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Warren Buffett: Euro System's 'Major Flaw' Can't Be Solved By Words Alone

11/21/2011 08:21 am ET | Updated Nov 21, 2011

Billionaire investor Warren Buffett said Europe's debt crisis had shown up a "major flaw" in the 17-member euro zone system and it would take more than words to fix it.

"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 told CNBC during his first trip to Japan on Monday.

Buffett, dubbed the 'Oracle of Omaha' for his long track record as a value investor, said he had no idea how Europe's sovereign debt crisis, which started in Greece two years ago and rages on, would end, though he noted there were good valuations among companies in Europe.

"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.

"We bought Tesco earlier. I could buy more if the price came down," said the 81-year-old chief of Berkshire Hathaway Inc, referring to the British retailer.

Buffett earlier told reporters in Iwaki City in northeast Japan that he also sees opportunities to invest in the country and was not deterred by either the March earthquake or a scandal engulfing camera and medical device maker Olympus (7733.T).

Making a trip that he had canceled in March due to the earthquake and tsunami, Buffett told reporters: "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 said, referring to a widening accounting scandal at the company, which has admitted hiding losses for decades through improper accounting, raising questions about Japanese corporate governance standards.

Buffett earlier opened a new plant at cutting tool maker Tungaloy Corp, a unit of an Israeli firm in which Berkshire Hathaway holds an 80 percent stake. The factory is just 40 km from the Fukushima Daiichi nuclear power plant that was crippled by the disaster in March.

Posing for photographs outside the new factory with staff, holding a sign saying, "Never give up, Fukushima," Buffett said he felt "very welcomed."

Tungaloy, once part of conglomerate Toshiba Corp (6502.T), supplies automakers with superhard tools used to cut, groove and turn engine parts.

JAPAN STRUGGLES

A swift recovery in Japanese manufacturers' supply chains and output helped the world's No. 3 economy rebound from a post-quake recession and grow by 1.5 percent in the third quarter.

But a strong yen, cooling demand in key export markets and disruptions from widespread flooding in Thailand -- a major production base for Japanese firms -- have clouded the outlook, and Japanese stocks are down about 18 percent this year -- their worst performance since 2008.

Japan's exports fell 3.7 percent in the year to October, the fastest pace in five months, signaling more weakness ahead as the strong yen and sputtering global growth drag on the recuperating economy.

IBM STAKE

Known for avoiding companies he does not understand -- including those in the technology sector -- Buffett surprised markets this month when he revealed Berkshire spent nearly $11 billion to build up a 5.5 percent stake in IBM.

Buffett has said he was convinced by IBM's long-term road map and by its entrenched position with major businesses -- part of the durable competitive advantage he looks for when investing.

Early this month, Berkshire Hathaway reported a smaller third-quarter profit after losing more than $2 billion on derivatives related to stock market performance.

During the quarter, Berkshire funded the purchase of chemical maker Lubrizol and a $5 billion investment in Bank of America Corp.

(Writing by Tomasz Janowski, Editing by Ian Geoghegan)

Copyright 2011 Thomson Reuters. Click for Restrictions.

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