Just Saying NO!
By Alan Caruba
Don Young, (R-Alaska) ranking member of the Committee on Natural Resources sent a “Dear Colleague” letter to members of both parties of the House to remind them that, as energy prices rise steadily, “Congress is doing nothing to ease the pain at the pump.”As Rep. Young put it, up to now the policy has been to:
Say NO to ANWR’s 30-year, one million barrels a day supply of American oil.
So NO to an estimated two trillion barrels of American shale oil.
Say NO to clean-burning natural gas.
Say NO to clean coal.
So NO to energy exploration in the 85% of the United States’ outer continental shelf.
Say NO to more energy exploration in the Intermountain West.
Say NO to more hydropower energy.
Say NO to more nuclear energy.
Say NO to any form of energy that will provide meaningful relief from record high energy prices.
Say NO to 90% of the energy that fuels America’s economy.
In truth, Congress has done nothing for four decades and that’s how far behind we are if they were to actually do something tomorrow. You can’t drill for oil, lay pipelines, refine and transport crude oil overnight. The whole process takes years to build the infrastructure.For reasons beyond my understanding, both Democrat and Republican Congresses have utterly failed and/or refused to either understand or do anything.That makes Americans their victims. That means everyone who drives a car or truck is being penalized for stupidity, incompetence, and a situation that has put us at the mercy of nations, some of whom do not like us very much.Worse, if one just looked at the Alaskan National Wilderness Refuge, the one that environmentalists want to keep in its “pristine” purity for the sake of some caribou and other critters, what is really at stake is 2,000 acres out of 19.6 million!What’s more, Democrats and environmentalists want to lock up an additional 27.8 billion barrels in Alaska’s Chukchi Sea! That’s why the Bush administration’s Department of Interior is being pressured to declare polar bears “endangered” when every expert on that population says they’re not.At $120.00 a barrel, we will send $500 billion to foreign governments and hostile dictators in 2008 alone.At $120.00 a barrel, opening up ANWR would generate $183.5 billion in income tax and royalty revenue that would flow to the federal government over the 30-year lifetime of the field.If I could tell you why the Democrats oppose this, I would. I do know that Hillary Clinton is talking about confiscating “windfall” profits from the oil companies. Never mind that, for several years, they weren't make that much and what they're making now helps them gear up to meet our energy needs. I can't think of a worse way to discourage them from building new refineries and doing the hugely expensive exploration we need.This is, in so many ways, so sinister one might reasonably conclude that the Democrat Party—that hasn’t had a new idea since the 1940s—is deliberately acting to harm us all.That’s something to think about when you step into the voting booth in November.
Sunday, May 4, 2008
If They Win, I'll Sue The Gov't Too!
Amazon sues NY over Internet sales tax collection
By VALERIE BAUMAN
Amazon.com is suing New York over a new law that requires out-of-state online companies to collect sales tax from shoppers in New York."We are challenging the constitutionality of the recently enacted legislation in New York," Amazon spokeswoman Patricia Smith said.Officials estimated the state would gain about $50 million by requiring Internet giants such as Amazon.com to collect state sales tax. New Yorkers, like residents of many states, are currently on an honor system to report their online spending when they file state tax returns.The law applies to companies that don't have a brick-and-mortar presence in New York but have at least one person in the state who works as an online agent -- basically someone who links to a Web site and receives commissions for related sales.Businesses with a physical presence in New York already collect the state sales tax on online purchases. The proposed law would apply to companies that have $10,000 or more in New York sales.The suit argues the change unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.New York state has argued that the law closes a "tax loophole."Tom Bergin, a spokesman for the state Department of Taxation and Finance, said the change is a necessary update for modern times."Everyone in New York state either pays sales tax on articles that they buy or is required to pay sales tax on articles that they buy," he said. "This is not a new law, this is just amending the law to bring some of the new technology -- the Internet -- into compliance."Bergin would not comment on the lawsuit.
