A good discussion on the economic situation with Warren Buffet and Charlie Rose

[Kathy in MD]

Last night Charlie Rose interviewed Warren Buffet, one of the most respected investors in the country.

 

A bit of background on why I feel his imput on the current situation to be particularly valuable. He is a long-term, value investor. He doesn't believe in following fads and get rich-quick schemes. He's also been in the market for longer than I've lived and has gone through many market crashes, recessions, etc. He's lost money and made it. He believes in only investing in what he understands. He was a child during the depression and started his paper route when he was 13. Though Buffet is one of the richest men in the country (#2 at last ranking) he still lives a very modist life style in Omaha. He is also stresses that he feels the tax code penilizes the poor and middle class for the benefit of the super rich. In total taxes, he's never paid such a low percentage of his income, yet his janitorial staff pays a much higher percentage of their income to the gov't.

 

To briefly summerize his comments:

 

1) To do nothing, is to invite disaster. To delay action is to just make the cure even worse.

 

2) Even to do something immediately will not give us an instant cure, it's still going to be a hard haul out of this mess. To evaluate the results of the current plan immediately will not be possible.

 

3) The current plan is actually an investment, not a bailout. The money set aside for the financial situation is buying a lot of good assets that will eventually payoff, possibly even with a profit. He says the federal employees doing the bargaining are doing a good job bargaining and he would loke to hire them for his company.

 

3a)He personally looked at several of the situations the gov't is buying into, but didn't have the cash to invest. However he has been buying into other temporarily distressed situations.

 

4) The time to lay blame and go after any abuses and illegal actions is AFTER we get a rescue plan in place. To delay is to only make the situation worse.

 

5) Long term adjustments to the system can wait.

 

Unfortunately the video isn't available yet on the internet. I have connect to the Charlie Rose.com search page for finding the interview once it's up. I suggest you see it. Buffet makes many more points and gives some good analogies.

 

http://www.charlierose.com/search/

[fractalgal]

1) To do nothing, is to invite disaster. To delay action is to just make the cure even worse.

 

2) Even to do something immediately will not give us an instant cure, it's still going to be a hard haul out of this mess. To evaluate the results of the current plan immediately will not be possible.

 

3) The current plan is actually an investment, not a bailout. The money set aside for the financial situation is buying a lot of good assets that will eventually payoff, possibly even with a profit. He says the federal employees doing the bargaining are doing a good job bargaining and he would loke to hire them for his company.

 

3a)He personally looked at several of the situations the gov't is buying into, but didn't have the cash to invest. However he has been buying into other temporarily distressed situations.

 

4) The time to lay blame and go after any abuses and illegal actions is AFTER we get a rescue plan in place. To delay is to only make the situation worse.

 

5) Long term adjustments to the system can wait.

 

Unfortunately the video isn't available yet on the internet. I have connect to the Charlie Rose.com search page for finding the interview once it's up. I suggest you see it. Buffet makes many more points and gives some good analogies.

 

http://www.charlierose.com/search/

 

I disagree. I think if Congress wants $700 Billion dollars of my children and grandchildren's money and will be resorting to socialism to get it, I am going to need more than one man's opinion. In addition:

 

" Buffett is one of the top economic advisers to Barack Obama, a senator whose influence over whether this bailout passes is, ahem, not small.

- Buffett took a sizable stake in Goldman Sachs today, investing $5 billion in the company. This came after Goldman reorganized itself in a way that will make it better able to capitalize on the bailout windfall.

- Sure enough, Bloomberg News reports that if this bailout passes, it will mean a potentially huge windfall for Goldman Sachs - ie. now for Buffett."

 

http://www.huffingtonpost.com/david-sirota/questioning-warren-buffet_b_129112.html

[Kathy in MD]

I disagree. I think if Congress wants $700 Billion dollars of my children and grandchildren's money and will be resorting to socialism to get it, I am going to need more than one man's opinion. In addition:

 

" Buffett is one of the top economic advisers to Barack Obama, a senator whose influence over whether this bailout passes is, ahem, not small.

- Buffett took a sizable stake in Goldman Sachs today, investing $5 billion in the company. This came after Goldman reorganized itself in a way that will make it better able to capitalize on the bailout windfall.

- Sure enough, Bloomberg News reports that if this bailout passes, it will mean a potentially huge windfall for Goldman Sachs - ie. now for Buffett."

 

http://www.huffingtonpost.com/david-sirota/questioning-warren-buffet_b_129112.html

 

 

True, Buffet is but one man, but he explains well in mostly layman terms what I and many others have thought long before his interview.

