Is Warren Buffett Signaling a Housing Recovery?

by Robert Williams, Publisher Thursday, November 5, 2009

Warren Buffett is teaming-up with Goldman Sachs as the investment bank attempts to buy $3 billion of tax credits from taxpayer-owned mortgage firm Fannie Mae.

According to The Wall Street Journal, investments in low-income housing tax credits has waned dramatically in the face of the credit crisis.

Credits are being sold for between 65 cents and 79 cents on the dollar. By comparison – at the height of the real estate boom – developers were fetching 95 cents on the dollar.

(Property developers receive tax credits – worth between 30% and 60% of a project’s cost – to encourage building in low-income areas and to hold rents down. They typically then sell the credits to large financial institutions for the tax benefits they offer.)

Although Buffett and Sachs surely intend

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Warren Buffett's Berkshire Hathaway (BRK.A) said on Tuesday that it is acquiring Burlington Northern Santa Fe Corp (BNI) for $44 billion. This is the biggest acquisition ever for Berkshire Hathaway. With this acquisition, Berkshire Hathaway is adding the railroad transportation business to its already diverse range of businesses including retail sales, insurance and financials, newspaper publishing, manufacturing, business services and several regional electric and gas utilities. Berkshire Hathaway, which already owns 22.0% stake in Burlington Northern, has offered $100 per share in cash and stock for the remaining portion of the holding. The transaction which is contingent on approval by two-thirds of Burlington’s outstanding shareholders is expected to close by first quarter of 2010. Burlington Northern will continue operating from its Fort Worth, TX headquarters. Berkshire Hathaway also announced that its Class B common share (BRK.B) will be split off into 50 ...

Lost in today's news that Berkshire Hathaway (BRK.A) (BRK.B) was acquiring Burlington Northern (BNI) was the announcement that Berkshire's "B" shares, or, commonly known by investors as the "cheaper" shares, would be split 50 to 1.

It is rare to see a stock split for either the Berkshire "A" shares or the "B" shares. Over the years, Warren Buffett has resisted calls to split the stock.

The "A" shares have long been out of reach for nearly everyone except professional investors. In the past 52 weeks, those shares traded in the range of $70,000 to $119,000 per share.

The "A" shares are obviously not very attainable for most investors.

Many investors turned to the "B" shares but even those "cheaper" shares traded in the range of $2241 to $3969 in the last 52 weeks. Again, for many investors, owning a share of Berkshire was likely out of

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If you follow financial news, or any news for that matter, you know what happened this morning. Warren Buffett's Berkshire Hathaway a href="http://finance.yahoo.com/news/Berkshire-buying-Burlington-apf-3016566039.html?x=0amp;.v=18"agreed to buy Burlington Northern/a. He already had a large stake (I believe around 20%), but this is a massive bet on the US economy. It really is classic Buffett. If you've read my blog at all, you know I'm bullish on railroads, and have felt BNI is the best out there. I don't own any shares, so I missed out on this one. Buffett isn't stealing it, but it will likely look like a good purchase five years from now. br /br /In other news, a href="http://finance.yahoo.com/news/Berkshire-Hathaway-OKs-50for1-apf-323762915.html?x=0amp;.v=5"Berkshire agreed to split /atheir "B" shares 50 to 1, which is a big departure for them. br /br /Buffett is clearly trying to make a statement here, and likely wanted another "signature purchase" (like ...

What If Jeremy Grantham is Right?

by Alexander Green, Chief Investment Strategist

Jeremy Grantham, president of investment management firm GMO LLC, has been getting a lot of press lately.

At the market’s top, he warned of an impending bear market. At the bottom in March, he forecast a historic rally. Today, he says the market is 25% overvalued.

Should you be worried? Perhaps not.

Let’s start with Grantham’s track record. He’s made a couple of good calls lately. But does he get it right all the time? Of course not. No one does.