By VALERIE BAUMAN
Amazon.com is suing New York over a new law that requires out-of-state online companies to collect sales tax from shoppers in New York."We are challenging the constitutionality of the recently enacted legislation in New York," Amazon spokeswoman Patricia Smith said.Officials estimated the state would gain about $50 million by requiring Internet giants such as Amazon.com to collect state sales tax. New Yorkers, like residents of many states, are currently on an honor system to report their online spending when they file state tax returns.The law applies to companies that don't have a brick-and-mortar presence in New York but have at least one person in the state who works as an online agent -- basically someone who links to a Web site and receives commissions for related sales.Businesses with a physical presence in New York already collect the state sales tax on online purchases. The proposed law would apply to companies that have $10,000 or more in New York sales.The suit argues the change unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.New York state has argued that the law closes a "tax loophole."Tom Bergin, a spokesman for the state Department of Taxation and Finance, said the change is a necessary update for modern times."Everyone in New York state either pays sales tax on articles that they buy or is required to pay sales tax on articles that they buy," he said. "This is not a new law, this is just amending the law to bring some of the new technology -- the Internet -- into compliance."Bergin would not comment on the lawsuit.
If Only Americans Really Knew How The Federal Reserve Came Into Being
Fed `Rogue Operation' Spurs Further Bailout Calls
By Craig Torres
May 2 (Bloomberg) -- A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.
There is ``a potential crisis in the student-loan market'' requiring ``similar bold action,'' Chairman Christopher Dodd of Connecticut and six other Democrats wrote Bernanke. They want the Fed to swap Treasury notes for bonds backed by student loans. In a separate letter, Pennsylvania Democratic Representative Paul Kanjorski and 31 House members said they want Bernanke to channel money directly to education-finance firms.
Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke's actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd's request today, expanding the swaps to include securities backed by student debt.
``It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced ``a backstop for the entire financial system.''
Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.
The Fed's loans to Bear Stearns were ``a rogue operation,'' said Anna Schwartz, who co-wrote ``A Monetary History of the United States'' with the late Nobel laureate Milton Friedman.
`No Business'
``To me, it is an open and shut case,'' she said in an interview from her office in New York. ``The Fed had no business intervening there.''
There are already indications that investors perceive the safety net to be widening as a result of the actions by Bernanke, 54, and New York Fed President Timothy Geithner. The Bear Stearns bailout and an emergency facility to loan directly to government bond dealers triggered a decline in measures of credit risk for investment banks and for Fannie Mae, the Washington-based, government-chartered company that is the nation's largest source of funds for home mortgages.
Yield differences between Fannie Mae's five-year debt and five-year U.S. Treasuries have fallen to 0.55 percentage point, from 1.15 percentage points on March 14, the day the Fed's Board of Governors invoked an emergency rule to lend $13 billion to Bear Stearns.
``The market understood that this is the method by which Fannie Mae and Freddie Mac could be bailed out if necessary,'' Poole said.
Wall Street Impact
The cost of default protection on Merrill Lynch & Co. debt fell to 1.4 percentage point by April 30 from 3.3 percentage points on March 14, CMA Datavision's credit-default swaps prices show. The cost of protection on Lehman Brothers Holdings Inc. securities has fallen to 1.5 percentage points from 4.5 percentage points over the same period.
Fed Board spokeswoman Michelle Smith declined to comment, as did New York Fed spokesman Calvin Mitchell.
On March 16, two days after the Fed provided its Bear loan, it agreed to finance $30 billion of the firm's illiquid assets to secure its takeover by JPMorgan Chase & Co.
The Standard & Poor's 500 Financials Index had lost 12 percent in the three weeks prior to March 14; Geithner defended the loans before the Senate Banking Committee on April 3, saying that the Fed needed to offset risks posed to the entire financial system.
`Everyday Life'
A systemic collapse on Wall Street would also mean ``higher borrowing costs for housing, education, and the expenses of everyday life,'' Geithner, 46, said.
While the Fed must by law withdraw its financing backstop for investment banks once the credit crisis passes, investors will probably still bet on its readiness to intervene.
``There is no way to put the genie back in the bottle,'' Minneapolis Fed President Gary Stern said in an interview with Fox Business Network on April 18. ``What worries me most about where we wind up is that we will have an expansion of the safety net without adequate incentives to contain it.''
Stern noted that he supported the Fed's moves to restore financial stability.
Fed Board officials haven't explained in detail how they plan to curtail moral hazard, the danger of encouraging investors to take on more risk out of confidence in a rescue.
Heat of Battle
``It is very hard in the middle of a crisis to know where to draw lines,'' said Harvard University professor Kenneth Rogoff, a former research director at the International Monetary Fund. ``They reduced the immediate risk of a crisis, but upped the ante of raising the possibility of a bigger crisis down the road.''
