US billionaire investor Warren Buffett said yesterday that problems in the US subprime mortgage market will likely weigh on consumers for up to two years, but that the US economy will weather the storm.
The subprime problem "is having an impact," Buffett said on his first visit to South Korea. "It will have more of an impact."
Rising default rates among US mortgage holders with poor credit histories have rattled global credit, stock and currency markets since August and raised concerns about a possible recession in the US economy, a major export market for Asian companies.
"In the next six months, one year, two years the problems in the mortgage market can cause a lot of problems with consumers and hurt buying power in the United States," he said at a press conference after arriving earlier in the day from China on his private jet.
However, the US economy has often had to face various difficulties and the present was no exception, Buffett said.
"Overall the economy will make progress," he said.
Buffett came to Daegu, located about 300km southwest of Seoul, to inspect Iscar Korea, a subsidiary of Iscar, the Israeli industrial tool manufacturer that his company, Berkshire Hathaway Inc, purchased last year for US$4 billion, its first overseas acquisition.
Buffett also expressed pessimism on the US dollar.
"We still are negative on the dollar relative to most major currencies," he said.
The US dollar has fallen against the euro, British pound, Japanese yen, Indian rupee and many other Asian and European currencies this year.
The euro, for example, has gained 8 percent against the US dollar this year.
Buffett spoke highly of South Korean stocks, including steelmaker Posco, saying he first became attracted to them years ago because he saw that they were far too undervalued.
He said he feels that currently South Korean stocks in general are valued at prices that "are no higher and probably somewhat less" than stocks in the US.
Buffett said that Berkshire Hathaway owns the equivalent of 3.4 million shares in Posco.
In March, Buffett said in his annual letter that Berkshire last year bought 3.49 million shares, or 4 percent, of South Korean steelmaker Posco. Berkshire spent US$572 million on the Posco shares, which were worth US$1.16 billion at the end of last year.
That would be worth considerably more now as Posco have more than doubled this year.
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