Buffett: Returns ‘Terrific’ as U.S. Workers Suffer

By Andrew Frye - Nov 16, 2011 1:02 AM GMT+0700

Warren Buffett, who invested $23.9 billion in the third quarter at his Berkshire Hathaway Inc. (BRK/A), said shareholders of U.S. companies are enjoying prosperity that eludes workers struggling with high unemployment rates and lower home values.

“The return on equity, on tangible equity, for American business today is terrific, overall,” Buffett said in an interview posted today on the website of Berkshire’s Business Wire unit. “Housing is still in the depression of the fall of 2008. It has not come back at all.”

Buffett, 81, is adding to his stock portfolio, repurchasing shares of Omaha, Nebraska-based Berkshire and investing in a collection of subsidiaries that span power production and insurance to consumer goods and luxury travel. The chief executive officer said the U.S. housing market will be healthy “in a few years” without forecasting exactly when the slump will end.

Real estate has defied prior predictions of rebound from Buffett, who said in February 2010 that “within a year or so, residential housing problems should largely be behind us.” The median price of a single-family home decreased in the third quarter from a year earlier in 111 metropolitan areas out of the 150 measured, the National Association of Realtors said in a report this month.

Housing “doesn’t hurt corporate profits that much in most areas,” Buffett said. “But the American worker is not doing well.”

Trains, Candy

The property-market slump has hurt Berkshire’s brick and carpeting businesses, while results improved at units including the Burlington Northern Santa Fe railroad, See’s Candies and Business Wire, which distributes press releases. The interview was conducted Sept. 30 with Business Wire CEO Cathy Baron Tamraz to commemorate the unit’s 50th anniversary.

Buffett has drawn down Berkshire’s cash this year to fund investments including the takeover of engine-additives maker Lubrizol Corp. and the purchase of more than $10 billion of stock in International Business Machines Corp. Berkshire’s third-quarter profit declined 24 percent to $2.28 billion as Buffett’s equity derivative bets produced a loss.

“We have been coming back,” Buffett said of the U.S. economy. “Employment has lagged.”

Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate in the third quarter, up from 1.3 percent in the prior three months, Commerce Department figures showed last month. The jobless rate has been stuck around 9 percent or higher for more than two years. Hourly wages adjusted for inflation were down 1.8 percent in the 12 months ended in September.

‘My Class Has Won’

Buffett, the world’s third-richest person, reiterated his call for increased taxes on the wealthy.

“Through the tax code, there has been class warfare waged, and my class has won,” Buffett said. “It’s been a rout. You have seen a period where American workers generally have gone no place, and where the really super rich as a group increased their incomes five for one in this rarefied atmosphere.”

Berkshire owns a residential real estate broker in addition to units that produce building materials such as Acme bricks, Benjamin Moore paint and Shaw carpets. The housing market and residential construction won’t recover until household creation outstrips the supply of homes, Buffett said.

“We had the greatest binge in housing that this country or probably any country has seen,” Buffett said. “When you have a huge bubble in the biggest asset that most people have and that bubble pops, and people have borrowed against that asset and everything, you’re not going to get over it in a day or a year or a month.”

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net