Lawmakers plan to debate the management of risk and role of supervisors in coming weeks and months. House Financial Services Committee Chairman Barney Frank said April 23 that new rules are needed to deal with a lack of regulation of risk.
Geithner told Congress April 3 that the direct lending needs to be complemented with ``a stronger set of incentives and requirements for the management of liquidity risk.''
The risk to the Fed is that it is routinely asked to step in and support insolvent companies whose creditors are on the run, economists say.
``Discount-window accommodation to insolvent institutions, whether banks or nonbanks, misallocates resources,'' Schwartz said in a 1992 lecture available on the St. Louis Fed Web site. ``Institutions that have failed the market test of viability should not be supported by the Fed's money issues.''
`Moral-Hazard Problem'
Richmond Fed chief Jeffrey Lacker and policy adviser Marvin Goodfriend wrote in a 1999 paper that central bank lending creates ever-expanding expectations. ``The rate of incidence of financial distress that calls for central bank lending should tend to increase over time,'' they wrote. That ``creates a potentially severe moral-hazard problem.''
Whatever regulations and incentives the Fed tries to put in place now would be evaded by the market's innovation of new types of products, Goodfriend said in an interview. Investors would nonetheless still count on the safety net, he added.
``We have to start now to recognize the strategic instability of the path we are on,'' said Goodfriend, now a professor at Carnegie Mellon University's Tepper School of Business in Pittsburgh. The Fed needs to prepare markets for how it won't intervene, which it didn't do before the Bear Stearns meltdown, he said.
Lending Treasuries
The Fed also influenced market incentives when it introduced the so-called Term Securities Lending Facility. The program is designed to lend up to $200 billion of Treasury securities from the Fed's holdings to Wall Street bond dealers in return for commercial and residential mortgage bonds among other collateral. Congress has noticed the program favors mortgage credits, and Dodd asked the Fed to swap some of its $548 billion in Treasury holdings for bonds backed by student loans.
While Bernanke rebuffed Kanjorksi's request for direct loans in a March 31 letter, Fed officials today expanded the collateral they accept under the TSLF. The facility now includes all AAA rated asset-backed investments, including bonds backed by student loans. Former Fed officials say it is risky for the central bank to use its portfolio to address specific markets and satisfy Congress without saying where it will stop.
``If there is a public purpose in lending to investment banks, and taking dodgy mortgage securities as collateral, then it is a question of degree about other potential lending,'' Vincent Reinhart, former director of the Fed board's Division of Monetary Affairs, said in an interview. ``That's the consequence of crossing a line that had been well established for three- quarters of a century.''
By Craig Torres
May 2 (Bloomberg) -- A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.
There is ``a potential crisis in the student-loan market'' requiring ``similar bold action,'' Chairman Christopher Dodd of Connecticut and six other Democrats wrote Bernanke. They want the Fed to swap Treasury notes for bonds backed by student loans. In a separate letter, Pennsylvania Democratic Representative Paul Kanjorski and 31 House members said they want Bernanke to channel money directly to education-finance firms.
Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke's actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd's request today, expanding the swaps to include securities backed by student debt.
``It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced ``a backstop for the entire financial system.''
Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.
The Fed's loans to Bear Stearns were ``a rogue operation,'' said Anna Schwartz, who co-wrote ``A Monetary History of the United States'' with the late Nobel laureate Milton Friedman.
`No Business'
``To me, it is an open and shut case,'' she said in an interview from her office in New York. ``The Fed had no business intervening there.''
There are already indications that investors perceive the safety net to be widening as a result of the actions by Bernanke, 54, and New York Fed President Timothy Geithner. The Bear Stearns bailout and an emergency facility to loan directly to government bond dealers triggered a decline in measures of credit risk for investment banks and for Fannie Mae, the Washington-based, government-chartered company that is the nation's largest source of funds for home mortgages.
Yield differences between Fannie Mae's five-year debt and five-year U.S. Treasuries have fallen to 0.55 percentage point, from 1.15 percentage points on March 14, the day the Fed's Board of Governors invoked an emergency rule to lend $13 billion to Bear Stearns.
``The market understood that this is the method by which Fannie Mae and Freddie Mac could be bailed out if necessary,'' Poole said.
Wall Street Impact
The cost of default protection on Merrill Lynch & Co. debt fell to 1.4 percentage point by April 30 from 3.3 percentage points on March 14, CMA Datavision's credit-default swaps prices show. The cost of protection on Lehman Brothers Holdings Inc. securities has fallen to 1.5 percentage points from 4.5 percentage points over the same period.
