Some believe that had Mitt Romney embraced this idea and made it a big deal it would have put him in the White House. That’s probably right.
Why should the banks get access to free money and students not be able to? There are all sorts of issues surrounding whether loan programs should even exist at all – and I think the world would be better off with out a Federal Reserve – but that aside, why do the big banks get .5% loans and students 7%?
Goldman, JP Morgan, and their brethren are swimming in cash thanks to the government throwing digital greenbacks at them. I don’t think we should be throwing cash at anyone, in fact if the Fed must exist, and a bank needs an infusion of liquidity it should have to pay a penalty rate of interest. I am actually for letting banks go completely kaput no matter how large they are. But given that we must deal with the Fed for the foreseeable future, students might as well get the same deal as the bankers. Why should government make a free 7% from students but nothing from banks which overleverage themselves every 8 years or so?
View full post on AgainstCronyCapitalism.org
Warren Buffett buys Heinz for $28 billion
H.J. Heinz Co. says it agreed to be acquired by an investment consortium including billionaire investor Warren Buffett in a deal valued at $28 billion. (Toby Talbot/AP Photo)
H.J. Heinz Co. says it agreed to be acquired by an investment consortium including billionaire investor Warren Buffett in a deal valued at $28 billion.
The ketchup company says Heinz shareholders will receive $72.50 in cash for each share of common stock they own. The deal value includes the assumption of Heinz’s debt. Based on Heinz’s number of shares outstanding, the deal is worth $23.3 billion excluding debt.
"It’s our kind of company," Buffett said in an interview on CNBC, noting its signature ketchup has been around for more than a century. "I’ve sampled it many times."
Berkshire Hathaway and 3G Capital, the investment firm which also bought Burger King in 2010, say Heinz will remain headquartered in Pittsburgh.
Given the saturated North American market, Heinz has increasingly looked to emerging markets for growth. In its last quarter, the company said emerging markets made up 23 per cent of sales.
‘I’ve sampled it many times’—Warren Buffett on Heinz ketchup
The per-share price for the deal represents a 20 per cent premium to Heinz’s closing price of $60.48 on Wednesday. Buffett said Berkshire will still have room to make more acquisitions, noting that the firm’s businesses continually replenish its cash supply.
"Anytime we see a deal is attractive and it’s our kind of business and we’ve got the money, I’m ready to go," Buffet said.
Statistics: Posted by DIGGER DAN — Thu Feb 14, 2013 11:29 am
View full post on opinions.caduceusx.com
You Pay More Taxes with “Fiscal Cliff” Deal, Rum Distillers, Hollywood, and Warren Buffett Big Winners
As the sun rises and more light is cast upon the fiscal cliff deal the details become more clear.
You and I will pay more in taxes because the 2% payroll tax cut was not extended.
However, all is not lost. Puerto Rican rum makers get a return of the excise taxes levied on them. So that’s good.
And railroads also get a 50% tax break on the maintenance of lines, such as the ones Warren Buffett controls which run from the oil fields in North Dakota to the refineries in Texas. (Much more efficient than a pipeline right?)
And then there’s Hollywood, which got a nice little tax break too. You know the industry which sought to impose SOPA and enjoys ridiculous levels of copyright protection. Yeah, they got hooked up.
We’re on the hook.
View full post on AgainstCronyCapitalism.org
Warren Buffett thinks rich people don’t pay enough taxes. He tells us his secretary pays a higher rate than he does (though that’s probably not true), a claim President Obama brings up when pushing for the “Buffett Rule,” which would increases taxes on the very rich.
Libertarians, when we encounter this sort of thing, often respond by pointing out that, hey, the Treasury Department accepts donations. If you don’t think what you’re paying is fair, go ahead and cut them a check.
Matt Zwolinski did exactly that over at Bleeding Heart Libertarians, saying that if Buffett “really believes that he ought to be paying more taxes, then what’s stopping him?”
But is that fair? Will Wilkinson doesn’t think so. “This is a pretty lousy argument,” he writes, “and I can’t see why libertarians keep making it.” Why’s it lousy? Because of collective action problems.
Suppose I’m a utilitarian convinced that human consumption of meat causes a huge amount of animal suffering. And suppose I love meat, and giving it up would leave me worse off. I would happily comply with a no-meat-eating rule if I thought others would likewise comply. But in the absence of a mechanism (whether internal/moral or external/political) to enforce compliance, I rationally believe that my compliance with the no-meating-eating rule will have zero effect on market demand for meat. And suppose I rationally believe my heeding the rule will only make me worse off while making no animals better off. In that case it is perfectly rational to continue to eat meat even if I believe that it would be immoral to eat meat under conditions of general compliance with utility-maximizing rules. I think Matt’s voluntary taxpayer case is exactly analogous.