But even if he’s right, it wouldn’t necessarily be negative. It all depends on your time horizon. Here’s why…

How Long-Term Investors Can Benefit From A Bear Market

If you own stocks on margin, call options, or LEAP options, a market downturn could be devastating. A 50%

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It isn't fun being a value investor right now. Just 8 months ago, value investors had the stock markets at their feet. The S&P 500 was trading at just 10 times earnings, and some blue chips were trading at multi-decade lows.

And then, poof!

Before value investors could even blink, stocks moved higher and, so far, haven't looked back. Over the next 8 months, the valuation on the S&P 500 nearly doubled.

Make no mistake; the rally has been great. Every investor has benefitted. For value investors, current market conditions are both the best of times and the worst of times.

Who doesn't feel a tinge of jealousy as growth investors cash in on multi-decade highs for stocks like Amazon.com? If you're like me, sometimes it's tempting to just throw in the towel and follow the crowd into the growth stocks, even if they are trading with P/Es at 50 or higher.

But never

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Doug Casey is an American free-market market economist, financial author and entrepreneur. He has been writing a monthly investment newsletter, the International Speculator since 1979 and I always find his ideas quite refreshing. He is also somewhat of a perma gold bull as gleaned from an interview posted here a few days ago. In a follow-up discussion with Louis James, editor of the International Speculator, Casey focused on the outlook for gold stocks.

Here is the first section of Casey’s interview:

L: Doug, we were talking about gold last week, so we should follow up with a look at gold stocks. If one of the reasons to own gold is that it’s real - it’s not paper, it’s not simultaneously someone else’s liability - why own gold stocks?

Doug: Leverage. Gold stocks are problematical as investments. That’s true of all resource stocks, especially

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Harry Dent: Bold Predictions of the Great Depression Ahead

by Alexander Green, Chief Investment Strategist Monday, October 6, 2009: Issue #1108

As they said in the movie “Poltergeist”: “They’re baaa-aaack.”

Who’s back? Harry Dent, the self-styled “economic futurist,” who presumes to tell us about the great economic booms and busts that lie ahead.

How can he possibly know these things?

According to Dent, an analysis of the “highly predictable” nature of consumer spending based on demographic trends – increasing spending during child-rearing years, peak spending as the kids leave home and slower spending during late work and retirement – reveals what lies ahead for the economy and the stock market…

Harry Dent: Dow 44,000 & Other Flimsy Forecasts

Harry Dent is a man worth listening to. After all, he has a near perfect track record – as a contrary indicator…

For example:

With less than auspicious timing, Dent ...

Some of Wall Street’s most prominent bears are turning bullish right now. But that doesn’t mean that your small-cap portfolio is safe. Here’s why these brilliant minds think that we’re back on the path to recovery — and why they’re wrong.

I was in Manhattan last week attending Grant’s Fall Investment Conference. The U.N. General Assembly is meeting there, and the streets were blocked off in places. The NYPD was out in full force. I heard one passerby complain about the inconvenience of it all to one police officer. He responded, “Don’t blame the NYPD, blame the General Assembly.”

With the General Assembly in Manhattan and the G-20 in Pittsburgh, government has taken over the headlines this week. It seems half the world is mostly preoccupied with telling the other half what to do. No doubt, bossiness is in a bull market.

At Grant’s conference, I heard presentations on gold, the dollar, oil,

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Growth and value investing has been on life support for a long time now. Last year, someone finally pulled the plug.

A quick search of the ETF database will show you something quite telling—71 ETFs are dedicated to a slice of the market self-defined as either “growth” or “value.” That’s nearly 10 percent of the U.S. ETF market.

But honestly, why?

First, there’s a definitional issue. Russell (just to pick one index provider) defines their growth and value universe based on two characteristics: price-to-book and “projected growth” based on IBES (Institutional Brokers’ Estimate System) consensus estimates. This very distinction makes the indexer in me cringe. By taking the market and slicing it into buckets, and then picking one, investors are fundamentally picking stocks, and I still believe that rarely makes sense.

Let’s take a look under the hood at one family of growth and value: the iShares Russell 3000 series.

 

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