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| Investing Buffett's Doomsday Scenario NEW YORK - Much like Cassandra, mythology's most famous noodge, Warren Buffett has spent the past few years making predictions most people disregard--at their great expense. When the dot-coms pushed the Nasdaq ever higher in the late 1990s, the 71-year-old clung to his paint and underwear holdings and watched shares of his Berkshire Hathaway (nyse: BRKa - news - people ) plummet. The rules had changed in the so-called new economy, investors believed, and Buffett, a famous technophobe, would miss out on ever-expanding profit. As usual, Buffett's disdain for mass sentiment paid off: While Internet companies have crumbled, Berkshire shares now trade close to their 52-week high of $75,700 a piece.
"We're going to have a something in the way of a major nuclear event in this country," said the billionaire. "It will happen. Whether it will happen in ten years or ten minutes or 50 years...it's virtually a certainty." The world's second richest man added that New York City and Washington, D.C., both hit during the Sept.11 terrorist attacks, would be the most likely targets. The comments were a chilling bombshell even for the famously cantankerous Buffett. Poking fun at dot-com dreamers is one thing, foreseeing a nuclear holocaust is another. Unlike other company meetings where executives go out of their way to coax and reassure shareholders, Buffett--in the tradition of oracles of a bygone era--told his audience what they didn't want to hear. Doomsday prediction aside, Buffett was remarkably bullish on his firm's prospects. "You're going to see great results from our insurance business," he said. Berkshire, a holding company primarily involved in the property and casualty insurance business, had a $2.4 billion loss because of the Sept. 11 attacks. The firm is now making up those losses as insurance premiums rise. Buffett said that premiums before payouts increased by $1.8 billion in the first quarter and the firm had an underwriting profit of $20 million. Things are less lucrative in the stock market, Buffett said, sounding a familiar refrain. "We have more money than ideas," he said, adding that 6% to 7% was a fair rate of return in the current environment. The company has more than $37 billion in cash to invest. One place the money certainly won't go is derivatives. "There's no place with as much potential for phony numbers as derivatives," he said. Buffett's 78-year-old billionaire vice chairman, Charlie Munger, couldn't resist chiming in. "To say that derivative accounting is a sewer is an insult to sewage." Seclusion and soothsaying seem to go hand in hand. Ancient oracles lived in caves. Cassandra was imprisoned in the Temple of Athena. Buffett lives in Omaha. "A great IQ is not needed to do well as an investor," Buffett said. What you do need is to "detach yourself from the crowd." Buffett has detached himself from the whir on Wall Street and made billions by peeking into the future. We can only hope he is less gifted at predicting acts of mass terror.
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