Forty-four billion reasons to support the bull market
Warren Buffett has just made his biggest investment ever in buying Burlington Northern Railroad Company in the US.
By Alan Steel
Published: 1:21PM GMT 06 Nov 2009
Alan Steel The two big differences between Warren Buffett and the thousands of pessimists predicting our financial demise is that he puts his hard earned cash on the line, and he is usually right.
Warren Buffett, in buying Burlington Northern Railroad Company in the US has just made his biggest investment ever. All said and done the business came with a $44 billion price tag.
He said he’s betting on an out and out recovery in the US economy and he is focusing, as all good investors should, on the medium to long term.
Meanwhile, pessimists are pulling their money out of equity funds and piling into fixed interest bonds.
So no doubt they will not only be dismayed by Warren Buffett’s move, but also by Cisco CEO’s statement on Thursday which ignited US stockmarkets. He stands alongside his counterparts at Apple, Amazon and Intel by stating “the quarter was very strong and the recovery is gaining momentum”.
Further good news comes from the US Institute for Supply and Management who reckon the US GDP is likely now growing at an annualised rate of 4.5pc. Workers’ productivity also offers a guide.
This week the US Labour Department said output per hour of non farm workers rose at an annual rate of 9.5pc in the quarter, more than four times the average productivity growth rate of the last 25 years. Taking that together with the previous quarter’s 6.9pc, it’s the strongest productivity growth rate over any six month period since 1961.
All of this, plus the continued scepticism among experts and ordinary investors, tells us to expect a continuing worldwide stockmarket recovery.
Alan Steel is chairman of Alan Steel Asset Management
http://www.telegraph.co.uk/finance/personalfinance/investing/6514334/Forty-four-billion-reasons-to-support-the-bull-market.html
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