Warren Buffett is not buying into projections of an imminent “double dip” recession and sees a broad based economic recovery ahead. Berkshire Hathaway’s diverse collection of operating companies gives Mr. Buffett a unique view into the health of the overall economy and he has frequently commented on overall economic conditions over the past few years.
Last year, Mr. Buffett mentioned that rail car loading statistics are one of his favorite economic indicators. This was before Berkshire Hathaway’s acquisition of Burlington Northern Santa Fe. Now that Berkshire owns Burlington Northern, Mr. Buffett presumably receives much more frequent updates on car loadings. Based on the Association of American Railroads Rail Time Indicator report for September (pdf), we know that weekly carloads in August were at the highest level since November 2008. While car loadings are not yet close to the record high levels prior to the recession, the trend is positive and points to economic growth.
Here are a few excepts from Mr. Buffett’s comments at the Montana Economic Development Summit earlier today:
“I am a huge bull on this country,” Buffett, Berkshire’s chief executive officer, said today in remarks to the Montana Economic Development Summit. “We will not have a double-dip recession at all. I see our businesses coming back almost across the board.”
“I’ve seen sentiment turn sour in the last three months or so, generally in the media,” Buffett said. “I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”
“It’s night and day from a year, year and a half ago,” Buffett said. “I know Wells Fargo, they would love to have $50 billion more of loans now. Go in and talk to the banker.”
Cynics might say that Mr. Buffett is simply talking his own book given Berkshire’s heavy exposure to economically sensitive businesses. However, all indications are that he is a straight shooter when it comes to views on the economy. This was clearly illustrated in June 2009 when he was interviewed by CNBC and declared that no “green shoots” had yet emerged at that time.
In a series of interviews in late April, Mr. Buffett indicated that he was starting to see an upswing in business conditions. From his comments today, it appears that the trend has continued despite gloomy talk of a double dip recession. Presumably Mr. Buffett is also not buying into the deflationary logic that has led to ten year treasury rates well below 3 percent. If he is correct regarding a potential “onslaught of inflation”, investors buying treasury bonds at current rates will not have a pleasant experience in the coming years.
Disclosure: The author of this article owns shares of Berkshire Hathaway.