If you haven’t had a chance, check out Buffett interview on Charlie Rose. It was great to hear Warren’s views on subjects ranging from the “bailout” (Buffett prefers seeing it as an investment) to trade deficit to tax rates. Here are some of what I thought were highlights (in my PowerPoint grammar).
- “Economic Pearl Harbor”. $20 trillion real estate market dropped 20%, $4 trillion loss. Massive real estate bubble bursting.
- $40 billion in Treasuries just sold paying 1/20 of 1% in interest. Business/Americans want safety at any price. Buffett has never seen people so scared. [Clearly evidenced by GE deal.]
- Entire business community deleveraging simultaneously. If whole world is seller only U.S. government can serve as buyer. Has nearly unlimited access to capital, lowest possible cost of capital, and can stay in an investment for very long time.
- Would prefer quick, “good-enough” response to delayed perfect response. America is like great athlete that just had heart attack. EMS team shouldn’t argue over where to put stethoscope or blame patient.
- Would give Paulson blank check. “Trying to invest through 535 people [Congress] is tough job.”
- #1 issue is Treasury paying market prices for “investments” as it provides liquidity to economy. Thinks Congressional oversight should be focused on making sure Treasury pays market prices with $700 billion instead of overpaying.
- Believes mark-to-market should stay. You get in a lot of trouble when you start putting fictitious numbers in financial statements. Companies shouldn’t be afraid to tell the truth even if they think an asset is undervalued.
- Higher unemployment and inflation coming. $4 trillion loss just now starting to hit mainstream economy in terms of car and jewelry sales. Will get worse.
- As a country we spend $2 billion a day more than we earn. Are selling off pieces of our country to fund overspend. (He does an even better job describing this in another great Rose interview. We’ve used up our savings account and are now living off credit cards. Our children will have to service interest.)
- Supports Obama. Supports higher capital gains. Thinks lower tax for return on capital compared to tax on return on labor (income tax) is wrong. 20% of population trying to live on $21,000 a year. Push money to these people and they will spend it. More taxes should come from people like Buffett.
- Fed structured AIG deal very, very well. Drove tough terms. “I want to hire the guy that drove that deal. He’d fit in well at Berkshire.”
P.S. I also I really like Roger Ehrenberg’s comments on this as well.
