Buffett: Billionaire Warns That U.S. Trade Gap Undermines Dollar

Forbes ^ | 20JAN05 | Greg Levine

[familyop]

NEW YORK - Doers and doings in business, entertainment and technology:

Heed the Sage of Omaha. Warren Buffett, whose investment acumen seems unerring, had a caveat for America: Barring "a major change" in policies, the trade deficit will further undermine the U.S. dollar. The billionaire spoke in a Wednesday interview with CNBC, the cable TV news channel owned by General Electric (nyse: GE - news - people ). Without shifting current trade policy, "I don't see how the dollar avoids going down," he mused, warning of inflation risks posed by an anemic Yankee currency. The prairie-born genius also confessed he's having a "hard time" identifying stocks to buy, and isn't purchasing commodities. His cash swelled to $43 billion in the third quarter, by one account, because he couldn't find many investment opportunities. Buffett, 74, is chairman of Berkshire Hathaway (nyse: BRKa - news - people ), the immensely successful investment vehicle that acquired a new--and immensely successful--board member in December: Microsoft (nasdaq: MSFT - news - people ) Chairman Bill Gates. The latter also enjoys a personal friendship with Buffett, and takes part in his bridge games. (see: "Gates: Buffett's Pal Bill Elected To Berkshire's Board")

[maestro]

Buffett: Billionaire Warns That U.S. Trade Gap Undermines Dollar

?.........H.L.Hunt?

[Last Dakotan]

What's the solution? Trade barriers? Speak up Warren.

How about forcing open foreign markets?

[SierraWasp]

Stocks' cold start
"Year's performance to date worst since '82"

I don't know about Soros and Buffett, the binary billionaires moving the market, but CBS.MarketWatch.com sure does the best it can in it's lead story tonight!!!

They grudgingly slip in the fact, later in the article, that 1982 ended up a great deal higher and eventually turned out to be a good year on the market... but never mind that! This "worst since '82" makes a much better blast at the Bush administration!!!

Oh! And I refuse to believe that billionaires are any smarter currently than they may have been fortunate in the past. There's no such thing as "continuing education" for supposed "genius" billionaires that is offered or untilized anywhere that I'm aware of.

They can blunder bigger than any of us can because they have more padding and better credit... that's all!!!

[FITZ]

Since the dollar is based on not much --- they can just produce more dollars apparently. According to free traders, a huge and fast increasing trade deficit is great news and the dollar should fall in value against other currencies. For some reason we bail out Mexico whenever the peso falls but it's good when the dollar falls.

[familyop]

"He's whining 'cause his lib buddies are not in control to facilitate his interest rate plays. Its a whole new world out there and the balance of financial power is shifting. Why was SorryAssOs throwing good money in desperation?"

I am most interested in responses and possibly learning something new. Some information in return follows below.

Bullseye876, you just might have scored a bullseye with that reply, IMO. If those in the economic elite (mostly libertines) lose more of their investment power to new competition, more family men will be hired, for one. That could cause the labor pool to shrink considerably as mothers again choose to rear their own kids and work when they are not involved in their homes.

http://www.umich.edu/~urel/admissions/legal/gru_amicus/32_internatl.pdf

The following filed briefs in favor of "affirmative
action" in the Michigan "Grutter v. Bollinger"
(Michigan University) case. Be sure to save the
list of corporations below for later reference.

American Bar Association

American Council on Education, et. al.

Civil Rights Project of Harvard University

Clinical Legal Education Association

Fortune 500 Corporations that filed briefs in favor
of "affirmative action" for Michigan University

3M
Abbott Laboratories
American Airlines
Ashland
Bank One
Boeing
Coca-Cola
Dow Chemical
E.I. Du Pont De Nemours
Eastman Kodak
Eli Lilly
Ernst & Young
Exelon
Fannie Mae
General Dynamics
General Mills
Intel
Johnson & Johnson
Kellogg
KPMG
Lucent Technologies
Microsoft
Mitsubishi
Nationwide Mutual Insurance
Nationwide Financial
Pfizer
PPG
Proctor & Gamble
Sara Lee
Steelcase
Texaco
TRW
United Airlines

General Motors Corporation

Law Deans of Columbia, Cornell, Duke, Georgetown, Harvard, New York and Yale University, and
University of Pennsylvania

Lawyers Committee for Civil Rights under Law

Michigan Attorney General

Michigan Public Officials

National Asian Pacific American Bar Association, et. al.

