Warren Buffett sees economy slowing amid coronavirus contagion
Billionaire investor Warren Buffett says the outbreak of coronavirus disease in China has slowed economic growth and sparked stock market losses in recent sessions, but he remains confident in the long-term future of American business.
Buffett appeared on CNBC Monday after releasing his annual letter to Berkshire Hathaway Inc. shareholders. Buffett said the reports he gets from Berkshire Hathaways assortment of more than 90 businesses and stock investments show that business is a little softer now than it was six months ago, but he remains optimistic.
"Twenty or 30 years from now, American business — and probably all over the world — will be far better than it is today," Buffett said.
Many of Berkshire Hathaway's roughly 1,000 Dairy Queen stores in China have been closed during the outbreak and many of its other companies are suffering supply-chain problems tied to business slowdowns during the public health crisis.
U.S. stock markets saw a steep selloff on Monday as the coronavirus disease spread well beyond China in recent days, raising fears about its economic impact on several continents. Authorities in Italy are battling Europe's first major outbreak of the disease, while South Korea's president said he's putting his country on its highest alert to fight the contagion.
On Wall Street, the Dow Jones Industrial Average plunged more than 1,000 points Monday, or about 3.6%, to 27,961. Other indexes saw similarly significant declines, including the tech-heavy Nasdaq (down 3.7%) and the broader S&P 500-stock index (down 3.6%).
"This is scary stuff," Buffett said Monday morning as stocks were falling. "I don't think it should affect what you do in stocks."
Berkshire-owned companies include BNSF railroad, Geico insurance and utilities. The company also has major investments in such companies as Apple, American Express, Bank of America and Coca-Cola. Buffett recently sold his newspaper chain to Lee Enterprises.
Berkshire owns roughly 10% of the four largest airlines, but Buffett said it's unlikely that Berkshire would ever buy any airline outright because they are highly regulated businesses that could create complications with Berkshire's other investments.
Berkshire continues to hold roughly $128 billion in cash and short-term investments because Buffett said it is difficult to find acquisitions at reasonable prices. Even with recent stock market drops, he said businesses are selling at a premium partly because it is so easy to borrow money for acquisitions.
"We want to be prepared for anything," he said of his cash hoard.
The company remains a net buyer of stocks over time, and Buffett doesn't expect that to change because of the coronavirus outbreak.