Fed Board spokeswoman Michelle Smith declined to comment, as did New York Fed spokesman Calvin Mitchell.
On March 16, two days after the Fed provided its Bear loan, it agreed to finance $30 billion of the firm's illiquid assets to secure its takeover by JPMorgan Chase & Co.
The Standard & Poor's 500 Financials Index had lost 12 percent in the three weeks prior to March 14; Geithner defended the loans before the Senate Banking Committee on April 3, saying that the Fed needed to offset risks posed to the entire financial system.
`Everyday Life'
A systemic collapse on Wall Street would also mean ``higher borrowing costs for housing, education, and the expenses of everyday life,'' Geithner, 46, said.
While the Fed must by law withdraw its financing backstop for investment banks once the credit crisis passes, investors will probably still bet on its readiness to intervene.
``There is no way to put the genie back in the bottle,'' Minneapolis Fed President Gary Stern said in an interview with Fox Business Network on April 18. ``What worries me most about where we wind up is that we will have an expansion of the safety net without adequate incentives to contain it.''
Stern noted that he supported the Fed's moves to restore financial stability.
Fed Board officials haven't explained in detail how they plan to curtail moral hazard, the danger of encouraging investors to take on more risk out of confidence in a rescue.
Heat of Battle
``It is very hard in the middle of a crisis to know where to draw lines,'' said Harvard University professor Kenneth Rogoff, a former research director at the International Monetary Fund. ``They reduced the immediate risk of a crisis, but upped the ante of raising the possibility of a bigger crisis down the road.''
Lawmakers plan to debate the management of risk and role of supervisors in coming weeks and months. House Financial Services Committee Chairman Barney Frank said April 23 that new rules are needed to deal with a lack of regulation of risk.
Geithner told Congress April 3 that the direct lending needs to be complemented with ``a stronger set of incentives and requirements for the management of liquidity risk.''
The risk to the Fed is that it is routinely asked to step in and support insolvent companies whose creditors are on the run, economists say.
``Discount-window accommodation to insolvent institutions, whether banks or nonbanks, misallocates resources,'' Schwartz said in a 1992 lecture available on the St. Louis Fed Web site. ``Institutions that have failed the market test of viability should not be supported by the Fed's money issues.''
`Moral-Hazard Problem'
Richmond Fed chief Jeffrey Lacker and policy adviser Marvin Goodfriend wrote in a 1999 paper that central bank lending creates ever-expanding expectations. ``The rate of incidence of financial distress that calls for central bank lending should tend to increase over time,'' they wrote. That ``creates a potentially severe moral-hazard problem.''
Whatever regulations and incentives the Fed tries to put in place now would be evaded by the market's innovation of new types of products, Goodfriend said in an interview. Investors would nonetheless still count on the safety net, he added.
``We have to start now to recognize the strategic instability of the path we are on,'' said Goodfriend, now a professor at Carnegie Mellon University's Tepper School of Business in Pittsburgh. The Fed needs to prepare markets for how it won't intervene, which it didn't do before the Bear Stearns meltdown, he said.
Lending Treasuries
The Fed also influenced market incentives when it introduced the so-called Term Securities Lending Facility. The program is designed to lend up to $200 billion of Treasury securities from the Fed's holdings to Wall Street bond dealers in return for commercial and residential mortgage bonds among other collateral. Congress has noticed the program favors mortgage credits, and Dodd asked the Fed to swap some of its $548 billion in Treasury holdings for bonds backed by student loans.
While Bernanke rebuffed Kanjorksi's request for direct loans in a March 31 letter, Fed officials today expanded the collateral they accept under the TSLF. The facility now includes all AAA rated asset-backed investments, including bonds backed by student loans. Former Fed officials say it is risky for the central bank to use its portfolio to address specific markets and satisfy Congress without saying where it will stop.
``If there is a public purpose in lending to investment banks, and taking dodgy mortgage securities as collateral, then it is a question of degree about other potential lending,'' Vincent Reinhart, former director of the Fed board's Division of Monetary Affairs, said in an interview. ``That's the consequence of crossing a line that had been well established for three- quarters of a century.''
