Tue, Sep 18, 2001 page19

• Business Focus: Buffett, Welch holding their stocks

  • BLOOMBERG
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  The worst terrorist attacks in US history wouldn't prompt Warren Buffett or Jack Welch to sell stocks when trading resumed yesterday, they said in an appearance on CBS's 60 Minutes. "I won't be selling anything," said Buffett, the billionaire chairman of Berkshire Hathaway Inc. "If prices would fall significantly, there's some things I might buy."

  Welch, who retired Sept. 7 as chairman of General Electric Co, said he would "probably just hold" his stocks.

  Analysts are less optimistic, expecting stock indexes to plunge as much as 10 percent when the New York Stock Exchange reopens at 9:30am. European stocks posted their worst week in three years after terrorists hijacked commercial airlines and crashed them into Manhattan's World Trade Center and the Pentagon.

  Trading of US stocks stopped after Tuesday's attacks, which left more than 200 people confirmed dead and more than 5,000 missing.

  Buffett and Welch disagreed on whether the government should bail out the industry.

  Buffett said the US economy hadn't changed and that it would be "crazy" to sell "if you owned a piece of American business that you felt good about a week ago." "My view is that this is the best place in the world to invest," Welch said. "We have the strongest economy. Where else would you go with your money?"

  Echoing economists, Welch said consumers would be "hurt a little bit" by the crisis and "retrench a touch." Consumer spending, which accounts for two-thirds of US gross domestic product, has supported the economy this year, even as growth slowed to a 0.2 percent annual rate in the second quarter. Some analysts say consumers may curb spending in the wake of Tuesday's attacks, which would push the economy into its first recession in a decade.

  Buffett said the economy was already slowing before Tuesday and that "there'll be a slowdown going on next week," which would have some effect on earnings in the third quarter.

  Over time, consumers will spend again, ensuring the economy will pick up, Buffett said.

  Former Treasury Secretary Robert Rubin, now chairman of Citigroup Inc's executive committee, advised consumers and businesses to concentrate on the "long-term strength of the economy." President George W. Bush should be "very visible" because that will "provide reassurance and comfort and confidence," he said.

  Rubin and Buffett agreed a tax cut wouldn't aid the economy.

  Most analysts expect stocks to fall. Airlines such as AMR Corp and UAL Corp, which account for one-fifth of the Amex Airline Index, may lose more than half their value, said Credit Suisse First Boston analyst James Higgins. Revenue will fall as passengers avoid flying and costs rise to pay for heightened security, he said. Insurers such as American International Group Inc may decline because claims stemming from the attacks will curb earnings. Reinsurance company General Re, which Berkshire Hathaway owns, would pay out "more money than we've ever paid," yet was "well-equipped" to do so, Buffett said.

  As for airlines, Welch said, "There's just no question that industry has been impacted uniquely." Buffett opposed such a move, saying many airlines have gone bankrupt in the past without events as disruptive as last week's.

  "We have to be very careful about any mass subsidization," he said. Congress is considering legislation that would offer airlines US$2.5 billion in aid and US$12.5 billion in loan guarantees.
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