“The banks will not get this country in trouble, I guarantee it,” – Buffett, chairman and chief executive officer of Berkshire Hathaway Inc.
Maybe he knows something we don’t, likely. I guess the hundreds of trillions of derivatives, home equity lines of credit on underwater mortgages and other off-balance sheet assets are just fine. What I decode this message as truly saying that no matter what happens, the U.S Treasury in partnership with the Federal Reserve, will bailout and issue what ever amount of credit is needed so that none of our too big too fail banks,…fail.
Mr. Buffett, sir, our country is already in trouble, even in your own words, everyday we are mortgaging off a little bit of our country every day (Charlie Rose Interview). We are backing bad money and bad debt and according to Gresham’s Law, bad money chases good money out of the market. At the same time we have reduced interest rates to zero so we are burning anyone who has saved their money and instead, forcing them to speculate on riskier assets. Too top it off, we have codified a two-tier legal system for influential people like yourself and everyone else, like myself.
Maybe you are right, banks do not pose any threat to the U.S.
Bloomberg - Warren Buffett, the billionaire investor who oversees stakes in some of the largest U.S. banks, said the nation’s lenders have rebuilt capital to the point where they no longer pose a threat to the economy.
Warren Buffet could be right but I think he is discounting the risk in the markets over the long-term. Another explanation is that we have run too far too quick and their is growing fear (healthy) in the markets. Investors was to be creditors over equity holders because over history that is a more certain method of principle retention.
Warren is absolutely correct on the point that eventually interest rates will rise and that will crush people locked in bonds at this historic rate. The real question is if before the “reflation” happens, will we see another market crash where people in stocks at these prices and valuations will be crushed in the decline. I am of the opinion that keeping your capital safe should be the number one priority until we get a clear sign that we are out of the woods. We have not seen that sign with central banks are starting to do more quantitative easing (money printing) to keep the economy afloat. Don’t believe? Just look at the record gold bullion prices.
Fortune - Buffett, speaking Tuesday at Fortune’s Most Powerful Women Summit in Washington, said it’s “quite clear stocks are cheaper than bonds” now. He added that he “can’t imagine” the rationale for adding bonds to your portfolio at current prices.
Warren can defend these all he wants but he was also the one who coined them as “Weapons of Financial Mass Destruction”. I am surprised that he has so much exposure ($67 billion) to these products. I hope he has been doing the right thing and keep reserves for these insurance contracts like a normal regulated insurance product would normally be.
I really don’t have much issue with the concept of a financial product like this, but be unregulated and a industry that did not have the foresight to self-implement some sort of reserve requirement is no good and as a important lesson, we should not bailout any of these companies that are taking losses like these, the fees were easy in the boom years so companies got greedy, now its time to instill fear back to these markets to keep the balance between fear and greed.
Saying “derivatives are dangerous,” Warren Buffett defended his use of them after they played the main role in driving Berkshire Hathaway Inc annual profit to a six-year low.
Buffett devoted one-fifth of his 21-page annual letter to Berkshire shareholders to explaining how he uses derivatives to make long-term bets on stock markets, corporate credit and other factors.
With the fundamentals in place on the dollar, it does seem like we have a huge crowd of “safe haven” investors sitting on the sideline in cash waiting for some sign of a bottom, which may or may not be in the near future. I would say we are not close and we most likely see another bear market rally before we really start continue declines in the Dow and S&P. I am personally shorting treasuries in anticipation of a fall in the dollar after these record levels of debt issuance.
Warren Buffett, whose Berkshire Hathaway Inc sits on $25.54 billion of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing.
In his widely read annual letter to Berkshire shareholders, the man many consider the world’s most revered investor said investors are engulfed by a “paralyzing fear” stemming from the credit crisis and falling housing and stock prices. Treasury prices have benefited as investors flocked to the perceived safety of the “triple-A” rated debt.
Even the great Warren Buffett is not immune to this broad market decline. In the press release, they cite the falling income from the insurance businesses. They mention that the two hurricanes that hit the U.S., it generated claims of $1.05 billion dollars. It also mentioned that it had a loss of $1.26 billion on derivative contracts as well. Knowing Warren, he has found the undervalued and unpopular companies and he is building his position so that he will be in a solid position when our economy finally recovers.
Warren Buffett’s Berkshire Hathaway said on Friday third-quarter profit fell 77 percent, the fourth straight quarterly decline, hurt by weaker results from insurance underwriting and a big loss on derivatives contracts.