I Love It When Obscenely Wealthy People Tell Me To Lower My Expectations
Buffett to investors: Think small
OMAHA (CNNMoney.com) -- In the Q&A session Saturday morning at Berkshire Hathaway's annual meeting, CEO Warren Buffett and vice chairman Charlie Munger repeatedly warned investors to lower their expectations. When a shareholder asked whether Buffett's recent purchases of publicly traded stocks were likely to generate returns greater than 7% to 10% over time, Buffett promptly said no.
Note: What follows is based on a best-effort attempt to take accurate notes of a fast-moving discussion and does not purport to be an exact transcript of Buffett and Munger's remarks.
"We would be very happy if we earned 10%, pre-tax" on the additions to Berkshire's equity portfolio, said Buffett. "Anyone that expects us to come close to replicating the past should sell their stock; it isn't going to happen. We'll get decent results over time, but not indecent results." Added Munger: "You can take what Warren said to the bank. We are very happy at making money at a rate in the future that's much less than the past... and I suggest that you adopt the same attitude."
"We think Berkshire is an attractive investment [at today's price]," said Buffett. "We don't think it's the most attractive in the world."
Both men made it clear that their preference now is to acquire 100% ownership of private businesses at a "fair" price and to increase BRK's interest in companies that get substantial portions of their earnings in non-U.S. currencies.
"We are happy to invest in businesses that earn their money in euros in France or Italy or sterling in the UK, because I don't have a feeling that those currencies are likely to depreciate against the dollar," said Buffett. "Overall I think that the U.S. continues to follow policies that will make the dollar weaken against other major currencies.... I feel no need to hedge purchases of companies that earn profits in other currencies." Buffett added that major U.S. multinationals, like Coca-Cola (KO, Fortune 500), are a natural hedge against the dollar, since they earn most of their profits offshore -- which, he said, "will be a net plus over time."
Asked what's in store for the economy, Buffett said he doesn't have a clue and doesn't care.
"I haven't the faintest idea," he said. "We never talk about it, it never comes up in our board meetings or other discussions. We're not in that business [of economic forecasting], we don't know how to be in that business. If we knew where the economy was going, we'd do nothing but play the S&P futures market."
His simple point: As an investor, you don't need to predict the economic cycle (or even pay much attention to it). Instead, you should focus on evaluating individual businesses if you pick your own stocks -- or, simply buy the entire market in the form of an index fund. When a shareholder asked for the single best specific investment idea Buffett could recommend to an individual in his 30s, Buffett said: "I would just have it all in a very low-cost index fund from a reputable firm, maybe Vanguard. Unless I bought during a strong bull market, I would feel confident that I would outperform...and I could just go back and get on with my work."
In response to a similar question from an investor asking how Berkshire (BRKA, Fortune 500) would invest differently if it had only a few million dollars to put to work, Buffett advised him to think small. "That would open up thousands of opportunities," said Buffett. Earlier this year there were "very mispriced bonds" that "we could buy nowhere near enough of to make a difference to Berkshire," but a smaller investor could have exploited. "Most of the opportunities would probably be in small stocks or in specialized bond situations."
On succession
Asked about succession, Buffett (who is 77) and Munger (who is 84) had this to say:
"On the CEO front, we have three [internal candidates] who could step in," said Buffett. "The board is unanimous in knowing which one it would be, although the answer might change with time.... In terms of the [chief] investment officer, the board has four names, any one or all of whom would be good at my job. They all are happy where they are now [working outside of Berkshire], but any would be here tomorrow if I died tonight, they all are reasonably young, and compensation would not be a big factor.... There will be no gap after my death in terms of having someone manage the money. They'll be much more energetic [than I am] and may even have a better record."
Added Munger: "We still have a rising young man here named Warren Buffett. And I think we want to encourage this rising young man to reach his full potential." At this point, Buffett interjected: "At the average age of 80, we're aging at the average rate of only 1 1/4% per year. That's a lot better than younger people."
From the Cubs, to China
Later, asked by a teen shareholder whether he is interested in buying the Chicago Cubs (currently on sale by the Tribune Co. for roughly $700 million), Buffett said he did not need the "psychic income" and would not swing at the offer.
Asked whether Berkshire will seek to purchase entire private companies based in China or India, Buffett responded: "We would like to. If we get lucky, we'll buy one or two in the next three or four years. I don't know if it will be in China, India, Germany, the U.K. or Japan -- there's a lot of luck in that in terms of families thinking of us specifically.... But you will see the day that BRK owns businesses in both countries [India and China]."