 

In his interview he explains that cash rich investors are looking to invest in the fall out. It's just that 1) the size of some companies nees are so large that the private companies either don't have the cash or the time frame that the fed gov't has. (remember that Wall Street lives by quarterly earnings reports. Buffet is one of the few not buffeted by such short term outlooks). Because of that combined with the low cost of borrowing for the federal gov't (last debt issue is paying under 1% interest), Buffet is projecting that the your children and grandchildren will at least break even and may even make a profit.

 

Yes, he does stand to benefit from investing in the current situation, but he is also investing in GE, which is involved in far more industries than the financial markets. So he is seeing that the current financial situration IS starting to hit Main Street and that a long term, far-sighted investor can make money.

 

Side note: Personally I was very against the Bush tax cuts. I knew that it would cut into or eliminate our surplusses and that the gov't had big bills coming up with the Baby Boomers. I knew that it would be our children and grand children that would pay heavily for the cuts. This economic plan I feel will be much less of a burden on our children than to let the fallout happen, because of the longer term effects of a major economic crash. Finally a rhetorical question NOT to be answered in this thread, maybe in a different thread: How many individuals supported the tax cuts, ignoring the economic effects on their children are now against the gov'ts current proposal because of "pushing" the costs onto their children?

 

Yes, Buffet is advising Obama, but he is also advising the current admistration. But probably one reson he's supporting Obama is because of something he's been talking about for some time, the inequality of the federal tax system on the middle class and poor, expecially after the Bush tax cuts. He maintains it doesn't matter the the richest pay the most taxes in raw $. He complains that he has never before paid such a small % of his BILLIONS in tax, yet his lower paid employees pay a very high % of their relatively low income, many in the low 10,000. Buffet's been complaining about the tax program and Bush's tax policies for years.

 

Finally, just because Buffet supports Obama is no reason to throw out his opinions. I forget which fallacy you've violated, but it is a fallacy. It is a valid reason to look at his proposals more throughly perhaps. But before you throw out Buffet's opinions and proposals, look at his level of expertise in the business and investment world. Look at his character. I've followed him for years, to my mind, he's an excellent resource to listen to on both accounts. I especially like that he freely owns up to not knowing everything, making mistakes and not liking some of the current accounting changes proposals that will make it harder for individuals to judge the value of companies.

 

Look at it this way, what if I threw out all of your opinions soley because you supported XYZ. Give me good solid resons for your beliefs and I'll ignore the fact that I can't stand XYZ, whom you support. I might even totally change my opinion. Please look beyond the "socialism" label and consider the possibility that this is an investment, just as the gov't, fed, state and local, invests in highways and bridges (facilitating interstate and international trade), education (facilitating hopefully a better educated population), science and medicine research (facilitating new technology that can be exported)

All these investments *can* improve our children's and grandchildren's lives. Not only is it projected that they will at least break even on the basic "payout", but there will beincreased income because of lower layoff levels and unemployment payouts.

 

I maintain that if the various gov't had relied **only** on private investment, we would not be the economic powerhouse we still are and our standard of living and quality of life would be far, far lower. I am all for reasonable, judicious investments by our gov't.

[Alana in Canada]

It seems the video is posted now.

[Kimber]

I totally disagree with the bailout. I don't trust congress and I don't trust Buffet, either. Why should I?

 

Here's how I see it.

 

Debt is not based on real money, but potential earnings. So, our country as a whole is operating off debt and not real cash. The debt is created at the lowest levels and owed to the highest levels. The poor get poorer and the rich get richer. All the reason, to let the system as it stands die off. Let the artery bleed, it will be better for us in the long run.

 

And yes many people will loose money. When the Savings and Loans lost money in the 80's, my single parenting mom lost her job and we slipped into dismal poverty. It made us stronger. Since then, my mother, my sister and I have all received college degrees and worked ourselves up. While a slow down or a depression is not fun, it builds and develops character.

 

Look at the greatest generation ever, the parents of the baby boomers. They lived through the great depression. They fought in WWII. They were real men and women. Look at the baby boomers, those children whose generation size doubles that of Generation X because of the number of abortions they had. It's the first generation to put their own needs ahead of their children. (I know this is a gross generalization and not true of all, but it is true of a large majority.)

 

It's easy to get caught up in these situations and think that something has to be done. But that isn't true. Nothing has to be done to correct this problem. Economic hardships are not something that has to be feared. When forced with the alternative of a socialists society, I prefer a limit to available credit.

[laylamcb]

I love Buffett. When I look for stock- and fund-picking advice, I look to Buffett.

 

But remember that first and foremost, Buffett must consider what is best for Buffett and for Berkshire Hathaway investors. Not what is best for me.

