Warren Buffett vs. the Profiteers of Doom

MIAMI, Fla. (MarketWatch) — Buffy the Vampire Slayer, meet Buffett the Doom Slayer.

The Oracle of Omaha, Warren Buffett, is firmly entrenched with optimists who believe the worst is over for both the U.S. economy and the stock market.

“It’s a terrible mistake to get pessimistic on America,” Buffett said on CNBC last month. “It has not worked since 1776 and it’s not going to work now.”

Tell that to Harry Dent, Gerald Celente and Robert Prechter — confirmed pessimists who predict a stock market crash, financial panic, and perhaps a run on the banks.

A market crash is coming in 2013 or 2014, Dent warned in an article in USA Today. “This will be a repeat of 2008-09, only bigger, when it finally hits,” said Dent, author of “The Great Crash Ahead.”

“Get out of the way,” Dent told USA Today. He suggests that you buy short-term U.S. Treasury bills and the U.S. dollar, and avoid stocks.

In that same article, trend forecaster Gerald Celente told Americans to brace for an “economic 9/11.” He predicted that the coming meltdown will lead to social unrest, anti-government sentiment, more people out of work, and a weaker U.S. dollar.

If there is a financial panic, Celente said it could trigger a run on the nation’s banks that might cause the government to invoke “economic martial law.” According to Celente, the threat is real. “When money stops flowing to the man on the street, blood starts flowing in the street.”

Celente suggests that you buy gold if the U.S. dollar plunges, plan a getaway to more stable countries, and arm yourself with weapons.

Meanwhile, author Robert Prechter was quoted in the USA Today story that “1930s-style deflation” could cause havoc with the nation’s finances. He warned that the major U.S. indexes could fall below their March 2009 lows. According to Prechter, just like in the 1930s, even a brief recovery will fail, and stocks could lose half their value. “The economic recovery has been weak, so the next downturn should generate bad news in a big way.”

Sunny side of the Street

Buffett is having none of that. “In terms of the economy,” he said on CNBC, “the luckiest person born in the history of the world is the baby being born in the United States. I mean, in terms of the outlook for their lives, they are going to live better than John D. Rockefeller lived or better than I lived.”

Buffett has said that you could sit down at the start of every year and list 20 reasons why things are terrible. “But the truth is, this economy works wonderfully. It’s working wonderfully now. I mean, it isn’t working for everybody at this moment, and it’s coming back from a terrible shock that it received in the fall of 2008.”

On CNBC, Buffett said that the U.S. financial crisis in 2008 was an “economic Pearl Harbor.” He said the country had never seen this kind of financial panic before. “The country almost stopped,” Buffett said. “And that financial panic bled over into the general economy very quickly and very severely. And we’ve been coming back now for three years from that, and we continue to come back. But I will predict that our businesses will have more people working for them at the end of this year than at the start of the year.”

Accordingly, Buffett is a big believer in stocks, though he noted that October 2008 was a better time to buy than now. Yet investors have to look ahead. Said Buffett: “This is a better time [to buy stocks] than 10 years from now will be.”

Buffett also believes it’s a great time to buy a home. “I’d finance it with a 30-year mortgage, and it’s a terrific deal,” he said.

Believe the optimists or the pessimists? The answer is to believe in yourself. Every day you’ll get conflicting views of the state of the world. No one really knows, so make your own informed, thoughtful decision.

Michael Sincere is the author of Start Day Trading Now (Adams Media, 2011), All About Market Indicators (McGraw-Hill, 2010), and Understanding Stocks (McGraw-Hill, 2003).

Warren Buffett vs. The Naysayers

This is my latest article for Marketwatch, about Warren Buffett, and his optimistic outlook on the U.S. stock market and economy, versus three doomsayers: http://bit.ly/xAWTKX

Note: This paragraph was not included in the final version of the article (via the CNBC interview):

Buffett also believes that it’s a great time to buy a home right now, as long as you live in it. “I’d finance it with a 30-year mortgage, and it’s a terrific deal.” If he was the handy type, and Buffett isn’t, he’d buy a couple of houses at distressed prices and find renters. “It’s a leveraged way of owning a very cheap asset now, and I think that’s probably as attractive an investment as you can make now. But I think equities are very attractive compared to everything else.”