Euro zone not working, words alone won't fix it: Buffett

IWAKI, Japan Mon Nov 21, 2011 7:55am EST

1 of 2. Berkshire Hathaway Chairman Warren Buffett shouts the slogan 'Never give up, Iwaki' in Japanese, in response to a request from a local television reporter that he do so, at the end of his news conference after the opening ceremony of Tungaloy Corp's new plant in Iwaki, Fukushima Prefecture November 21, 2011.

Credit: Reuters/Kim Kyung-Hoon

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IWAKI, Japan (Reuters) - Billionaire investor Warren Buffett said Europe's debt crisis had shown up a "major flaw" in the 17-member euro zone system and it would take more than words to fix it.

"There is a major flaw in the euro system ... I do know the system as presently designed has a major flaw and that flaw won't be corrected just by words," he told CNBC during his first trip to Japan on Monday.

Buffett, dubbed the 'Oracle of Omaha' for his long track record as a value investor, said he had no idea how Europe's sovereign debt crisis, which started in Greece two years ago and rages on, would end, though he noted there were good valuations among companies in Europe.

"Not in the debt space, but in the equity space there are opportunities. I can think of a dozen euro stocks that are attractive ... there are stocks I like and wonderful businesses.

"We bought Tesco (TSCO.L) earlier. I could buy more if the price came down," said the 81-year-old chief of Berkshire Hathaway Inc (BRKa.N), referring to the British retailer.

Buffett earlier told reporters in Iwaki City in northeast Japan that he also sees opportunities to invest in the country and was not deterred by either the March earthquake or a scandal engulfing camera and medical device maker Olympus (7733.T).

Making a trip that he had canceled in March due to the earthquake and tsunami, Buffett told reporters: "My view on Japanese people and Japanese industries is unchanged. We just had a demonstration over months that the tsunami did not stop Japanese business and the people."

"Olympus doesn't change my view at all on Japanese investments," Buffett said, referring to a widening accounting scandal at the company, which has admitted hiding losses for decades through improper accounting, raising questions about Japanese corporate governance standards.

Buffett earlier opened a new plant at cutting tool maker Tungaloy Corp, a unit of an Israeli firm in which Berkshire Hathaway holds an 80 percent stake. The factory is just 40 km from the Fukushima Daiichi nuclear power plant that was crippled by the disaster in March.

Posing for photographs outside the new factory with staff, holding a sign saying, "Never give up, Fukushima," Buffett said he felt "very welcomed."

Tungaloy, once part of conglomerate Toshiba Corp (6502.T), supplies automakers with superhard tools used to cut, groove and turn engine parts.


A swift recovery in Japanese manufacturers' supply chains and output helped the world's No. 3 economy rebound from a post-quake recession and grow by 1.5 percent in the third quarter.

But a strong yen, cooling demand in key export markets and disruptions from widespread flooding in Thailand -- a major production base for Japanese firms -- have clouded the outlook, and Japanese stocks are down about 18 percent this year -- their worst performance since 2008.

Japan's exports fell 3.7 percent in the year to October, the fastest pace in five months, signaling more weakness ahead as the strong yen and sputtering global growth drag on the recuperating economy.


Known for avoiding companies he does not understand -- including those in the technology sector -- Buffett surprised markets this month when he revealed Berkshire spent nearly $11 billion to build up a 5.5 percent stake in IBM (IBM.N).

Buffett has said he was convinced by IBM's long-term road map and by its entrenched position with major businesses -- part of the durable competitive advantage he looks for when investing.

Early this month, Berkshire Hathaway reported a smaller third-quarter profit after losing more than $2 billion on derivatives related to stock market performance.

During the quarter, Berkshire funded the purchase of chemical maker Lubrizol and a $5 billion investment in Bank of America Corp (BAC.N).

(Writing by Tomasz Janowski, Editing by Ian Geoghegan)

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Comments (4)
scythe wrote:

Warren Buffet said to CNBC that he was hunting for companies that are large and can “move the needle at Berkshire Hathaway.”

“I’m hunting for (Euopean) companies … that I can buy at a price that makes sense…
I can think of a dozen European stocks that are quite attractive, depends on the prices …
There are some wonderful businesses in Europe and the prices have come down on some of them …”

Has Reuters any other bearish headlines to foam the eurozone equity market and help Buffet find that big greek bargain?

Nov 21, 2011 6:03am EST  --  Report as abuse
milkel wrote:
I have been writing on this forum since last 1 year that euro-zone concept of sharing same currency is like a 3-legged race, where different economies, with diverse tax-laws, diverse tax-administration, diverse budgets, diverse subsidisation policies, diverse regulations regarding corruption, diverse rates of labour and capital productivity, diverse rates of unemployment, etc. are bundled together, and their legs tied to one-another and then they r asked to run together against other world economies.
How and how long if at all, can such an entity run? Sooner than later one of the weaker participants of the bunch is going to tire out and stumble, eventually setting off a chain reaction, pulling the whole lot down.
Imagine a car running with all 4 wheels of different sizes, diameters, thicknesses, make of the rubber, etc….. U can’t? just look at Euro zone, and u will get an idea about such a car!!!!

Nov 21, 2011 1:00pm EST  --  Report as abuse
FBreughel1 wrote:
@Ocala: Well, if you like that poor excuse for a system you live in. Who needs healthcare, education and an infrastructure anyway ?

Nov 21, 2011 1:23pm EST  --  Report as abuse
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