When all you read is gloom, turn here for a much different perspective.

Friday, May 15, 2009

It Still Feels Like 1975 - Buffett Actions Included

Back in 1974-1975 I was living in Lancaster, Pennsylvania. Even though I am now out West, it sure feels like the mid-70s economically.

What was Warren Buffett doing then? I do remember everyone was still scared. Most doubted that the stock rally in the early part of 1975 could be sustained. The market moved sideways for a while. But ultimately moved higher. All the while Buffett was buying good companies.

So what's he buying now? Big Banks! Buffett's Berkshire raised its holdings in US Bancorp (USB) and Wells Fargo (WFC) this past week. Other investors are still scared. But not Warren. He knows those firms will be around ten years from now. With equity prices probably 5 to 10 times better than their beaten down current valuations. Both banks' shares fell to decade lows in the first quarter.

And what's happening in southeastern PA in 2009? Is this time different from the 70s? Thomas Russo is a partner at Gardner Russo & Gardner, a firm from Lancaster with significant holdings in Berkshire. Says Russo, "Buffett has a timeframe that transcends near-term swings."

The stock charts sure look the same.


  1. GNE,

    Are you concerned about the increase in weekly unemployment claims? Could this be a sign that the uptick the last few weeks was a "head fake" as one analyst put it?

  2. I am not concerned. In general claims will now begin to come down. The other reports from ADP, Monster and Christmas&Gray job cut data which lead the claims reports continue to show an improving employment outlook. If the 4 wk moving average of initial claims started moving higher again, then I'd be concerned. At this point that is highly unlikely.


  3. National Bureau of Economic Research later called the end of the recession (the "trough") having occurred in March 1975, with the next round of expansion starting one month later in April. (Maybe they'll call it for March-April this time around as well?)

  4. Joe,

    It sure will be interesting to see. Hindsight will be 20/20...


  5. What are your thoughts on the Commercial sub-prime loan shoe dropping? I hear a lot of talk about that lately. Also, what about the credit card market?


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