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Source link: http://archive.mises.org/9519/jim-cramer-buffett-is-selling-america/

Jim Cramer: “Buffett is Selling America”

February 28, 2009 by

I find this interesting, if only because of that horrible New York Times piece Warren Buffett wrote telling average Americans to “buy American.” Although I reject the “buy American” expression, Cramer is exactly right in saying that Buffett is selling America just four months after telling others to buy. (Here’s the video.) Here is my take on Buffett as a government propagandist who doesn’t follow his own very emphatic advice. One hedge fund manager says:

He dove in too fast and probably wishes he had waited a few months. … No one, not even Buffett, can call the bottom.”

Keep in mind that Warren Buffett’s annual letter to Berkshire Hathaway shareholders – which is always a fascinating read – will be available at 8am EST today right here.

{ 18 comments }

Walt D. February 28, 2009 at 11:17 am

Great article Karen. I have to agree with you – I find Warren Buffett disingenuous. For someone who is renowned for his ability for fundamental analysis and the fact he has been doing this sucessfully over decades, I can not believe that he can not see the parallels with Japan and Zimbabwe. If you’d invested in the future in the Nikeii 20 years ago, you’d still be waiting. Using his mentor’s guideline, with a 35% corporate tax rate, when the Dow hits 6,500 next month, it would be trading at 10,000 with a 0% corporate tax rate. Granted, that this would be down from a 21,000 high instead of 14,000.
The significance of the drop in the market is the affect that it has on retirees. Also, bear in mind that pension fund managers will have to redeem twice as many shares to provide the income stream for retiree. As the baby boomers start to retire, we will see a steady increase in redemptions. This will place a downward pressure on the market.
Warren Buffett seems to have forgotten (his own?) adage “When taxes are high the market will die, when taxes are low the market will grow”.
Obama promised change and change we have. Before, we had tax and spend. Now we have spend and tax.
Maybe Warren Buffett is right and we are headed for strong economic growth. However, I think the smart money is on the Austrians and that we are headed for disaster.

Ralph H February 28, 2009 at 12:12 pm

I agree with Walt that this is a great article. What I have noticed since the beginning of this crisis in September is the number of capitalist apologists that have come on business shows expressing support of government intervention. Most notably have been the CEO’s wanting bailouts but others all give support for government investments or loan guarantees. All of these executives should be fired by their boards or shareholders for such statements. There must be principles of management being taught in our business schools that encourage government as a financing tool. As an example of this, I experienced a conversation with a young second generation local GM car dealer who when I asked about his opinion on the future of GM, he answered that he was literally banking of their ability to pull this off. This statement probably confirms my statement above.

ehmoran February 28, 2009 at 12:36 pm

Warren Buffet is looking out for himself. He did call the China blowout, but that’s it.

And a hedge fund owner having privy info from top Gov’t sources, isn’t that a conflict of interest.

And Obama pledges he has the advise of Buffet and SOROS; Soros, the biggest criminal of all pleading he cares about the peasants. What an outfit.

Mark February 28, 2009 at 1:19 pm

Are you guys serious? Buffett has bought *massively* on a net basis.

It is always amusing to hear people who are clueless about Buffett pontificate on him and try to tear him down.

Anonymous February 28, 2009 at 2:16 pm

Warren Buffett is the richest man in the world , let alone America.

Buffett owns 10 % of Wells Fargo , a Financial company

Buffett is an economic advisor to the Obama team

Wells Fargo gets $25,000,000,000—i.e. 25 billion dollars from the US Government as a part of the financial aid package in the fall of 2008

Buffets 10% of that would be $2.5 Billion dollars or $2,500,000,000.

The federal minimum wage in the USA is $6.55 per hour (since July 2008) or $262 for a 40 hour week or $13,624 for a 52 weeks a full year.

183,500 people would have to work for a full year and give all their earnings to Buffett to account for his share of the federal financial bailout.

But Minimum wage workers have to eat and spend on clothing shelter and essentials so that they cannot give all to Buffett but only their tax portion.

Since tax rates vary per person , lets choose a conservative figure of 25% tax rate that minimum wage workers would have to pay. $3406 would be the tax take on each minimum wage worker.

