TheRiskBlog

If there was one big news this week, it was surely Warren Buffetts acquisition of Burlington Northern Santa Fe (BNI) railroad. But although the deal itself is interesting, another thing caught my attention.

Berkshire Hathaway’s deal to acquire BNI for $44 billion is not only the biggest in its history, it is a statement from Warren Buffett. He called it a bet on the future of the US economy. Unlike many out there, he believes in a bright future for the U.S. and he strengthens this believe with this deal.

The pure facts of the deal aren’t so much interesting for me. You could read or hear about it this week in nearly all media (e.g. a CNNmoney article).  For one day this was nearly ruling the economic media. Not only is this remarkable by itself, but it is interesting to see that Buffetts opinion still counts so much for people. If Warren Buffets takes a bet it is always interesting.

This is about Warren Buffett, not about a company that acquires another one. If he speaks, Wall Street listens and that’s something you should keep in mind for your trading. Listen to what Warren Buffett or other people who are widely followed like Ben Bernanke, Alan Greenspan and others say, because everyone out there does. And most of the times it influences people’s thoughts.

Warren Buffet is famous for the deals he makes and the success those achieve. And many want to play their own part in this. But what these people sometimes forget is that he is a man of vision. He doesn’t comment on the near term so much he is always concerned about the long term. If he acquires a company, the time horizon of his investment is for the long run. And it is the same with this deal.

So don’t act too early. Warren Buffett didn’t say that everything will be ok by Christmas. Five years are enough time for markets to get into downward trends, enough time to see many more businesses fail and especially it is enough time to lose our accounts if we are careless and take too much risk.

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