Wit and wisdom of Omaha's sage - Feb.07/2008

Warren Buffett

After an interview with the Financial Post, Warren Buffett, chairman of Berkshire Hathaway Inc., yesterday answered questions from some of Bay Street's top investor relations professionals. He shared more on his views on the markets, politics and the economy.

Q What are your views on the credit crunch?

A Credit has been repriced, but it has not become unavailable. There is repricing of risk and an unavailability of what I might call "dumb money," of which there was plenty around a year ago.

We first noted it big in the mortgage field. You had a situation a couple of years ago where virtually every American believed that house prices would do nothing but go up. If you've got every American believing that about any asset class, they're going to get more and more enthused about it, and borrow more and more money against it. And the lenders believed it, as well. And then you had Wall Street repackaging mortgages into unfathomable instruments that people bought to get a little bit extra yield, and now we are finding out what they own.


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