Bruce Berkowitz: The Dangers of Investing In Heavily Regulated Industries

Johnny HopkinsBruce BerkowitzLeave a Comment

During his recent interview with WealthTrack, Bruce Berkowitz expresses hesitation about investing in highly regulated businesses where government decisions can significantly impact a company’s fate based on their perception of social good. Here’s an excerpt from the interview:

Berkowitz: I am more hesitant to deal with highly regulated businesses, where one civil servant can decide whether a very large company lives or dies based upon a perception of social good, and without any respect for owners.

In fact, the Fannie Mae and Freddie Mac situation made me think that ownership is becoming, you know, an illusion for, in highly regulated companies.

This is exactly what Fairholme has done with Wells Fargo, Bank of America, AIG, Goldman Sachs, Regents Financial, many other companies where our shareholders stepped in to support financials during difficult times. And those financials came back.

We all benefited. The companies benefited from the support. Our shareholders took a risk and received a reward, but not with Fannie Mae and Freddie Mac. And I hesitate now to invest in the banks and insurers today, because there are many that could possibly face the same issue as Fannie Mae and Freddie Mac.

You can watch the entire discussion here:

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