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Buffett’s Favorite Indicators Point to Slowing Economy

By    |   Wednesday, 20 June 2012 09:04 AM

Warren Buffett has long been considered one of the greatest investors in the world. Experts have spent hours trying to understand what he is thinking with varying degrees of success. In late 2009, CNBC reporter Becky Quick simply asked Buffett which economic indicator he would want if he was stranded on a desert island with access to only one number.

His answer was freight-car loadings and truck-traffic data. The latest data in both of these numbers show cause for concern.

Freight-car loadings refer to the number of railroad cars loaded each week. The Association of American Railroads recently reported that loadings fell by 1.7 percent compared with a year earlier for the week ending June 9. For the first 23 weeks of 2012, U.S. railroads reported a decline in loadings of 3.1 percent when compared to the same period last year.

Trucking data also point to slow growth. Although the American Trucking Association’s For-Hire Truck Tonnage Index was 4.1 percent higher in May than it was a year earlier, it has dropped in each of the past two months. According to the association’s website, this indicator has turned negative before every recession.

For now, the economy looks like it will continue to grow slowly. However, that could change quickly and if it does, Buffett’s desert island indicators should provide warning.

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Wednesday, 20 June 2012 09:04 AM
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