Warren Buffett, head of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), has confirmed a new tool in his belt today as the news that the veteran investor can predict birth rates hits the Internet. The Wall Street Journal‘s Anupreeta Das reported earlier today that Buffett’s predictions about the housing market and the birth rates back in 2011 have come true.
In a letter to his investors back in 2011, Warren Buffett predicted that the housing market would begin to rebound because the birth rate in the United States was likely to bounce back. The birth rate fell during the financial crisis because of economic stress in the United States. He said that the rise in household formation was a prelude to a return in demand in the housing market.
Exclusive: Izzy Englander’s Millennium Management Focuses On Longer Term Capital
Earlier this month, Greylock Capital Associates, an emerging markets hedge fund, filed for bankruptcy protection in New York assets under management dwindled from nearly $1 billion in 2017 to $450 million at the end of 2020. After three years of losses, Bloomberg reported that assets could drop below $100 million by the end of the Read More
Buffett right on housing market
In the 2011 letter, Buffett said “Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.”
Household formation dropped in the early part of the recession but had picked up drastically by 2011. Buffett predicted that “hormones would take over” and new families would be searching for somewhere with a little more room to live. His prediction turned out to be exactly right.
Yesterday, The Wall Street Journal reported that America’s fertility rate stabilized in 2012 after several years of a drop. The article hailed the end of the “baby bust” ushered in by the 2008 financial crisis. As the birth rate ticks up a little bit more, it is likely that demand for housing will pick up, just as Buffett predicted.
Oracle of Omaha
Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has had a great year, with B class shares rising by more than 25 percent since January 1. The company is dealing with several stresses, but none greater than the existential nightmare born from the realization that Buffett will not be at the company forever.
The company has made a lot of promises about its plans for leadership when Buffett chooses to leave the firm, but his reputation and personal profile are so great that investors have a hard time believing in that promise. His prediction about the rise in births in the United States demonstrates his value, and his ability to make uncanny predictions about the economy.