According to Warren Buffett, American billionaire investor, problems in the U.S. subprime mortgage market will likely weigh on consumers for up to two years, but the U.S. economy will weather the storm.
The subprime crisis "is having an impact," Buffett said on his first visit to South Korea. "It will have more of an impact."
Rising default rates among U.S. 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 U.S. economy, a major export market for Asian companies.
"In the next 6 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 U.S. 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, who rarely travels overseas, came to Daegu, located about 300 kilometers (185 miles) southwest of Seoul, to inspect TaeguTec Ltd., which is owned by privately held Iscar Metalworking Cos., the Israeli industrial tool manufacturer that his company, Berkshire Hathaway Inc., purchased 80 percent of last year for US$4 billion (€2.8 billion) in its first overseas acquisition.
Buffett, who received a hero's welcome from TaeguTec employees, also expressed pessimism on the U.S. dollar.
"We still are negative on the dollar relative to most major currencies," he said.
The 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 dollar this year.
Buffett, who arrived from the airport in a black Lincoln Royale limousine, was greeted by dozens of TaeguTec employees at the company's leafy campus, surrounded by scenic mountains.
"We're happy to be here," he said to loud applause and cheers.
He accepted a bouquet of flowers, toured the company's grounds, watched a performance of Korean drumming by women in colorful traditional dress and answered questions from employees, often offering up samples of humor and plain spoken advice.
"The best investment you can make is in yourself," he said in response to one question from an employee about investment strategy, urging his listeners "to develop your own abilities." That, he added, "will do far more for yourself" than any single stock or other such investment.
Buffett spoke highly of South Korean shares, 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 United States.
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 in 2006 bought 3.49 million shares, or 4 percent, of South Korean steelmaker Posco. Berkshire spent US$572 million (€401 million) on the Posco shares, which were worth US$1.16 billion (€813.2 million) at the end of 2006.
That would be worth considerably more now as Posco have more than doubled this year.
Buffet's comments helped lift shares in Posco, which rose 4.2 percent to 651,000 won (US$710; €497) as well as the broader South Korean market. The benchmark Korea Composite Stock Price Index advanced 2.2 percent to 1,976.75.
Posco shares ended last year at 309,000 won.
"It's a great company," Buffett said later of Posco. "And great companies get worth more and more all the time."
Buffett, known as the "oracle of Omaha" for the acumen that has made him one of the world's richest men, clearly left an impression.
"I was overwhelmed, overwhelmed by his humble appearance," said Jinny Lee, a TaeguTec employee, speaking a soft "Bye, bye Mr. Buffett" as he drove away.
"He's a big star," she said.
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