But it’s not, at least not within the terms of the debate as framed by Buffett and those sympathetic to the “rich people should pay their fair share” argument. That kind of argument isn’t couched in terms of effectiveness. If it were, Buffett would have an out precisely as Wilkinson describes.
Instead, Buffett and Obama and people like Elizabeth Warren argue from a principle of fairness. What’s wrong with Buffett paying a lower rate than his secretary is that it’s unfair. Rich people, the claim goes, don’t pay their fair share. The idea isn’t to raise taxes on the rich because with enough money we’ll get to some magic threshold where government will start working better. Instead, the idea is to tax the rich more because they benefited more from the government we all paid for.
So the meat-eating analogy doesn’t quite fit, because it’s not concerned with fairness. To get at that sort of moral argument, imagine a rock band.
This band, seeking to mix up the standard music business model, posts their latest album on their website as a free download. Right next to the link, they put a notice reading, “Instead of asking you to pay up front, we’d like to you download our songs, listen to them, and then send us money based on how much you enjoy them. The more you like them, the more you should pay. By downloading, you’re agreeing to this arrangement. Thanks!” Then there’s a suggested pay scale. If you don’t like the music, pay nothing. If you like it a little, but probably won’t listen to it too often, pay a dollar. Like it a lot, pay $10. If it changed your life, send the artist $20. The scale looks completely fair to you.
So you download the songs and love them. Looking at the suggested payments, you see that you ought to send the band $15. You could pay that without causing yourself any noticeable hardship–but, really, you’d rather only send a buck.
To justify your decision to send one-fifteenth what the suggested pay scale says you think, “Look, I know nobody’s sending these guys anything. I mean, how many people are really going to pay, no matter how much they like the music? So until enough of us get together and pay what we’re supposed to, none of it makes any difference to the artist. My $15 really isn’t going to help him much.” In other words, you raise Wilkinson’s collective action excuse.
Now, it may be true that your $15 in isolation won’t do a lot of good. And it may be true that the artist won’t make enough money to thrive unless we pass a law requiring everyone to pay. But those two truths don’t seem to get you out of fulfilling your obligation. Your moral obligation in this case isn’t to figure out how to earn that band a living, it’s to pay what fairness says you ought to pay. Just because everyone else is falling down in their moral duty doesn’t mean it’s okay for you to do so, too.
This is why libertarians can continue making Zwolinski’s argument. If Buffett thinks it isn’t fair that he pays less than his secretary then on his own terms he ought to pay more, regardless of whether the government makes him or how many of his peers are cheapskates.
The other stuff about collective action and efficacy of government vs. private charities is worth discussing and ought to inform the debate about tax policy, but it doesn’t get Warren Buffett off the hook.
View full post on Libertarianism.org
Warren Buffett: Why the oracle of Omaha is irrelevant – Olive
Published On Mon Feb 27 2012
By David Olive
It will be awhile before I get around to reading the entirety of the latest letter to shareholders by the chairman of Berkshire Hathaway Inc. It was released on the weekend, and has been a must-read for decades. For some years now, Warren Buffett has not been relevant.
A multibillionaire will always command attention. But that status alone doesn’t make him or her more sagacious than the person does the oil change on your car.
The world’s most famous stockpicker has broken too many of the cardinal rules that earned him renown.
• Never buy bank stocks, Buffett for decades counselled us. And wisely, as it happens. Banks can too easily hide losses on their balance sheets, Buffett said. Ain’t that the truth, as we learned again in the global credit meltdown of 2008-09.
Yet Buffett in the past decade has taken a stake in about half a dozen of
America’s largest banks, including the vilified Goldman Sachs Group Inc. Other Buffett favourites include Wells Fargo & Co. (stock down 15 per cent in the past five years) and U.S. Bancorp (down 21 per cent).
• Buffett warned us off derivatives. During the meltdown he memorably labelled them “weapons of mass wealth destruction.” And ain’t that the truth, also.
But it was later revealed that Buffett has been quietly using Berkshire’s money to place massive bets on derivatives since the early 2000s. And he proved his point about their destructive power when Berkshire took a huge loss on them year before last.
• Never use your own stock rather than cash to finance acquisitions, Buffett used to preach, explaining how this dilutes the value of the buyer’s shares.
Yet Buffett’s been doing precisely that for more than a decade now.