This means that 734,000 people on minimum wage are working for the full year to pay for the financial bailout for the richest man in America who is a financial advisor to President Obama.

Kyle Napierkowski February 28, 2009 at 3:22 pm

Walt, while I agree with you for the most part, it’s unfair to say that Obama has changed our approach to spending. Bush led the charge in this arena, managing to drive the nation deeper and deeper into deficit even during the boom years of 2001-07. Obama is simply picking up where Bush left off. Neither major party values fiscal restraint any longer.

David February 28, 2009 at 5:27 pm

I was actually going to bring this up in the forum, but since I see this post on Buffett, I’ll mention it here…

On one hand, Buffett talks up the recent interventions and bailouts by the government during this recent “crisis”. He said that doing otherwise would have left the whole economic system up to “cataclysmic” ruin:

http://www.allheadlinenews.com/articles/7014250979

At the same time, Buffett sees firsthand how the unintended consequences of these banking system prop-ups and bailouts have affected Berkshire Hathaway:

http://www.businessinsider.com/buffett-how-berkshire-gets-screwed-when-government-props-up-weak-banks-2009-2

Thoughts?

newson February 28, 2009 at 8:05 pm

i take my hat off to buffett as an investor, but like soros, that doesn’t mean he talks economic sense.

he doesn’t like gold, but think the usd is going south. he decries financial engineering and paper-shufflers, but buys into goldman sachs. he’s just all over the place.

i, too, wonder about buffett-the-investor in the coming years. i seem to recall his moaning about how miserable the seventies were for investors like himself. now we’re set for a re-run of the seventies, only nastier, i find his present optimism difficult to understand.

Boss February 28, 2009 at 8:59 pm

Buffett is an old fool at best and
a state crony at worst.

He made money in good times, but
his mindset is glued to what was, not
what is in the present.

He and Bill Gates thinks you and I are
not taxed enough! and that we
need to send (send?) more money to Washington
and Abroad…

Both can get by easy if taxes are 100% of income
since they already made their money and can sit
back and relax while others suffer.

Shoot the old ****ker

Bennet Cecil February 28, 2009 at 10:08 pm

Buffet had a pile of cash that he needed to spend and the market is on sale. He thinks the market is like 2002 and not 1933. He could be correct with interest rates down to zero and the huge government stimulation of the economy. Obama can take from the wealthy and give to poor and middle class to spend for at least a couple of years.

Democrats could offer 3% mortgages to anyone who wants them. Stocks could rise sharply as corporate earnings increase.

Until the rest of the world decides to charge the US Treasury 10-15% instead of 2%, this party can go one a bit longer. When the national debt is $20 trillion, and unemployment and interest rates are in double digits is when it will really be interesting.

Walt D. February 28, 2009 at 10:30 pm

Kyle, I agree with what you say. However, a large part of the blame has to got to go to Congress. Obama claims he inherited this mess. However, he is one of the Senator’s who voted for the bailout!
If you look at Obama’s voting record he was the most liberal (i.e least financially responsible) Senator. To claim he inherited Bush’s problem is a gross distortion, not that I am any fan of GW. I’d rate GW as the worse than Nixon and nearly as bad as Carter. (I’d rate Nixon and Carter as the worst presidents of each party in the 20th century).
To Nixon’s credit he did institute a program that reigned in congressional spending. This kept congress “on the wagon” until 2008. The recent binge as shown what happens when congress falls off the wagon – like a frat-house party with an unlimited supply of liquor!

danny March 1, 2009 at 11:56 am

anonymous — you are on the right track. Anyone claiming Buffett is too old, senile, lost it, etc…you are wrong. until you can create the wealth he has created, your views on his investing expertise don’t count for much.

Buffett did his whole “Buy American” pitch right around the time the government switched backing of Wachovia to Wells Fargo and away from Citigroup…consider this — for a few pennies (relatively speaking) of his own personal money, he got Wachovia and billions in government money. Make no mistake, he traded his “campaign” in exchange for the government switching the deal — and the government needs all the “sages” it can line up in this propaganda campaign.

