Warren Buffett, the world's best-known investment guru, said Wednesday the possibility that the U.S. economy will go into recession will make no difference in how he runs his Berkshire Hathaway empire.

"We don't spend any time talking about where the economy is going," Buffett told a business audience in Toronto. "We have a basic belief that the country will do very well over time.

Investment guru Warren Buffett, 77, tells a Toronto audience that he still loves going to work every day.
(Matt Bingley/CBC)

"We like to buy businesses run by good people in fields we understand. It doesn't make any difference what goes on in the short term."

Buffett said the era of "dumb money" is over. He criticized what he called the "madness" of the complex structured financial products that have led to the recent turmoil in the mortgage and credit markets.

'It's only when the tide goes out that you find who has been swimming naked.'—Multibillionaire investor Warren Buffett

He said there was a "certain poetic justice" that some of the companies who dreamed up these "toxic" products are now having to buy back some of them at quite a loss. 

"As I've said in the past, it's only when the tide goes out that you find who has been swimming naked," he said. "Well, the tide has gone out — and it has not been a pretty sight."

For people and businesses wanting to borrow reasonable amounts of money, he said funds are still widely available and are now cheaper, thanks to recent rate cuts from the U.S. Federal Reserve.

Advice to investors: Buy index funds

Buffett, who is famous for his "buy-and-hold-forever" philosophy, suggested that investors ignore the daily market ups and downs and buy index funds over time.

"It's much easier to just buy pieces of wonderful American businesses." 

Forget trying to time the market, he said. "You shouldn't try to compete with the pros. If you try to be a lot smarter, you'll probably end up being a lot dumber." 

During a wide-ranging question-and-answer session, Buffett told his audience he was prepared to answer any question — except what investments he was looking at acquiring next.

As for the decline in the value of the U.S. dollar, he blamed the enormous current account and trade deficits the U.S. is running.

"We're still sending about $2 billion a day to the rest of the world," he said. "Force-feeding a couple of billion a day to the rest of the world is not conducive to a stable dollar."

He said U.S. voters have "some interesting and good choices" in this year's presidential election.

Buffett said he would be supporting a Democrat, but had kind words for the Republican front-runner. "I don't agree with John McCain on a lot of points, but I think he's an outstanding human being."

Known as the "Oracle of Omaha," Buffett began his business career by buying the textile firm Berkshire Hathaway in 1965. Thanks to his investing prowess, Berkshire is now a huge holding company for a business empire that employs 240,000 people.

Buffett himself has become the second-richest person in the world with a reported net worth of $52 billion US. He plans to leave most of that to a charitable foundation controlled by Microsoft's Bill Gates.

Buffett, who is well known for avoiding technology investments because he doesn't understand them, said he bought 100 shares of Microsoft after meeting Gates — a "huge vote of confidence," he joked.

Buffett said he still loved going to work each day. "At 77, why do I keep doing what I'm doing? I like painting my own painting," he said. "I tap dance my way to work."

Buffett was in Toronto to launch the Canadian office of Business Wire, a news release distribution company that Berkshire Hathaway bought in 2006.