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.
This country and the people on the whole need to boost the savings rate and lay off the credit. But make no mistake, those who are talking down the dollar are doing it for the sole purpose of waiting for the right moment to buy up assets in America.
This is news! My investment's are doing better than Warren Buffet - two years in a row! Jeez. And the world doesn't even know who I am.
He keeps trying to be like Soros.
I'm still puzzling over the sharecropper analogy. It's an interesting choice of words.
Nope,he and Soros are in this doom&gloom tag team together,to bring down America,because President Bush won the election.
Soros has become kind of a parody of himself, but when Warren talks I tend to listen.
But yes,inappropriate and silly choice of words.
Sounds more like a political manifesto to me.
You can never trust a Leftie who speaks of anything that may involve politics.
WB was a disciple of Graham (sp?) who was also a fascinating character (ran off and married the maid!). Over the years I've debated whether WB has any serious political views. It looks to me as if the guy has programmed himself for one thing -- assigning value.
LOL !!! He doesn't care about his shareholders very much .Warren has become a total DemoRat.
What,you only look at his gains and not his losses? You've swallowed the Buffet mythos? Stay outta the markets and don't tout Warren ... you'll be much happier.
He's a Dem and worse than that,an active Bush hater.
He strikes me as a "machine." I don't know his politics, though the thing about living with the two women is pretty cool. (Kidding, kidding)
He's very like Soros,but has just managed to hide it a bit better......until the last few years.
But Warren is also very clever with the PR and sadly,many have fallen for the smoke and mirrors.
Well, you know -- he does the folksy thing. I may be bitter, I had a chance to buy some of his stock when it was at like $1,800. Wish I had 20 shares of it today.
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