Buffett gets a lot of heat from the financial press that aren't in love -- or in awe -- of him, for being a hypocrite on the issue of derivatives, or over his investment in Goldman Sachs while he berates investment banking as an occupation. However, in this case, Warren Buffett has spoken the words himself that indicate why investors shouldn't pay attention to each and every word, from the bold the the hesitantly bold to the equivocating words, that he issues on the U.S. economy.
Remember when Warren Buffett was called to testify before the federal government's Financial Crisis Inquiry Commission (FCIC) back in June? Buffett refused to come forward voluntarily, and the feds had to issue a subpoena to get the Berkshire Hathaway chief to show up and provide testimony on the issue of the rating agencies.
Warren Buffett said the feds were wasting his time, and he had nothing worthwhile to offer on the subject of the rating agencies and the financial crisis. Yet when the FCIC began to interrogate Warren Buffett, the Oracle of Omaha kept coming back to one idea. It was clear pretty quickly in his testimony that Buffett was using the old public relations maxim of "answering the question you wanted them to ask, not the one they asked" and that he had a sound bite or two from which he wasn't going to wander away.
Over and over again, Warren Buffett made the point that even the smartest people in the world can't predict a financial crisis, and it's a fool's game to even discuss the subject of a financial crisis and why or how it happens. The Berkshire Hathaway chief went so far as to invoke Sir Isaac Newton in his financial bubble evasions before the FCIC. Buffett noted several times that Sir Isaac Newton invested in bubbles.
The logical conclusion of Buffett's testimony was that any attempt to predict financial downturns are pointless, and anyone who thinks it's a good idea to trust the smartest people in the world for advice on investing are making a mistake, as the best and brightest are still among the ranks of the fallible institution known as humanity.
Sure, it was humble Warren Buffett, no surprise there. The man who is the second-richest in America, but was simply a lucky winner in the "ovarian lottery," thinks the humble way to go is to say it's beyond any individual's ability to opine on such intricate forces as the market's ability to take a turn for the worse beyond our ability to see coming.