Investment legend Warren Buffett indicated the credit crisis doesn’t worry him now by taking on debt to fund his latest takeover.
And his company Berkshire Hathaway made that crystal clear in a recent regulatory filing.
In that filing, which announced a tripling of the company’s third-quarter profit, it said, “the credit crisis has abated,” Bloomberg reports.
“Interest rates for investment grade issuers relative to government obligations have declined.”
So it’s no wonder that Buffett was willing to risk Berkshire’s triple-A credit rating in borrowing $8 billion to help finance the company’s $26 billion purchase of Burlington Northern Santa Fe railroad.
Two ratings agencies said they may lower Berkshire’s rating in light of the deal.
“He’s clearly talking from the position of a guy that has his finger on the pulse of the world economy,” Jeff Matthews, author of Pilgrimage to Warren Buffett’s Omaha and founder of Ram Partners hedge fund, told Bloomberg.
“If he were still worried about credit markets, he wouldn’t be doing this. It does say something for this guy to put that much money on a bet on the U.S. economy.”
Buffet has called the deal “an all-in wager on the economic future of the United States.”
Not everyone was so enthusiastic.
“He's buying industrial businesses with mediocre returns on capital and paying premiums on them,” Christopher Bloomstran, president of Semper Augustus Investments, told The Toronto Globe & Mail.
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