debt across the Western world, the result of the economic stimulus measures put in place to prevent a much worse recession after the financial panic of 2008.

But he distinguished the situation in Britain from the present problems of Greece. The UK can print its own currency, he said – something that is "a wonderful asset."

And Charlie Munger, Mr Buffett's long-time business partner, said that it was important not to overstate the difficulties facing the UK. Britain is "not totally failing", he said. The US "copied from Britain" the best way to restore the financial system in 2008, "so your government is not as bad as you may think."

The Buffet and Munger double act has been the highlight of Berkshire's annual meeting for decades, as the two dispense investment advice and thoughts on the world in nuggets of high comedy. When Mr Buffett expressed concern about the state of government finances in the West and the increased prospects for significant inflation, the 86-year-old Mr Munger added: "If I can be optimistic, and I'm nearly dead, surely the rest of you can handle a little inflation.

"Thousands of Berkshire shareholders descend on the modest Midwestern city of Omaha each year for the company's meeting, which was again bigger than ever this time, thanks to the addition of new shareholders due to Mr Buffett's acquisition of railway company Burlington Northern.

He spent six hours taking questions in a packed sports arena, while many more shareholders watched in overflow rooms and on the floor of an adjacent exhibition centre, where Berkshire's eclectic mix of subsidiaries hawk wares ranging from chocolates and T-shirts to jewellery and mobile homes.

Mr Buffett, a long-time critic of Wall Street excess, surprised many by beginning Saturday's meeting with a full-throated defence of Goldman Sachs (GS), saying he didn't believe that the investment bank was guilty of the fraud charges levelled against them last month.

In a theme that the billionaire returned to again and again, he described the errors of banks, derivatives traders and rating agencies as being caused by group-think."It is very hard to think contrary to the crowd," he said, when asked about the performance of the credit rating agencies, which disastrously certified mortgage-related bonds as being as safe as government debt. "They couldn't see a world where residential housing countrywide would collapse. They succumbed to the same mania that prevailed throughout the investment world."

Mr Munger pointed his own finger of blame at the mathematical models that Wall Street players have been taught – and which turned out to be highly misleading as the crisis developed. "I'm yet to hear a single apology from business academia for its contribution to our present difficulties," he said, to huge applause.