Interesting commentary from Warren Buffett’s appearance at the Fortune Most Powerful Women Conference. He says the economic recovery is chugging right along without a hiccup. What Buffett says is not coming back is housing and as we all know by now housing is causing a major drag in the economy (via Joe Weisenthal):
“As of today, our housing-related businesses are as bad as they’ve ever been during this period. Everything else you name is up. And our railroad carried 200,000 car loads last week, that’s the highest total in three years. That’s stuff moving around the country, supplying merchants and doing all kinds of things.
If you take our five largest businesses, all of them will either set records for earnings or just about set records for earnings this year. And in our retailing operations, we’re seeing same-store gains just like before.
I really thought in August and September with all the turmoil in the markets, you’d see a falloff particularly in higher-priced items, but it hasn’t happened yet. Maybe it will, but as of today, the recovery is still underway.
The business has gotten better and better, straight since the summer of 2009, every quarter, and we see it in our business. You know, our railroad will have record earnings this year, our energy business will have record earnings this year, Marmon, our big diversified operation will have record earnings this year. We just bought a company, Lubrizol, which will be at or have record earnings. Iscar, our tool manufacturer in Israel, very big business, will have record earnings.
So, business has come back. What has not come back, and should not have come back, but needs to come back, is residential housing. And we were creating two million households — we were creating two million housing units five or six years ago, and we were creating a million or something like that households. There are only two factors in that supply and demand equation: Houses and households. We kept producing too many houses relative to the number of households.
See the full interview at Fortune.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.