Billionaires Weigh In…

Remember John Paulson, the fund manager who became a multi-billionaire during 2008 by massively shorting mortgage backed securities? According to Brett Arends of

 

 

The Wall Street Journal Paulson made 3 big financial calls late last year that you need to know about.  First, he said gold could go to $2,400 an ounce based on the fundamentals. Second, he said you’re better off investing in blue chip stocks with good dividend yields than bonds. And third, he said you should buy a home. Now. If you don’t own a home, buy one, if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home”.

Why does he feel this way? Paulson anticipates the kind of inflation that causes prices of everyday goods to soar and turns homeowners into geniuses.

Brett Arends, continues, “Paulson sees inflation coming by 2012 or so. The explanation isn’t hard. Put simply: We will get inflation because we have to. We are the most indebted nation in the history of the world…There is only one plausible route out of this appalling situation. The government needs inflation. The country needs inflation. That will shrink these debts in relation to the economy, asset prices and incomes.” Although home prices could certainly still slide, add in the impending inflation and the effective price of a home increases.

Similarly, Warren Buffet, an internationally recognized billionaire, in his economic outlook earlier this year noted, ” A housing recovery will probably begin within a year or so”. Buffet is considered a long-term investor, not a timer. He tends to be early in his projections however

 

Buffet has let it be known Berkshire is ramping up spending and acquisitions at its housing-related businesses

This is still not a market where flipping homes would be an effective investor strategy.  However, mortgage rates are still at an all time low and the real estate market is 30% down from its peak according to Standard & Poor’s Case-Shiller Index. This buyer’s market of both a housing market low and an inflationary low means these factors could make real estate a good long-term investment.

from Starker New 2nd Qtr. 2011

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