Credit squeeze will not ease in New Year
Gloomy news from across the waters has erased any hopes that the credit squeeze will ease in the New Year.
Billionaire investor Warren Buffett, often referred to as the Sage of Omaha, warned it may take many years for US banks to recover from sub-prime mortgage crisis.
Furthermore, property prices in North America are falling at a fast rate while mortgage applications in the US fell to their lowest level for 12 months.
Mr Buffett believes there could be further contagion from the collapse of the so-called trailer park mortgage market. For US banks who aggressively pushed loans to low-income Americans, he said it was ‘certainly possible’ that profits would not return to the record levels of early 2007 for several years.
The credit squeeze has resulted in US investment banks such as Citigroup, Merrill Lynch and Morgan Stanley to seek funds from foreign investors.
Mr Buffett added that he won’t even consider investing in a financial High Street stock for at least 6 months following the turmoil surrounding the US banking system.
Warren Buffett accumulated his fortune from investments managed through the holding company Berkshire Hathaway. In September 2007, he was ranked as the third richest person in the world, behind Carlos Slim and Bill Gates.