Billionaire Buffet bearish on war and equities

Billionaire investor Mr Warren Buffett has issued a pessimistic outlook on the world, saying the war on terror could never be won - a potential problem for his insurance interests - and warning that returns from the stock market over the next few years look meagre.

Mr Buffett, known as the "Oracle of Omaha" for his astute investments, also blasted executives for taking millions of dollars out of businesses even as they fared badly, a practice he said went far beyond Enron, the collapsed energy trader.

Mr Buffett second only to Microsoft's Mr Bill Gates among the world's multibillionaires, made his remarks in his annual letter to shareholders of his company Berkshire Hathaway.

Omaha, Nebraska-based Berkshire - a group of 50 or so operating companies, chiefly in insurance, which generate money for Mr Buffett to invest - had a tough year in 2001. It reported drastically lower net profits, cut by a whopping $2.4 billion (€2.74 billion) in claims from the September 11th destruction of the World Trade Centre by two hijacked airliners. Berkshire made a net profit of $795 million in 2001, down from $3.3 billion the year before.

Mr Buffett said further terror attacks on the US were possible, and must be accounted for by insurers. "The war against terrorism can never be won. The best the nation can achieve is a long succession of stalemates."

Working on that assumption, Mr Buffett said his reinsurance operations, including General Re - the largest US reinsurer - would only underwrite some coverage for terrorist attacks, including some third-party liability coverage for airlines.

Mr Buffett saw the size of his stock portfolio plummet last year, to about $29 billion from nearly $38 billion the year before, due mostly to wilting prices. His major long-standing holdings, including American Express and Coca-Cola lost billions of dollars in value.

"Today's equity prices presage only moderate returns for investors," Mr Buffett warned investors looking for outsize returns.

"The market outperformed business for a very long period, and that phenomenon had to end. A market that no more than parallels business progress, however, is likely to leave many investors disappointed, particularly those relatively new to the game.