As an investor, it was a shrewd move — and he can afford to lose a few dollars and still feed the family. How it plays out in the long term — who knows, but a bigger Wells Fargo better ensures that the government will consider Wells “too big to fail.”

To be clear — I am not advocating any of this from a viewpoint of free markets. Buffett doesn’t either — he is a pragmatist, and uses the system as it is and as he views it will be to his advantage. And, like most of the big players (Pimco comes to mind) they will shamelessly advocate for actions that will benefit themselves and their investors. He will never pound the table for true free markets, there is better money for him to make in the “system” as it is.

So beat him up because he isn’t an Austrian, but his skills as an investor are unrivaled. He could lose half his wealth (over the half that has been lost in the current downfall) and this would still be true. Having said that, I find his philosophy of more government, more taxes (which he largely avoids), estate taxes (which he will largely avoid), and his public comments designed to skew the system to his benefit as immoral.

Artisan March 1, 2009 at 3:11 pm

@ehmoran
why do you consider Soros a criminal?
What about Jim Rogers?

Dan March 1, 2009 at 5:23 pm

I agree with much that has been said and much that has been decried as of yet. However I disagree greatly with the intention that Obama is taxing the rich unfairly. Much of the promise of “trickle down economics” has been refuted, as the idea that the trickle would come in a constant stream. This is not in fact correct, the faucet is tightened so greatly as to not afford anything but a drip. The problem stems from the fact that the flow was nowhere but down to up in the prior years. I disagree greatly with many of Obama’s market interference, but I do not disagree with his motivations. Do not blame the result, blame the causes of the inequities which have resulted from too much power being granted to too few in the prior eight years. At least Obama has the balls to actually state what the spending on a senseless, needless, and completely unrequired war on Iraq has been. Do not fall into the Austrian trap of only finding fault and not assigning proper guilt to the causes of the trap.

Milan March 2, 2009 at 12:22 am

Dan- your whole response was contradictory. You agree with most said, but don’t think Obama is taxing unfairly. Do you have a clue? First off, ANY TAX is UNFAIR. Second, small businesses will be hurt MOST by the taxes, the businesses that create 90% of jobs in America. My friend is a small business owner, not the richest guy, but makes over 250k a year. He employs 200 people. Guess what your fair tax will do? Make him get rid of 20% of workers. The shit is going to hit the fan soon. Obama is running the country into the ground.

“At least Obama has the balls to actually state what the spending on a senseless, needless, and completely unrequired war on Iraq has been. ” — Really? What, you think Afghanistan is a required war? That is where the troops are going. Eat your hat, and don’t post non sense any more. I can’t handle moronic comments at this point.

ehmoran March 2, 2009 at 12:46 am

Anyone in the public that says anything about the war in Iraq and tries to assume why the U.S. was involved is automatically a complete narcissistic, talking-head, fool spouting throw-away words from their other mouth.

Congress had access to the same Intelligence reports as Bush, in fact, as only one point, both Clintons saw the same info.

Now, for anyone to divulge to the public at this point the true reasons for the war either is a traitor to the country, a potential spy, or a moron. WHY?

Because these talking heads in the general public do not, never had, and never will have access to TOP SECRET Gov’t Info (such as the Intelligence info about Iraq that is only provided to those specific top Gov’t officials only), because if they did, they could not divulge that info to the public without going to jail, or worse!

grapplerke March 3, 2009 at 1:33 pm

“At least Obama has the balls to actually state what the spending on a senseless, needless, and completely unrequired war on Iraq has been.”

Dan, you do realize that Obama has continued the same Bush policies, right? It would be quite hypocritical of Obama to criticize the unnecessary spending on Iraq when he’s currently spending more than any president that has ever lived.

grapplerke March 3, 2009 at 1:33 pm

“At least Obama has the balls to actually state what the spending on a senseless, needless, and completely unrequired war on Iraq has been.”

Dan, you do realize that Obama has continued the same Bush policies, right? It would be quite hypocritical of Obama to criticize the unnecessary spending on Iraq when he’s currently spending more than any president that has ever lived.

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