NOW Legal Defense and Education Fund

Ohio State University

Thirty-six Faculty Members of The Ohio State University College of Law

UAW (International Union, United Automobile, Aerospace and Agricultural Implement Workers

~~~~~~~~~~~~~~~

Bill gates has also supported much anti-family political work within his company and abroad ("Family Planning," anti-father "human resources" policies--the whole thing). It fattened the labor pool for awhile, folks, by the Maoist, Leninist, Engels and Marxist policy of putting as many women as possible in the workplace with hopes to have government rear our children.

But that flooding of the labor pool has dried up. Thus...the more recent flooding of our labor pool with easy, cheap, temp. work tech. visas while family related immigration continues to be very expensive.

And friends, our economic masters are hypocrites in their leftist lies about environmentalism, population control and all of that. If more couples lived together instead of separately, fewer cars, home heating furnaces, etc., would be needed. Getting most families together again (as opposed to current divorce, "hooking up," and so forth) would be the most effective move for the environment and lower fuel consumption than anything else we could do.

Folks, our rich lefties want to keep all of the money and all of our women at their disposal regardless of what their policies do against production and families. What else should we expect from spoiled brats?

[SierraWasp]

Nope! You're all alone in your fright!!! Sorry... Go join the optimist club, er something. (grin)

[lonestar67]

Trade deficit is utterly meaningless as a statistic. Maybe he has been watching too much Lou Dobbs.

If the statistic means anything it means that our economy continues to boom. The fact that we are buying goods in greater amounts in an ever larger global economy simply shows economic growth. "Bigger than ever" is consistently true because the global economy continues to grow.

It is embarassing to see people deliberately deceive others with it. I think Buffet or some advisor definitely knows better.

The trade deficit could go down precipitously-- by reducing domestic purchases of goods. That would certainly be a clearer indication of a weak economy than some peculiar extrapolation that buying goods indicates a weak economy.

The statistic grows ever more meaningless as companies become multinational.

[SierraWasp]

Dang you're cold hearted to say that to durasell!!! How can you be so cold like that? Do you have icewater running through your optimistic capitalistic veins???

How can you say that to him and leave him standing there in the cold January down-draft, worst since 1982, according to CBS.MarketWatch.com's headline, shivering in abject fear with you heartless dismissal like that... HOLY TOLEDO!!! (sniker...)

[durasell]

For the record, I asked the question in good faith. A decline in the stock market is worrisome, but not the end of the world.

[SierraWasp]

I'm sure you did and I don't blame you for asking! Just try to remember where it (the Dow) was when that awful Dubya person sent our poor deluded children into that fearsome Iraq place in March of 2003 to face hideous gasses, nukes and atomized germ warfare... Against that Nebuchanezzar II, That pillar of UN compliance and whirled peas... Sodamn Hussane!!!

The Dow was down around 7500 the previous October, IIRC!!!

But, ya know, they told me to cheer up... Things could be worse! So I cheered up... And sure enough!!! They got worse!!!

[Betaille]

"According to free traders, a huge and fast increasing trade deficit is great news and the dollar should fall in value against other currencies."
The trade deficit is not the reason for the falling dollar, that was my entire point.

[familyop]

"Trade deficit is utterly meaningless as a statistic...It is embarassing to see people deliberately deceive others with it."

I agree, BTW, when market probabilities are considered in isolation. In the long term, though, it can bring frightening political probabilities into play, and those can also affect the economy. The Democrats are getting much more radical, but family oriented men (the majority) won't vote without obvious, immediate motivations for long. My advice for all who want to keep their private properties in the future is to hire more American men. Let families rear more of their own children more of the time, and give the women more breaks to do so. That would give incentive to more of our greatest Republican base (social conservatives) to stay in the game.

"Then it will be plain that the first condition for the liberation of the wife is to bring the whole female sex back into public industry, and that this in turn demands the abolition of the monogamous family as the economic unit of society" (Frederick Engels, "Origins of the Family, Private Property, and the State").