 

Buffett saw a golden (haha!) opportunity at Goldman Sachs, and he moved. I don't fault him for that at all: He has the money to take advantage of a fire sale. More power to 'im, I say. But he's betting that this and other investments will pay off bigtime because people are panicked and the government will move in to assuage our fears. (He's probably right.) In the words of George Bailey in It's a Wonderful Life, "[buffet's] not selling, [buffett's] buying. And why? Because we're panicky and he's not." (Apologies to Warren the Great for linking him to the Evil Potter. :D)

 

If life as we know it were coming to an end, why would Buffett be plowing money into Goldman Sachs instead of spreading it around in hundreds of savings accounts??

[jmgconner]

It's easy to get caught up in these situations and think that something has to be done. But that isn't true. Nothing has to be done to correct this problem. Economic hardships are not something that has to be feared. When forced with the alternative of a socialists society, I prefer a limit to available credit.

 

I think you've hit the nail on the head. Americans are so quick to avoid any pain or hardship. And correct me if I'm wrong, but don't we NEED a limit to available credit? Wasn't it bad lending practices and consumers over-borrowing what got us into this mess? Why do Americans feel entitled to credit?

[Kimber]

Yes, but according to the politicians, we don't understand the ramifications. We aren't education enough, and even those of us who are, we're just too ignorant to understand what is best for us.

 

Kimberly

[laylamcb]

Yes, but according to the politicians, we don't understand the ramifications. We aren't education enough, and even those of us who are, we're just too ignorant to understand what is best for us.

 

Kimberly

 

But we're gonna show them what we know AND give THEM an education in democracy in the process, aren't we, Kimber?

 

People: If you are against this bailout, it's NOT TOO LATE to be heard. I just called my congressman again to ask him to vote no on the "new and improved" pork-laden Senate bailout bill. I had to call because I could NOT get through via email. The intern who answered the phone said that the House server is just not able to keep up with the traffic--they haven't seen anything like this since 9/11. We will NEVER have the kind of clout we have now, because every one of these guys is up for reelection in just one month. Let your voice be heard.

[Word Nerd]

If these are such good investments, then why is it necessary for the government to make them?

[CLHCO]

I saw that last night. I admit, I can't say I agreed with him over the many others I've heard on the same issue, probably less so. I appreciated his point of view, I just feel he is coming from a different direction of what is ultimately best for our children's children and the government system they are to inherit.

 

I wish I could remember what came to mind last night while watching it but I was sewing at the time and it was right before bed.

[Kathy in MD]

If these are such good investments, then why is it necessary for the government to make them?

 

1) the amount of money in many situations is more than private companies can afford and keep their current businesses viable. Many of our corporations have larger gross incomes than the Gross National Product of many smaller companies, but they don't begin to have the value of the federal gov't.

 

2) The federal gov't is now borrowing money at rates FAR below that available to companies, making the deals even better for the federal gov't than private companies

 

3) The federal gov't often can have a longer investment horizon than the private companies can.

[fractalgal]

1) the amount of money in many situations is more than private companies can afford and keep their current businesses viable. Many of our corporations have larger gross incomes than the Gross National Product of many smaller companies, but they don't begin to have the value of the federal gov't.

 

2) The federal gov't is now borrowing money at rates FAR below that available to companies, making the deals even better for the federal gov't than private companies

 

3) The federal gov't often can have a longer investment horizon than the private companies can.

 

The flaw here is thinking that it is good for the Fed. Govt. to have this much power and control.

The government is not our benevolent uncle. The government is about growing government, not about helping us.

If the government were to actually profit from these sales in the long run, we will not see this money. The govt. will come up will more problems to solve to spend it on.

It is similar to an alcoholic. All this spending and no way to pay for it. If the US Congress continues down this path it will self destruct.

 

If all these bailouts pass and taxes keep going up and up, then incentive to work is going to go down. If over 50-75% of your income is going automatically to the government in taxes, why bother getting a job?

[Zelda]

Yes, but according to the politicians, we don't understand the ramifications. We aren't education enough, and even those of us who are, we're just too ignorant to understand what is best for us.

 

Kimberly

 

This may be true but do we really want to say that our elected officials should do what their constituents want them to do unless the officials feel that they know better? (I understand that we elect officials to act on our behalf and not to literally do what we tell them to do but if an official goes against the will of the majority the majority can elect someone else next time and the all-knowing official will be out of a job so the net effec is that they act on our behalf according to our wishes.)

 

If the majority of the electorate decides to do a bone-headed thing it is not the function of our elected officials to wrest control from us and take over until they've decided we've come to our senses. That's a whole different kind of government.

 

ETA: Possibly, you are being very sarcastic here and if so then I am agreeing wholeheartedly with your sarcasm!