Jane Martinson in New York Saturday August 25, 2001 The Guardian
Warren Buffett, the world's second richest man and most successful money manager, has warned investors to expect another eight years of economic stagnation and weak US stock markets.
The septuagenarian head of Berkshire Hathaway has been telling executives to prepare for a famine of almost biblical proportions after the feast of the late 1990s, according to a report in the latest issue of Business Week magazine.
One private equity investor said that Buffett believes the stock market will suffer from a prolonged "hangover" after the party of the last decade.
Buffet, who has shunned technology stocks for those with high cash flows, has seen returns at his own company improve dramatically over the past year.
Vinay Saqi, analyst at Morgan Stanley, said: "He has clearly been one of the better investors through thick and thin. He didn't benefit from the tech boom but, on the positive side, he didn't fall apart from it either."
Mr Buffett's bearish prediction came as the technology-laden Nasdaq stock market enjoyed its best day for more than a month. The market rose more than 50 points, or 3% to touch the 1900 benchmark by midday yesterday.
Shares were boosted by networking group Cisco, which said it had begun to see signs of stabilisation in the tech market. Wall Street also welcomed news that Microsoft had successfully shipped the final version of its new operating software to computer manufacturers.
Mr Buffett, a close friend of Microsoft founder Bill Gates, has often said that he could not buy technology shares as he did not understand them. Last year, Berkshire paid $8bn for companies which sell paint, bricks and carpets. Last month, the Omaha company announced the $590m acquisition of Xtra, which leases truck trailers and cargo containers.
In Berkshire's annual letter to shareholders in March, the man dubbed the Sage of Omaha said he prefers purchasing companies over stocks because the long-term prospects for stocks are "far from exciting".
One pleased shareholder stood up at the annual company meeting in April and said: "Last year, a shareholder implored you to buy tech stocks to juice our returns. I would like to this year thank you for not having done that."
Last year, shares in Berkshire Hathaway rose 27% while the Nasdaq composite index fell 39% - its worst performance ever.