I don’t normally pay much attention to economic predictions mainly because I don’t believe the person offering the prediction actually knows what is likely to happen. However, when Warren Buffett makes a prediction, I usually think about it at the very least.
Buffett’s latest prediction is some doom and gloom mixed with a small amount of hope. He says that the pain from the current global financial crisis will last longer than most people think, and that financial institutions haven’t been hit this hard since the Second World War.
If I hadn’t heard any more than this, I would have thought that his recommendation would be to sell bank stocks. But, Buffett goes on to say that the pain in the financial sector has already been recognized and felt. Now, I’m confused.
It seems that Buffett’s prediction is that we’re in for a long recession, but that bank stocks have already been beaten up enough to reflect this fact. So, what am I supposed to do then?
I think I’ll just go on following my financial plan and pretend that I never heard any predictions, even though they came from Warren Buffett.