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Guru praises Greenspan's 'terrific job'

By Sophie Barker and Gary Parkinson

WARREN BUFFETT, the American investment guru known as the Sage of Omaha, yesterday defended Federal Reserve chairman Alan Greenspan against accusations that he had failed to halt America's economic slowdown.

"I think Greenspan's done a terrific job. We couldn't have had a better Fed chairman," he said in London. His comments came as both the FTSE 100 index and the Dow Jones Industrial Average rallied for the third day in a row. London's blue chip shares gained 151.5 - up more than 400 points since Friday. This was despite a speech by Mr Greenspan in which he disappointed investors by failing to mention either the state of the US economy or his interest rate policy.

Like Mr Greenspan, Mr Buffett would not be drawn on whether there would be a global recession. All America's wealthiest man after Bill Gates would say is: "I have no idea. The only prediction I would make is that I will be chairman and CEO of [his insurance and investment company] Berkshire Hathaway in a year's time." He admitted that several of Berkshire Hathaway's subsidiaries were experiencing a sales slowdown.

"We are not doing a lot of [share] buying - we are buying more planes than stocks," Mr Buffett added. "Companies are all different. They are like children - none are the same, apart from twins." Asked what his advice to stock-pickers was, he said: "Do what you understand - don't buy a stock just because someone told you it would go up."

Mr Buffett is as famous for his homespun investment tips as for having shunned the dot com boom in favour of more traditional stocks. This strategy paid off last year when Berkshire Hathaway's profits rose 113pc to $3.3 billion. In Washington DC, Mr Greenspan addressed the National Association for Business Economics, where he kept closely to his chosen subject - improving statistical information. He argued that current economic indicators were failing to take the impact of technological change into account.

Mr Greenspan has drawn criticism that he acted too late in cutting American interest rates three times in the last three months by a total of 150 basis points. Before this year, he had not cut interest rates since 1998 - something his critics say helped the boom and subsequent collapse in technology and telecom shares.

While Mr Greenspan refused to give global stock markets a lead, American Treasury Secretary Paul O'Neill gave sentiment a fillip. He said the American economy was fundamentally sound and characterised by low inflation and unemployment. "The recent slowdown occurs against the backdrop of this fundamental soundness. Although equity markets have been unsettled recently, broad equity measures still have tripled in value over the past decade.

"The strength of the US economy is not reflected in any one asset price or number but in the flexibility and adaptability of our entire economy to new challenges", Mr O'Neill said. The Dow Jones was about 120 points higher in early trading as stronger-than-expected American consumer confidence figures for March eased recession worries. Mr Buffett was in London to promote his company Executive Jet, which offers clients fractional ownership of corporate jets.

-- Anonymous, March 28, 2001