Warren Buffett is rolling the dice in a failing U.S. market, but history shows that there is major opportunity in time of crisis. This is a big time deal, Warren’s company Brekshire Hathaway takes 100% ownership of rail road operator Burlington Northern by forking over a little sum of money; only $34 billion, its nothing to a boss.
You may not be ready to bet on the U.S. economic recovery, but according to Forbes Warren Buffett sure is.
The billionaire made a splash Tuesday when his investment firm, Berkshire Hathaway, announced a deal to take over railroad operator Burlington Northern Santa Fe. The cash-and-stock deal is worth $100 a share for the 77.4% of the company Berkshire didn’t already own, for a price tag near $34 billion.
Buffett called the deal an “all-in wager on the economic future of the United States,” but his enthusiasm couldn’t give Wall Street a lift Tuesday morning. The Dow Jones industrial average was down 71 points to 9,718 in the first 10 minutes of trading, the S&P 5007 points to 1,035 and the Nasdaq12 points to 2,038. Burlington Northern shares shot up 28.2%.
For the second-richest man in America, the Burlington Northern buy is just the latest investment in a high-profile American company. Buffett poured billions into preferred shares of General Electric and Goldman Sachs in late 2008–bets that looked questionable as the market continued to slide, but have paid off in a big way.
Elsewhere in corporate news Tuesday, Johnson & Johnson said it will try to save up to $900 million next year by cutting jobs and scaling back its management structure. The health care and consumer products giant said it will reduce its workforce by up to 7% in a move that could impact more than 8,000 workers. Shares were flat in early trading.
The Federal Reserve begins a two-day meeting in Washington Tuesday, but few expect any action on interest rates. Still, the closing statement at Wednesday’s meeting will be carefully parsed for any clues of future changes or slowdowns in the numerous liquidity facilities being run by the central bank.
