The Great and Not-So-Great Warren Buffett ~ The Risk Averse Alert

Wednesday, March 02, 2011

The Great and Not-So-Great Warren Buffett

Today, Warren Buffett not only saved the world another day waiting with great anticipation for the moment when Joe Kernan finally puts together a complete sentence, but during his lengthy appearance on CNBC's "Squawk Box" Buffett presented what probably will become an "Investment Classic" loaded with wisdom for every age...

Which is not to suggest that, an accomplished investor with a knack for simple businesses might also offer compelling perspective on political matters whose import over the past two centuries surely forms Mr. Buffett's faith in America, but whose present, practical reality — seen in growing revolts across the globe — might threaten his fortune more profoundly than he appears willing to fathom (possibly demonstrating for posterity a form of complacency existing at the top of the social order, and this at the worst moment)...

Simpson-Bowles? Spitting on the graves of prior generations whose accomplishment in building up the nation's wealth-creating capacity afforded every legislated benefit ultimately serving the national will, such as is eloquently put forward in the U.S. Constitution's Preamble in matters of principle giving government its very purpose, is no solution to a problem whose circumstance simply finds too many financial claims chasing too little capacity to produce new wealth of the kind that increases the economy's productive power, such as alone can bring all claims adequate service. There is no need to argue this point further, as already there is enough grasp of reality (even among monetarists) recognizing that, austerity is national suicide, making Simpson-Bowles another form of fantasy dominating the discussion at this early moment in the evolution of an unfolding economic and financial disaster — a time when denial of the hopeless state of confidence in status quo practices built up over recent decades still can be maintained. Apparently, Mr. Buffett does not see how the spirit of Simpson-Bowles could pave the way for our very own Hugo Chavez here in the U.S., with, say, the nationalization of railroads sometime thereafter helping secure the lender of last resort's credit line with the blob who incites the mob demanding such "revolutionaries." It wouldn't be the first time in history a stunt like this could turn the likes of Berkshire Hathaway into an asterisk.

Yet work an arrangement that retains Mr. Buffett's management over an asset that truly is a national treasure — railroads — tied to a policy geared toward ever-increasing that asset's potential efficiencies, such that its profitability is most practically assured, then it seems the very purpose for which Mr. Buffett invests would be most assuredly served. So, Mr. Buffett might be the wiser to focus his attention, first and foremost, on matters aiming to increase the national wealth over coming generations (50-100 years). Then, discussion on how that wealth should be most efficiently spent could commence on stable ground where all those affected would not feel so terribly threatened, and prone to revolt.

Not in his three possibilities forward — spend less, tax more, or inflate — is the matter of the presently accelerating collapse of the nation's wealth-producing capacity addressed. Strange political thinking for such an accomplished businessman. Does not casually assuming that, "the pie will get bigger" call into question Mr. Buffett's due diligence, at least to the extent of making Berkshire Hathaway equally at risk of abandonment should the pie instead shrink? (This seems to have been the market's judgment back in 2008.)

company chart (BRKA)

Returning to matters relevant to the stock market's current state, according to Buffett most publicly traded companies he is eying are trading at prices he would not pay a 20% premium to own outright...

So, Buffett's "trigger finger on an elephant gun" apparently (as ever) awaits a blue light special. As you know, I believe this is on the way. No doubt, the coming dislocation likely will jade the faith of many who share Buffett's view toward the future of American pie. Of course, these are the kind who haven't Buffett's $38 billion in cash just waiting to be put to work, that their faith might find way to be bolstered in difficult times.

If you're interested, here are more of Buffett's thoughts on the current economic and financial landscape, as well as the relative state of some of his businesses...

Again, his monetarist's viewpoint toward American capitalism exposes a danger to those Berkshire Hathaway shareholders possessing enough sense to realize that, the "long-term" and one's lifetime are not a guaranteed match. Buffett's unenlightened sense of government reminds me of a "Far Side" cartoon captioned "Cattle Humor," showing several cowboys on a cattle drive, and on the back of one cowboy is a post-it reading, "Trample me." His sense of what built America — what necessary role government played in organizing economic miracles — is rather confused. With policy ideas trapped in the framework of interests who have brought about the physical dismantling of the nation over recent decades, and whose desperate condition recently has made Mr. Buffett a useful backstop (and well-rewarded at that, receiving $25/second from Goldman Sachs), he fails to fathom how in shortage of fattened calves lies risk of a devastating slaughter wiping out the farm.

(You can watch the remaining video clips of Buffett's appearance today on CNBC's "Squawk Box" in a post titled, "The World According to a Coke Swilling Billionaire.")

Fast Money
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