Warren Buffett is a 70-plus-year-old individual, still very active in the investment world and regarded by many as one of the greatest investors of all time. Warren is a big deal with a really big balance sheet.
Buffett built his fortune and his fund Berkshire Hathaway by buying entire companies whenever possible — think GEICO, Net Jets and Fruit of the Loom — and large blocks of stock when he cannot. His long-term success has been unquestionable, though many have criticized the last 10 years. Nonetheless, Warren is an icon and his words really count.
Last year in the middle of the economic calamity — around 6:30 in the morning — a reporter from Canada misquoted Buffett: “Governmental action could make the dollar worthless.” Immediately the market fell reacting to his comments. Shortly the phone rang on the CNBC set and it was Warren. A billionaire watching TV at 5:30 his time! He said the reporter had it wrong. “I said the dollar would be worth less, not worthless!” The investing world listens to what he says and what he does.
On Monday Warren bought the rest of Burlington Northern. He already owned a large block of the stock and easily raised the necessary funds to offer a near 30 percent premium to buy out the other share holders. Warren said on CNBC that he was betting on America and that our best days are ahead of us. I think the first part was correct and the second part hopeful.
Betting on American business (the entire economy returning to states quo) is concerning to me. There simply is no evidence to support the notion that consumers will return to their spending habits prior to the economic collapse of 2008. We contend that change is more based on demographics than the economic fallout from last fall. An improving economy may help increase spending from these levels, but we do not see consumer spending escalating at the rate it did prior to 2008. We believe this is reason to be cautionary with regards to the overall economy growing anything beyond what in the past has been called subpar growth.
But, we too are bullish on American Businesses! Confused yet? I remember bombing a science test in high school because I called a cotton swab a Q-Tip and a tissue a Kleenex. I hope the teacher is reading this, frankly because I still think I am right. As far as the business world is concerned those brand names dominated their environment. They still do today. The point being is that individual businesses will indeed see their best days ahead just as they have in the past. The entire economy will have challenges but selective businesses will prosper in our opinion.
Smart investors will take their resources and transition from the broad-based American markets and attempt to pinpoint the next icons of American Business. The next Q-Tip, iPod or Google which is now deemed a verb by Webster’s dictionary! Good luck!
Joseph “Big Joe” Clark is a Certified Financial Planner and the Managing Partner of the Financial Enhancement Group, LLC. He can be reached at bigjoe@yourlifeafterwork.com, or (765) 640-1524.
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