Posted on 05/09/2003 5:44:23 AM PDT by Stand Watch Listen
At the risk of being tarred and feathered by Warren Buffet devotees, who live by every word that escapes his mouth, I´m not at all convinced that his pronouncements are good for America. Warren Buffet basically has made his billions by purchasing companies below their true market value and then using conservative business decisions to grow them. There is no doubt this is a workable money-making strategy and making money appears to be Buffet´s primary goal in life.
He did not buy computer-based .com businesses during the 1990s that were the major instruments of the incredible rise in stock market "values." In fact, Buffet warns us that we should beware of "transforming business inventions" that fuel booming economies. "Two of the most important technological developments of the 20th century were the automobile and the airplane." he says.
While both inventions have changed and enriched our lives, Buffet claims most investors lost money on both inventions. At one time in America there were 2000 automobile makers. Today there are only three. Once there were 300 airplane manufacturers. Today there are only a couple. "If I'd been at Kitty Hawk in 1903 when Orville Wright took off," Buffet said, "I would have been farsighted enough, and public-spirited enough – I owed this to future capitalists – to shoot him down."
As a denizen of the .com era, it was obvious to me in the 1990s that most of the stocks, including stock in the company I worked for, became over-priced as the stock market shot up. The problem, from the very beginning, was simple. Most of the .com companies of the 1990s either made no profit or only a modest profit.
Profits were not what fuelled the rise in stock prices. It was hope and optimism for the future that pushed up the Dow prices. That optimism led many people to foolishly speculate on stocks, rather than invest in companies, and, even more dangerous, to actually or mentally spend the money they believed their stocks were worth. Twenty-something millionaires were not uncommon – based on their stock portfolios.
When the stocks went back down, beginning in the mini-crash of 1998, speculators felt cheated and naturally looked for someone to blame – the business owners, their stock broker or financial advisor. However, much of the .com stock was not sold on the big board in New York. In a couple of companies I worked for, investor money was used to fund an idea and several years later, once the company was up and running, often manned by young, creative, dedicated workers willing to stay at their computers without overtime pay or for stock options.
In reporting what happened to the high tech bubble, Arnold de Borchgrave, editor-in-chief of United Press International, wrote the other day:
"Buffett, a $36 billion Democrat, warned some 10,000 stockholders and 5,000 guests in Omaha over the weekend, there would be a disconnect between ‘people at the top and the share owners who give them the money.´ Add to this the avalanche of corporate scandals – more in five years than during the entire 20th century – that failed to trigger real reform, and greed, which has inflicted more harm to the world's greatest free enterprise system since Sept. 11 than al-Qaida's terrorists."
So, here we have Warren Buffett, with his $36 billion, telling us peasants out here that other CEOs, who pull down $1 to $7 million a year are just corrupt scoundrels and he, with his $36 billion, is the small guy´s hero. Am I the only one that finds something missing in this picture?
Was it just corruption that prompted people in the 1920s to invest in automobiles and airplanes or was it mostly optimism and hope for the future? Who REALLY profited from the 1990s downturn when the savings of little old ladies were wiped out? Wasn´t it Warren Buffett who snatched up the undervalued stocks, sold by frightened little old ladies, and transferred a few million into HIS portfolio as they rose in value? While that is certainly smart capitalism, why is Buffett now being portrayed by the socialist leaning media as the hero in this scenario?
Of course, it could be that he gets a pass because he´s a liberal Democrat and is quite generous in his donations to liberal Democrat candidates and the abortion industry, to which most of his fortune will go when he dies, we are told.
However, corruption by company executives wasn´t the main factor in the euphoria of either the 1920s or the 1990s. The optimism and enthusiasm of .com employees who worked long hours without overtime pay, grew most .com companies I saw. Young people believed in their abilities and their future and were happy to have an opportunity to purchase stock in the companies for which they worked.
Sometimes stocks go up, and sometimes they go down. Some creative ideas win big, others flop. However, if demagogues get involved in the blame game, sometimes those downswings last a long time. In the presidential election of 1932 Franklin Delano Roosevelt and the Democrats blamed the worldwide economic problems on American "robber barons," wealthy Republican business owners who employed thousands of people. People´s hope and optimism vanished, they got scared, stopped buying, hid their money – and it took the stock market 25 years to regain its 1929 values.
Today another wealthy, highly visible Democrat is trying his best to convince people to get out and stay out of the stock market and again, Republicans are being blamed. Yet if most investors take Buffet´s advice, naturally more business will fail for lack of investment capital. Buffet could then have his pick, buy them and make lots more money. Those he can´t or won´t buy will go out of business, and more jobs will be lost.
It happened in the 1930s and it CAN happen again – if young people listen to Warren Buffet and lose their hope for the future, their enthusiasm, creativity and determination to work hard for their latest new idea.
Like cars and airplanes, the Internet and computers are here to stay. And, there are lots of new ideas out there that can and will make money and create new jobs – if investment money is not totally dried up by scare tactics, the blame game, multi-billion dollar lawsuits and billionaire Democrats who try to scare people for political or financial gain.
The replier above is correct. Buffet has his own $$$ agenda, nothing more.
Leni
Should read:" Not Listening To Warren Buffet Could Create The Next Depression."
Greenspan, with all the resources available to him, has not been able to produce anything even close!
errrrr... that would be Jimmy, not Warren but this would explain the confusion... ;-)"....trying to grasp a last shred of their youth as they sip $7 frozen margaritas ...."
If Buffett is so smart why is he a Democrat? Buffett may be genius on how he made his money, but he is far from a guru on everything else. I frankly am sick of the doom and gloomers that post daily crap about the coming depression.
Great post, Stand Watch Listen. I truly admire Buffet's business acumen; but really, he may be engaging in setting up a self-fulfilling prophecy here, as the present author suggests. He's a guy who has made a ton of money out of distressed businesses. If he helps to dry up capital formation with his predictions of doom and gloom, then he of all people would stand to benefit.
I'm surprised that nobody has yet mentioned the "significance" of last week's Kentucky Derby winner, Funny Cide -- the first gelding since 1929 to win the Derby. Of course, we all know what happened after that -- the stock market crashed, and a depression that lasted some ten years settled over the land. People looking for "signs and portents" by which to know the future might want to put that "negative leading indicator" into their ruminations....
Where will THIS story go?:
| NYSE's Grasso rakes in $10M Report: Chairman of the exchange amassed retirement package between $80M-$100M. May 7, 2003 [Excerpt] NEW YORK (Reuters) - New York Stock Exchange Chairman Dick Grasso, facing a market downturn and criticism of the exchange's specialists, earned more than $10 million last year and has amassed a retirement package worth $80 million to $100 million, according to a published report Wednesday. |
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