Berkshire’s biggest acquisition, the $42-billion purchase of rail giant Burlington Northern Southern Pacific Co., was financed entirely in Berkshire stock. The resulting dilution is prominent among the reasons Berkshire stock has disappointed even its most ardent fans.
I’ve noticed that those fans have shed the cultlike adulation they once had for Buffett. It’s been years since my annual published doubts about Buffett’s enterprise have met with a firestorm of criticism.
The real issue here is that Berkshire’s conglomerate model doesn’t work. Never has, never will.
Yes, there is such a thing as the focused conglomerate. At United Technologies Corp., to pick an example, Otis elevators, Carrier air-control systems, Pratt & Whitney aircraft engines and Sikorsky aircraft are bound by their common R&D intensity and deep-pocketed institutional clienteles. (UTC shares have performed twice as well as Berkshire’s in the past five years.)
Buffett himself relentlessly preached focus in the decades. That was Berkshire, with its Niagara of cash flow from easy winnings in the grossly undervalued equities market of the 1970s and 1980s, was obliged to invest that cascade of rewards somewhere.
And so today’s Berkshire is a $160-billion (net assets) monster whose 70-odd operating businesses range from Dairy Queen to America’s largest natural-gas pipeline network, and from Benjamin Moore paints to the world’s largest re-insurance operation (best regarded as a black hole, since losses from claims arising from “super-cats,” or mega-force Acts of God, are impossible to predict.)
Berkshire also deploys an army of women to U.S. households each day to pitch utensils at house parties.
Buffett last weekend once again announced the naming of a successor to himself, succession being yet another drag on Berkshire stock. And Buffett once again didn’t deign to identify the individual.
Given that the last two most heavily rumoured replacements to Buffett were flame-outs, I have limited confidence in Buffett’s character-assessment skills in picking a wise replacement for himself.
If there’s anyone out there still planning the gift of a Berkshire share to the kids when they hit 21, stop it.
The following prosaic companies are among those that outperformed Berkshire over the past five years: IBM, McDonald’s, Coca-Cola, Magna, Ford, Caterpillar, jams and jellies maker J.M. Smucker Co. and even Canadian Pacific Railway Ltd., currently under siege from a U.S. “activist” investor for its subpar stock performance.
And in the contest between Dilly Bars and Timbits, the latter are the hands-down winner. Berkshire shares are up 12.4 per cent over the past half-decade. Shares of Tim Hortons Inc. have soared almost 48 per cent in that time.
And Tims has suffered a world of woes during that period, from high-level management turnover to throwing in the towel in New England, where it was outmuscled by regional incumbent Dunkin Donuts.
This is not a recommendation on Tims. It’s a warning that when a single-suited chain of coffee shops outperforms the world’s largest conglomerate, it’s time to give the conglomerate a pass.
Statistics: Posted by yoda — Mon Feb 27, 2012 1:08 pm
View full post on opinions.caduceusx.com
WARREN BUFFETT’S ANNUAL SHAREHOLDER LETTER
26 FEBRUARY 2012 BY CULLEN ROCHE
Warren Buffett released his latest annual letter to shareholders this weekend. I always love reading Buffett’s letter. There are always nuggets of wisdom in there. I generally tell novice investors, the first thing you should print up and read is every one of Buffett’s letters (you can find the letters here). Nothing like learning from the best.
This year’s letter was a bit of a letdown as far as Buffett letters go. The only section that contained his usually unique insights pertained to gold. Buffett REALLY hates gold as an investment. History has had a tendency to prove him right on these sorts of big macro calls even though he’s often early. Time will tell…
Buffett is sticking with the housing call as well, specifically based around the incredibly low ongoing net increase in the housing stock and the pent-up demand of new household formation. “Eventually hormones take over,” that’s a pretty good line in the tradition of folksy “Buffettism”. FT Alphaville had a great post a few days ago that further illuminates the demand side of the argument.
Reply02/26/2012 at 2:23 PM
I read the letter. It was ok. Other years it has been a 1000 times better. He does a great job of glossing over the good stuff his managers do but buries the bad stuff (I am talking about the Sokol mess which happened in 2011). He is also trying too hard to sell BRKA which has underperformed the market as of late.If you want a meatier meatier/more serious letter read the latest JG letter at GMO:
You may need to register at the website. Subscription is free.
I have a nice story about BRKA. In the early 2000s I bought a few shares in the low 70s and sold it in the high 90s. With the profits I bought in cash the property (furnished!) we now live on during our time in Argentina at close to the bottom of the RE market here, which has gone CRAZY (I.e. China style) since then.
Statistics: Posted by yoda — Sun Feb 26, 2012 2:23 pm
View full post on opinions.caduceusx.com