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Bill Freehling is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Bill Freehling.
This week’s (5/16) investing column
TWO OF THE country’s most closely watched investors have recently made bullish comments about the state of the U.S. economy.
John Paulson and Warren Buffett, both of whom have made billions of dollars for themselves and millions for their clients with their prescient investments, have each made the case that the U.S. is experiencing a strong economic recovery.
Paulson, who made billions betting against the housing market a few years ago (and is now named, though not charged, in an SEC lawsuit against Goldman Sachs), spoke to his investors Monday about the state of the economy.
According to the Reuters account of the remarks, Paulson said he thinks the U.S. housing market is poised for a strong rebound. He encouraged listeners to buy now while prices and interest rates are low. He also said companies that are coming out of bankruptcy should yield lucrative results.
After betting for years against the banks, Paulson more recently has taken big stakes in financial companies including Bank of America and Citigroup.
He said in his comments Monday that surging payrolls, loosening bank lending and federal stimuli should lead to a V-shaped economic recovery.
Buffett, during an interview earlier this month with CNBC’s Becky Quick, wasn’t quite as optimistic as Paulson but was upbeat also on the improving state of the U.S. economy.
Buffett’s Berkshire Hathaway is a pretty good barometer of the overall economy, as it’s invested in a wide variety of companies. Berkshire now owns the Burlington Northern Santa Fe railroad company, whose results show the extent to which goods are being moved around the country. More rail traffic means a stronger economy.
Buffett said since March he’s been seeing a sharp increase in business at Berkshire. He said the rebound may not be quite V-shaped, as that implies a quick return back to the peak. He foresees a slow and steady comeback (to me, this sounds a lot like a “check mark” recovery).
Buffett, whose company owns one of the country’s largest residential brokerage firms and many homebuilder suppliers, was less bullish than Paulson on housing. He thinks there’s still too much of a supply overhang, which will prevent the market from returning to full steam for another year or so.
Nonetheless, from a man who called the recession “an economic Pearl Harbor,” Buffett’s comments are encouraging–as are Paulson’s.
Let all hope they’re right.