"By any common sense definition, we are in a recession," Buffett said. "Business is slowing down. We have retail stores in candy, home furnishings and jewelry; across the board, I'm seeing a significant slowdown."

"In '73 and '74, we had this stagflation situation, and we really had a meltdown in equity prices," Buffett said. "We are seeing more fixed-income type forced liquidations. We are seeing more indigestion at banks with a lot of loans they don't want to have. So you're seeing a time of easy money in terms of price, but not so easy money in terms of availability."

"At 1,300-plus on the S&P, stocks are not cheap," Buffett said, referring to the Standard & Poor's 500 index <.SPX>, which has fallen about 16 percent since mid-October.

"I find more things to look at now than I did six months or a year ago, but I would say it's changed more dramatically in the fixed-income market than it has in the equity market," he added. "That may be where I find the opportunities."

In this Reuters article, Buffett also talked about the bond insurers:

On February 12, Buffett offered to reinsure $800 billion of relatively safe municipal bonds, which are typically used to finance such things as hospitals, roads and schools.  But he offered to back the bonds only at a steep premium. His offer also excluded risky debt, including securities tied to subprime mortgages, that bond insurers had agreed to guarantee in recent years to bolster profit.  Buffett on Monday said his earlier offer is now "not on the table," saying, "We tossed our hat in the ring and they tossed the hat back."

To which I say, DUH!  You think Buffett runs his business for fun or profit! 

You may also want to note that many Muni bond traders are being investigated by the FBI and FINRA (Financial Industry Regulatory Authority).  Here is one article from Bloomberg.com about the "targets" of the investigation (receiving a target letter is often paramount to charges being filed, the article states.