November 21, 2011

Buffett: Eurozone Faces 'Major Flaw'

Words won't fix what's wrong, says head of Berkshire Hathaway

Warren Buffett sees opportunities for investing in Japanese companies. (AP photo) Warren Buffett sees opportunities for investing in Japanese companies. (AP photo)

Warren Buffett, head of Berkshire Hathaway, said Monday on his first trip to Japan that the debt crisis in Europe had revealed a "major flaw" in the eurozone, and that words alone would be inadequate to repair it.

Buffett, on a trip that had originally been scheduled for March but was canceled after the earthquake and tsunami, also spoke about Japanese businesses and investment opportunities in the country. Reuters reported that he said neither Japan's earlier natural disasters nor the current Olympus accounting scandal would deter him from taking advantage of them.

Regarding the eurozone, he was quoted saying, "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 added that he could not foresee how the debt crisis might end, but said there were good valuations in a number of European companies.

"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," he said. "We bought Tesco earlier. I could buy more if the price came down," he added, referring to the British retailer.

His sentiments regarding Japan were even more bullish. He said in the report, "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 was in Japan for the opening of a new plant at cutting tool maker Tungaloy Corp., only about 25 miles from Fukushima Daiichi, the nuclear power plant struck by the earthquake and tidal wave in March. Tungaloy, formerly part of Toshiba Corp., is a unit of an Israeli firm in which Berkshire Hathaway holds an 80% stake. It supplies automakers with superhard tools used to cut, groove and turn engine parts.

At the opening, Buffett posed for photos with staff members outside the new factory and held a sign saying, "Never give up, Fukushima." He also said he felt "very welcomed." He undoubtedly is; on the prowl for yet another investment for Berkshire Hathaway, Buffett said in a Bloomberg report that he could sink up to $10 billion into his next acquisition, which may very well be in Japan.

While he said that he had no specific M&A plans presently, he added that the location of future acquisitions activity “… can be any place. If I can find something here in Japan that was a business that I like and understood, like their competitive position, like the price, like the financial position, like the management, we would do that tomorrow.”

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