Buffett: Shares are best long-term investment still

Warren Buffett, the US investor dubbed the Sage of Omaha, continues to be a cheerleader for equities despite recent spectacular misjudgments on the timing of his buy and hold philosophy.

In a wide ranging interview with the CNBC television todayhe insisted that over 10 years, "you will do considerably better owning a group of equities" than US treasury bonds. This echoed his comments to the New York Times in Oct­ober that he was buying US equities. Since then the Dow Jones industrial average has fallen by over 26% and more than 2,300 points as it tests lows which have not been seen for 12 years.

Yesterday Buffett defended his October assessment of the market. "I stand by the article," he said. "I just wish I had written it a few months later." He claimed he was not calling the bottom of the market in October and yesterday again refused to be drawn on the short term outlook for financial markets.

"I would never have a feeling that the Dow is going to go to 2,000 or 12,000 or 4,300 or 20,200. I don't – I know over time it will go higher," Buffett said. "But if you buy a cross section of good equities, generally well capitalised companies, you'll make money over 10 or 20 years. I haven't the faintest idea where you'll be in 10 months, but it really doesn't make any difference."

His comments come just over a week after Buffett had to tell investors in his Berkshire Hathaway investment group that 2008 had been the worst year since he took the helm 44 years ago. He reported then that the group's annual income had fallen by 59% and that $11.5bn (£8bn) had been wiped off its net worth.

In that annual letter to shareholders, he predicted that the economy would be a shambles throughout 2009 and yesterday he said: " It's fallen off a cliff, and not only has the economy slowed down a lot, people have really changed their behaviour like nothing I've ever seen."

He described the current crisis as "an economic Pearl Harbor", performing close to his worst case scenario, and he believed that in September last year the financial system came perilously close to a complete breakdown.

Although Buffett anticipates further economic pain, with unemployment rising and inflation returning, he is confident that the US economy will recover.

" Everything will be all right. We do have the greatest economic machine that man has ever created, I believe," Buffett said. "This machine is gummed up right now and it's gummed up by a lack of confidence, and that makes people scared and, I mean, it feeds back and forth and it's a vicious cycle."

Buffett urged American political leaders to act to counter that fear.

"I've never seen the consumer or the Americans just generally more fearful than this. And they're also confused. And you can get fearful very quickly, but you don't get confident, you know, in five minutes. You can get fearful in five minutes, but you won't get confident for some time.

"And government is going to play an enormous factor in how fast it comes back. And if you're confused and fearful, you don't get over being fearful till you aren't confused. I mean, the message has to be very, very clear as to what government will be doing.

"And I think we've had – and it's the nature of the political process, somewhat, but we've had muddled messages, and the American public does not know … they feel that they don't know what's going on and their reaction, then, is to absolutely pull back."