Despite its huge cash hoard, Berkshire won't be paying a dividend anytime soon. "The test," said Buffett, "is whether you can continue to create more than $1 for every $1 you're retaining." He and Munger feel they still can put surplus cash to work and earn a higher return with it than shareholders could on their own, after tax, if BRK paid it out. "If we can turn $1 in dividends into $1.10 or $1.20 on a present-value basis, they're better off if we don't pay out. When the day comes, it should be paid out. But because we still have this ability to redistribute money in a tax-efficient way within the company, we can reallocate it," he said, where it will earn a higher return than shareholders may be able to on their own."
OMAHA (CNNMoney.com) -- In the Q&A session Saturday morning at Berkshire Hathaway's annual meeting, CEO Warren Buffett and vice chairman Charlie Munger repeatedly warned investors to lower their expectations. When a shareholder asked whether Buffett's recent purchases of publicly traded stocks were likely to generate returns greater than 7% to 10% over time, Buffett promptly said no.
Note: What follows is based on a best-effort attempt to take accurate notes of a fast-moving discussion and does not purport to be an exact transcript of Buffett and Munger's remarks.
"We would be very happy if we earned 10%, pre-tax" on the additions to Berkshire's equity portfolio, said Buffett. "Anyone that expects us to come close to replicating the past should sell their stock; it isn't going to happen. We'll get decent results over time, but not indecent results." Added Munger: "You can take what Warren said to the bank. We are very happy at making money at a rate in the future that's much less than the past... and I suggest that you adopt the same attitude."
"We think Berkshire is an attractive investment [at today's price]," said Buffett. "We don't think it's the most attractive in the world."
Both men made it clear that their preference now is to acquire 100% ownership of private businesses at a "fair" price and to increase BRK's interest in companies that get substantial portions of their earnings in non-U.S. currencies.
"We are happy to invest in businesses that earn their money in euros in France or Italy or sterling in the UK, because I don't have a feeling that those currencies are likely to depreciate against the dollar," said Buffett. "Overall I think that the U.S. continues to follow policies that will make the dollar weaken against other major currencies.... I feel no need to hedge purchases of companies that earn profits in other currencies." Buffett added that major U.S. multinationals, like Coca-Cola (KO, Fortune 500), are a natural hedge against the dollar, since they earn most of their profits offshore -- which, he said, "will be a net plus over time."
Asked what's in store for the economy, Buffett said he doesn't have a clue and doesn't care.
"I haven't the faintest idea," he said. "We never talk about it, it never comes up in our board meetings or other discussions. We're not in that business [of economic forecasting], we don't know how to be in that business. If we knew where the economy was going, we'd do nothing but play the S&P futures market."
His simple point: As an investor, you don't need to predict the economic cycle (or even pay much attention to it). Instead, you should focus on evaluating individual businesses if you pick your own stocks -- or, simply buy the entire market in the form of an index fund. When a shareholder asked for the single best specific investment idea Buffett could recommend to an individual in his 30s, Buffett said: "I would just have it all in a very low-cost index fund from a reputable firm, maybe Vanguard. Unless I bought during a strong bull market, I would feel confident that I would outperform...and I could just go back and get on with my work."
In response to a similar question from an investor asking how Berkshire (BRKA, Fortune 500) would invest differently if it had only a few million dollars to put to work, Buffett advised him to think small. "That would open up thousands of opportunities," said Buffett. Earlier this year there were "very mispriced bonds" that "we could buy nowhere near enough of to make a difference to Berkshire," but a smaller investor could have exploited. "Most of the opportunities would probably be in small stocks or in specialized bond situations."
On succession
Asked about succession, Buffett (who is 77) and Munger (who is 84) had this to say:
"On the CEO front, we have three [internal candidates] who could step in," said Buffett. "The board is unanimous in knowing which one it would be, although the answer might change with time.... In terms of the [chief] investment officer, the board has four names, any one or all of whom would be good at my job. They all are happy where they are now [working outside of Berkshire], but any would be here tomorrow if I died tonight, they all are reasonably young, and compensation would not be a big factor.... There will be no gap after my death in terms of having someone manage the money. They'll be much more energetic [than I am] and may even have a better record."
Added Munger: "We still have a rising young man here named Warren Buffett. And I think we want to encourage this rising young man to reach his full potential." At this point, Buffett interjected: "At the average age of 80, we're aging at the average rate of only 1 1/4% per year. That's a lot better than younger people."
