Mike Kueber's Blog

September 30, 2011

Buffett’s perspective

Filed under: Economics,Issues,Politics — Mike Kueber @ 11:04 pm
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This morning, while watching Imus in the Morning on the FOX Business channel, I learned that Warren Buffett was going to be interviewed on the floor of the stock exchange by a FOX correspondent in a few minutes.  What a pleasant way to start the day!

The ten-minute interview reminded me why I like Buffett so much.  Most of the interview focused on the Buffett Rule, which has been proposed by President Obama.  The rule is really nothing more than a minimum income-tax rate (probably 25%) for people who make more than $1 million a year.  As Buffett pointed out, hundreds of these people currently pay less than 25% because the bulk of their earnings are taxed at the 15% rate for long-term capital gains.  This new minimum rate seems perfectly fair, and it does not raise the specter of a rate so high that it discourages entrepreneurs.

The other major issue discussed by Buffett was the lagging economy.  Buffett said that that things were improving, with most of Berkshire’s operational companies on schedule for record profits, except for his homebuilding companies.  When the FOX correspondent wondered what could be done to revive homebuilding, Buffett sagely told her that nothing needed to be done – i.e., he didn’t want to see more houses being built now.  He went on to explain that the bubble caused America to build more houses than it had households, and that resulted in an excess inventory of houses.  Today, America was creating more households than houses and this was slowly reducing the excess inventory.  It’s just a matter of time before homebuilding picks up.

When asked what American government should do from a macro-economic perspective, Buffett said that fiscal or monetary policy cannot supply the answer.  When pressed for an answer, Buffett said that we have already done as much as we can with fiscal and monetary policy, and that we need to give the economy some time.  Ultimately, the “natural regenerative juices of capitalism” will prevail.

What did Buffet think about stock market prices?  Berkshire was buying stocks every day, and in the 2nd quarter they had a net increase of $4 billion in the market.  Talk is cheap, but that’s his money talking.  I wish I had $4 billion to put in today’s market.

Regarding the recent retirement planning going on at Bershire, Buffett claimed that he was merely making sound precautions “should he drop dead tonight.”  But he had no plans to retire or slow down.

Long live Buffett.

 

 

 

 

 

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