Mao's Little Red Book on Women
http://www.paulnoll.com/China/Documents/Mao-31-Women.html

Some of Lenin's words on women
http://www.marx.org/archive/lenin/works/1919/nov/06.htm

The following is from the "Manifesto of the Communist Party" (Karl Marx (1818-1883) and Fredrick Engels)
http://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch02.htm

"The bourgeois sees his wife a mere instrument of production. He hears that the instruments of production are to be exploited in common, and, naturally, can come to no other conclusion that the lot of being common to all will likewise fall to the women."

He has not even a suspicion that the real point aimed at is to do away with the status of women as mere instruments of production.

For the rest, nothing is more ridiculous than the virtuous indignation of our bourgeois at the community of women which, they pretend, is to be openly and officially established by the Communists. The Communists have no need to introduce free love; it has existed almost from time immemorial."

“Everyone who knows anything of history also knows that great social revolutions are impossible without the feminine ferment. Social progress may be measured precisely by the social position of the fair sex (plain ones included)” (Karl Marx Letter to Ludwig Kugelmann, MECW, Volume 43, p. 184, http://www.marxists.org/archive/marx/works/1868/letters/68_12_12.htm)

As for the trade deficit, it is highly unlikely that it will continue to be high indefinitely. Most American "human resources" (to be politically correct and suit the witches who dictated that lingustic activist phrase) are really cheap, while foreign workers will continue to get more expensive.

[Happygal]

I'm in Ireland...which has a good economy at the moment. And there are a lot of US firms invested here. :-)

Take heart. The low dollar at the moment is urging people over here to take vacations in the US (and everyone wants to go NOW, because we know it's not going to last!!!!).

This is just Ireland, so I figure all holiday makers in Europe feel the same, so expect a boost in tourist trade this year.

And like I say...no one over here expects it to last too long. So don't fret! :-)

[Americalover]

The Dow was at 10.500 when Dubya took office, it closed below that today. Secular bear.

[familyop]

...and sorry, a little, for running the topic beyond the truth you and others have stated that the trade deficit does not affect the price of the dollar. Yes, it is the other way around. The price of the dollar does affect the trade deficit. And the fed rate does, through other routes (without enough time here for all of that), affect the price of the dollar.

Pardon my lack of education (only Macro- in undergrad), but here are my guesses after hobby reading (and over a decade of study of the art of political propaganda--a little formal and much by myself).

lower fed rate = lower dollar = lower trade deficit

That's why so many in business complained (2000, 2001) about not being able to control Greenspan. Lower rates tend to invite new, young teams to get charters and go to work--domestic competition.

[M-cubed]

Since the dollar is based on not much --- <<< Bingo!..we have a winner!...IMHO..we are in a race to inflate our "fiat money" against all the other world "fiat" currencies...Fiat money backed by nothing..always goes to -0-...NO EXCEPTIONS!

[jackbill]

I can't speak for Warren, for sure, but two solutions to the trade deficit are a lower fed rate (more domestic competition) and a lower USD.

The lower USD has helped but the Fed Rate has been extremely low for years, and it hasn't helped a bit.

[ALPAPilot]

What it means is currency is flowing out of the U.S. and products are flowing in. That cash has to come back to the U.S. in some way or its only use is to wallpaper someone's office or wipe someone's ass. It comes back via purchases, investments, or currency exchanges. The exchange rate just depends on the choices being made.

Since the Chinese peg their currency to the dollar, they have no choice but to invest.

[Milwaukeeprophet]

Outstanding post.

[M. Espinola]

This comment is amazing... he's having a "hard time" identifying stocks to buy, and isn't purchasing commodities.(??)

Come on Warren, what is so difficultly about buying oil stocks coupled with energy related options or futures? plus the scores of currencies, stock indexes, bonds..oy

When the issue of Iran is brought to the front burner energy related stocks & commodity contracts will again climb if not soar contingent on the severity of shortfalls in Iranian crude, Opec's #2 producer & exporter, right after the Wahhabi Saudis.

Current prices may actually look on the cheap side when the showdown with the 'nuclear mullahs gets underway.