Trust Warren Buffett, Not Hindenburg Omen on Recession: Poll

NEW YORK ( TheStreet) -- Warren Buffett, CEO of Berkshire Hathaway and head public relations executive for the U.S. economy, found himself in the headlines again last week when he proclaimed that there won't be any double dip recession. Buffett was unequivocal in his words, saying that it was "night and day" for the U.S economy now versus a year or year and a half ago. What's more, Buffett didn't just say he didn't think a double dip recession is coming; he said it isn't coming, end of story. There was no mincing of words or hedging of bets from the Oracle of Omaha.


Warren Buffett's comments put him at odds with not just many economists , but the ominous-sounding Hindenburg Omen, the obscure technical market indicator that became a media sensation in August when it signaled a market crash, and worse yet, seemed to have a decent historical track record of making such a bearish claim about the economy's short-term trajectory.


The Hindenburg Omen captured the zeitgeist of the moment in August. The Hindenburg Omen was also helped by the fact that September and October are historically the worst months for the market. Just putting the word "October" in the same sentence with the words "stock market" is enough to send investors to the exits. Additionally, the mid-point of the presidential election cycle also has shown a high correlation to stock market slumps, if not outright market crashes.

It seemed as if September was shaping up to be a rocky month for investors, but it hasn't turned out that way, at least not yet. The Hindenburg Omen has given way to a September rally, and those investors who dismissed the references to the doomed German airship as nothing but hot air have turned out to place their bets wisely over the past few weeks, with both the Dow Jones Industrial Average and S&P 500 Index gaining ground since hitting a short-term low at the end of August.

Warren Buffett timed his bullish words right, and the Berkshire Hathaway CEO and don of old school American capitalism has had the power to restore faith in the markets previously. The trading desks of New York still give thanks to Buffett every time his investment in Goldman Sachs at the low point in the financial crisis is cited. Whereas Buffett described his purchase of railroad Burlington Northern famously as a bet on the U.S. economy, traders still talk about the Buffett investment in Goldman Sachs as a sign of faith in the U.S. economy at a time of investor desperation.

So are Buffett's words once again poised to give the markets a little push? Trading at the end of last week didn't suggest that Buffett's endorsement of the U.S. economy and dismissal of double-dip recession fears was enough to change the game, and the game is being played by jittery investors.

From one day to the next the markets go from being up for the year to down again -- it's been that close -- and from one day to the next the European debt crisis is either over, and the markets surge ahead, or the European debt crisis is again ominous, and the markets take a tumble. Maybe one day it's Japanese yen buying instead of European debt, or consumer weakness in the U.S. or industrial productivity numbers missing the mark that bring the latest mixed signals on the global economic recovery. The fact of the matter is that in 2010 there is always something to keep the markets from choosing a direction. Year-to-date, the S&P 500 is up less than 1% and the DJIA up roughly 1.7% through Friday, and it took a resurgent September to climb to those levels.

It may seem, at least for the moment, that the Hindenburg Omen will fade back into obscurity, although October, arch nemesis of the stock market, still looms on the horizon. The debate about the double dip recession isn't over -- even if Warren Buffett says it should be -- but one debate we can end today is whether investors place more stock in Warren Buffett's words or the data points of the Hindenburg Omen.

TheStreet asked readers, Who do you trust more about the double-dip recession debate?

It's Warren Buffett, by a landslide.

Roughly 82% of survey respondents think more highly of Warren Buffett's outlook on the economy than they do of the prognostication powers of the Hindenburg Omen.

Only 18% of investors were placing their bets on the Hindenburg Omen and the doomed market ship known as the U.S. economy.

Of course, it's important to remember that when it comes to speaking about the powers of market wizards to predict financial crashes, Warren Buffett has himself professed ignorance. Testifying recently before the federal government's Financial Crisis Inquiry Commission (FCIC), Buffett would only answer questions about the crash by saying that even people as smart as Sir Isaac Newton invested in market bubbles. Buffett's message to the FCIC was that it's well beyond even a genius ability to see the worst coming, yet his message last week about the U.S. economic recovery was unequivocal bullishness.

While Buffett expresses his unequivocal words about the road to economic recovery, September performance notwithstanding, it's important to remember that if there is any stance that has typified the stock market in 2010, that stance is in fact equivocation.

-- Written by Eric Rosenbaum from New York.

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