LEX When the man who has earned 362,319 per cent for his shareholders makes the biggest investment of his career to lock in a “reasonable return” as determined by regulators, it is saying something. Warren Buffett’s pending $26bn buy-out of railroad Burlington Northern Santa Fe, coming on top of other regulated pipeline and electric utility investments he has made in the past decade, is yet another sign that we have entered a low-return world.
Bond guru Bill Gross makes this argument in his latest investment outlook, even though he admits he does not enjoy Mr Buffett’s long time horizon. Buying utility shares not only garners a yield nearly three times as high as the broader US stock market but often yields more than utilities’ own debt. Mr Gross reasons that, since governments seem inclined to allow all types of other businesses to earn only utility-type returns, one may as well invest in a sector already priced for such an outcome.
