Posted on 03/06/2005 10:57:13 PM PST by nickcarraway
Warren Buffett has warned that the US trade deficit risks creating a “sharecropper’s society” as his letter to shareholders sounded an increasingly bearish tone about the value of the dollar.
The billionaire fund manager said his own performance as chairman of Berkshire Hathaway was “lacklustre” because he struck out in his quest for new investments. Annual results showed the book value of Berkshire shares underperformed the stock market for the second year in a row while full-year profits fell 10 per cent.
But his sceptical view of current market valuations continued as Berkshire’s holdings of cash rose from $36bn in 2003 to $43bn by the end of December – equivalent to nearly all the “float”, or excess cash, generated by its insurance businesses.
Mr Buffett’s bet against the dollar also grew. Foreign exchange contracts – mostly short positions against the US dollar – nearly doubled over the year to $21.4bn, generating $1.8bn in gains as the greenback fell against other major currencies.
These currency profits were partly responsible for a sharper than expected rise in fourth quarter earnings from $2.39bn to $3.34bn, although Berkshire earnings are notoriously volatile due to the timing of investment gains.
Mr Buffett stepped up his warning about the US trade deficit and the need to finance it with foreign investment, devoting more than two full pages of the annual report to the topic.
“This force-feeding of American wealth to the rest of the world is now proceeding at the rate of $1.8bn daily, an increase of 20 per cent since I wrote you last year,” he said. “Consequently, other countries and their citizens now own a net of about $3,000bn of the US”
In particular, he warned that this meant a sizeable portion of what US citizens earned in future would have to be paid to foreign landlords.
“A country that is now aspiring to an “Ownership Society” will not find happiness in – and I’ll use hyperbole here for emphasis – a “Sharecropper’s Society,” added Mr Buffett. “But that’s precisely where our trade policies, supported by Republicans and Democrats alike, are taking us.”
Nevertheless, Berkshire’s chairman and chief executive conceded he did not do his job very well last year in finding ways to profit from the unusual market conditions
“My hope was to make several multi-billion dollar acquisitions that would add new and significant streams of earnings to the many we already have. But I struck out,” he said “Additionally, I found very few attractive securities to buy. Berkshire therefore ended the year with $43 billion of cash equivalents, not a happy position.”
Berkshire’s net earnings, which are subject to volatile swings in realised investment gains, fell from $8.15bn to $7.31bn for the year. Total assets rose from $181bn to $189bn and shareholder equity increased from $77.6bn to $85.9bn.
Mr Buffett added little new information about an ongoing investigation into potentially illegal trading practices in the insurance industry.
“Berkshire cannot at this time predict the outcome of these investigations, is unable to estimate a range of possible loss, if any, and cannot predict whether or not that outcome will have a material adverse effect on Berkshire’s results,” said the report.
Same way Soros makes his.
I don't know why anyone gives them the time of day.
I'm not "bitter";have no reason to be. I just hate the droolers,who talk about him as though he was better than anyone ever has been and know less than NOTHING about him and his dealings.
Se la vie...we've all had chances to get in at a good price and either ignored it/were unable to take advantage of it/got in,but got out too soon/or made a killing. :-)
Money changes people's perceptions of things and inviduals -- you know the expression, "the fog of war." There's also the "fog of wealth."
In my view, WB has developed a very specific and narrow expertise -- assessing the value of companies. This is no small thing since he's obviously pretty good at it, but it also doesn't make his judgement on politics any more valid than my own.
But some people are bedazzled by "fame" of any kind.
I don't know what you mean by "good." It isn't original, as previously noted, he's a Graham disciple. But it's probably sound enough. I don't hold those guys in particularly high esteem. I haven't met WB, but do know a bunch of people like him. Pretty boring bunch, altogether. They even have ordinary vices. I prefer people who invent things or create things.
I've debated whether GWB has any serious political views, as I fondly remember Ronald Reagan.
IMHO this guy is talking like he's "not quite short enough"... the dollar needs to fall some more before he can profitably liquidate....classic WB talk
We're doomed.
Buffet is going to be losing lots of his wealth if he keeps converting into the falling dollar...duh. Maybe he should call up Soros and tell him to cut it out. The sooner some of these oldsters are planted, the better for the investment community.
Bingo!
It means Americans labor in foreign owned factories in the United States. Pay rent to foreign landlords. Foreigners buy up productive US assets with all those dollars they accumulate. They buy up US corporations, land, buildings, farms etc that yield them a profit while American are peasants laboring away (sharecropping) for their foreign masters
A sharecropper never owns the land he farms
My take on the dollar is it will start going up because the Fed will continue raising interest rates (they want their money too). Warren better not be blinded with political hatred, or he is going to be caught with his pants down.
F H
Buffet was a chief economic advisor to Arnold in the California governors race.
Here's the deal with big money people. Political ideology will take a backseat to a trade. It's that simple. Making money off a trade is their thing, their high. The logic of the numbers is superior to any ideology. While they will speak in partisan tones in public, they will bet their profit motive everytime irrespective of any ideology.
If you asked any forex trader right now where to place money, a large number would say short the dollar. Why? The fundamentals are terrible.
Some of these people are boring,some interesting,and some disgustingly smarmy in person. They are JUST PEOPLE,after all.
Nailed in one! :-)
Unlike Soros,Buffet had never been primarily been a currency trader. And please don't lecture others here,without knowing anything at all about them. I know and understand this topic better than you do and I'm guessing,for a far longer period of time. :-)
I gotta get out and about more -- I didn't know he was on a pedestal. Next thing you'll be telling me people admire Trump.
(Okay, I did know that about Trump. I've actually seen guys reading his books in airports.)
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