From the Cubs, to China
Later, asked by a teen shareholder whether he is interested in buying the Chicago Cubs (currently on sale by the Tribune Co. for roughly $700 million), Buffett said he did not need the "psychic income" and would not swing at the offer.
Asked whether Berkshire will seek to purchase entire private companies based in China or India, Buffett responded: "We would like to. If we get lucky, we'll buy one or two in the next three or four years. I don't know if it will be in China, India, Germany, the U.K. or Japan -- there's a lot of luck in that in terms of families thinking of us specifically.... But you will see the day that BRK owns businesses in both countries [India and China]."
Despite its huge cash hoard, Berkshire won't be paying a dividend anytime soon. "The test," said Buffett, "is whether you can continue to create more than $1 for every $1 you're retaining." He and Munger feel they still can put surplus cash to work and earn a higher return with it than shareholders could on their own, after tax, if BRK paid it out. "If we can turn $1 in dividends into $1.10 or $1.20 on a present-value basis, they're better off if we don't pay out. When the day comes, it should be paid out. But because we still have this ability to redistribute money in a tax-efficient way within the company, we can reallocate it," he said, where it will earn a higher return than shareholders may be able to on their own."
Nicely Said....................
"While private companies have been producing dazzling progress in computers, electronics, pharmaceuticals, and many other areas, everything in the social order has deteriorated. Our public institutions are a wreck." -Harry Browne
I Know They Only Polled Idiots, This Proves It
Americans value free time over money: survey
Fri May 2, 11:57 AM ET
Having enough free time is more important to most Americans than being rich, according to a new poll.
Only 13 percent of more than 2,400 people questioned in the telephone poll ranked being wealthy as most important to them, while 67 percent ranked free time as their top priority, higher than having a successful career, getting married, and having children.
"Everyone wants free time to do the things they want to do, young, middle-aged or old," said Richard Morin, of the Pew Social & Demographic Trends Project, which conducted the survey.
"So our desire to play unites us."
The poll also showed that people who were university educated valued career success over wealth, as did middle-aged people.
Not surprisingly, those who didn't have money, ranked wealth very highly. This included minorities, first generation Americans and less educated people.
The survey also revealed that a disproportionate number of people under the age of 30 and retirees in the group made $20,000 or less a year.
But the emphasis on wealth lessens with age, with younger people putting value on it but hardly any seniors.
"It just diminishes with time as the reality sets in that you would never be rich," Morin said. "But also, the reality sets in that you don't have to be rich to lead a very comfortable and fulfilling life."
While wealth was not at the top of people's list of priorities, 43 percent still said it was somewhat important.
Fri May 2, 11:57 AM ET
Having enough free time is more important to most Americans than being rich, according to a new poll.
Only 13 percent of more than 2,400 people questioned in the telephone poll ranked being wealthy as most important to them, while 67 percent ranked free time as their top priority, higher than having a successful career, getting married, and having children.
"Everyone wants free time to do the things they want to do, young, middle-aged or old," said Richard Morin, of the Pew Social & Demographic Trends Project, which conducted the survey.
"So our desire to play unites us."
The poll also showed that people who were university educated valued career success over wealth, as did middle-aged people.
Not surprisingly, those who didn't have money, ranked wealth very highly. This included minorities, first generation Americans and less educated people.
The survey also revealed that a disproportionate number of people under the age of 30 and retirees in the group made $20,000 or less a year.
But the emphasis on wealth lessens with age, with younger people putting value on it but hardly any seniors.
"It just diminishes with time as the reality sets in that you would never be rich," Morin said. "But also, the reality sets in that you don't have to be rich to lead a very comfortable and fulfilling life."
While wealth was not at the top of people's list of priorities, 43 percent still said it was somewhat important.
Believe It Or Not: A Sound Of Cannons PSA For Our Readership And The Country
Biking with the red, white and blue
Prior to my burgeoning family life (and SOC), I was an avid cyclist. With family responsibilities came the requisite decrease in free time to pursue bicycling through the New England countryside. But now I'm making the effort and have had my old mountain biike tuned and refurbished for the coming months.
Prior to my burgeoning family life (and SOC), I was an avid cyclist. With family responsibilities came the requisite decrease in free time to pursue bicycling through the New England countryside. But now I'm making the effort and have had my old mountain biike tuned and refurbished for the coming months.
With spring in full swing, the thoughts of many Americans are turning to spending more time outdoors. If that outdoors time includes cycling, you're going to have to think outside the big-box and take a road less traveled to get an American-made bicycle.
This means if you think you're going to walk into a Wal-Mart, Target or Sears and find a bicycle with a "Made in USA" tag on it, you're going to be disappointed that you wasted your time as well as your car's gas that you'll have to replenish at more than $4 a gallon.
It follows then, that we need a Buy American strategy before we blindly head out the door hunting for American-made Huffy for under a hundred bucks. It's not going to happen. Awareness is the key, and such a Buy American strategy should apply whether you're looking for bicycles or Band-Aids.
Two of the more-popular names in bicycles are Trek and Cannondale, but it's difficult to find American-made bikes from these brands for under $1,000. I bought my American-made Trek 1200 bike used for $400 over 10 years ago (I don't do a whole lot of cycling). Most of the high-end, carbon-frame bikes from Trek are made in USA, with their low-end, heavier aluminum frame bikes imported. Cannondale, which not long ago prided itself on having the complete line handmade in USA, is now importing the lower-end, lower-priced bikes from overseas. Trek and Cannondale usually are brands that are sought after by serious bike enthusiasts. You can locate dealers for Trek bikes at Trek Bikes.com and Cannondale bikes at Cannondale.com.
But what if you're not a super-serious bike enthusiast who wants a basic, casual, American-made bicycle for a cheaper price? Worksman Cycles proudly have been made in the USA since 1898, and you can custom design your own Worksman Customer Cruiser for $299. You also can find three-wheeled tricycles for $449.
Worksman Cycles workers pride themselves in the high quality of their bikes over the typical import, and they're not shy in telling you about it. On their website, they tell the reader, "To be perfectly frank, if you are looking for ordinary run of the mill imported cruiser bikes, shop somewhere else."
If you're in the market for an American-made bike with more of a retro-style feel, check out Aero-Fast bicycles. All Aero-Fast bicycles are made in Jacksonville, Fla. The least expensive model is the Beach Bomber Econo for $449, with almost all of their bikes costing under $1,000.
Bike riding is a source of recreation, relaxation and good health for many Americans. By buying an American-made bike, you can better your own health as well as the health of the U.S. economy, and that's better for all Americans whether they ride bicycles or not.
This means if you think you're going to walk into a Wal-Mart, Target or Sears and find a bicycle with a "Made in USA" tag on it, you're going to be disappointed that you wasted your time as well as your car's gas that you'll have to replenish at more than $4 a gallon.
It follows then, that we need a Buy American strategy before we blindly head out the door hunting for American-made Huffy for under a hundred bucks. It's not going to happen. Awareness is the key, and such a Buy American strategy should apply whether you're looking for bicycles or Band-Aids.
Two of the more-popular names in bicycles are Trek and Cannondale, but it's difficult to find American-made bikes from these brands for under $1,000. I bought my American-made Trek 1200 bike used for $400 over 10 years ago (I don't do a whole lot of cycling). Most of the high-end, carbon-frame bikes from Trek are made in USA, with their low-end, heavier aluminum frame bikes imported. Cannondale, which not long ago prided itself on having the complete line handmade in USA, is now importing the lower-end, lower-priced bikes from overseas. Trek and Cannondale usually are brands that are sought after by serious bike enthusiasts. You can locate dealers for Trek bikes at Trek Bikes.com and Cannondale bikes at Cannondale.com.
But what if you're not a super-serious bike enthusiast who wants a basic, casual, American-made bicycle for a cheaper price? Worksman Cycles proudly have been made in the USA since 1898, and you can custom design your own Worksman Customer Cruiser for $299. You also can find three-wheeled tricycles for $449.
Worksman Cycles workers pride themselves in the high quality of their bikes over the typical import, and they're not shy in telling you about it. On their website, they tell the reader, "To be perfectly frank, if you are looking for ordinary run of the mill imported cruiser bikes, shop somewhere else."
If you're in the market for an American-made bike with more of a retro-style feel, check out Aero-Fast bicycles. All Aero-Fast bicycles are made in Jacksonville, Fla. The least expensive model is the Beach Bomber Econo for $449, with almost all of their bikes costing under $1,000.
Bike riding is a source of recreation, relaxation and good health for many Americans. By buying an American-made bike, you can better your own health as well as the health of the U.S. economy, and that's better for all Americans whether they ride bicycles or not.
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