Buffett Commands

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One thing your editor notices after being out of contact with the financial news for the better part of two days is that most financial news is rubbish. It doesn’t matter much, at least when it comes to be the big underlying themes moving markets that we like to discuss here at the Daily Reckoning.

For example, once we were able to log on to the World Wide Web at our hotel on Maryland’s Chesapeake Bay, we learned from Bloomberg that Warren Buffett has ruled out a double dip recession in America. Gadzooks! Somehow, while we were sleeping over the Pacific, America became a command economy subject to the whims of Warren!

Buffett, in his role as aloof spokesman for a bygone era, said, “I am a huge bull on this country…We will not have a double dip recession at all. I see our businesses coming back almost across the board.”

All of that is interesting. But only some of it is relevant. Berkshire Hathaway’s shareholders would be more concerned with the actual performance of its units than how Buffett feels about America. But to the extent that Buffett himself has become a brand (cliché), then exuding confidence about future profits is probably part of his job.

Buffett being bullish on America the brand may be an example of generational attitudes. We had this conversation on Saturday night with a financial journalist from one of Australia’s tabloids. There is a certain generation of Americans and Australians who have a basic confidence in the power of good government to accomplish big and worthwhile goals. After all, this is their experience of government, from World War Two on.

And to be fair, we’ve had contact with this as well. For example, last night at the airport hotel in Baltimore we ran into a group of World War Two veterans. Their trip to the DC area had been sponsored by an outfit who wanted to honour war vets by giving them an all-expenses paid trip to Washington to see the war memorials.

The irony for your editor is that the group at the hotel last night was from Northern Colorado, where we were born and raised. We sat next to a gentleman from Loveland, Colorado and made small talk while we watched a football game.

“I can’t believe they made such a fuss over us,” he said. “They picked is up in a bus. But we had a police escort all the way to airport. And along the way the firemen and police from the local houses came out and saluted us. And we didn’t even have to go through airport security, which is a good thing, given all the walkers and medical equipment these guys have now. It was a chartered flight too.”

“It looks like quite a few of you are staying out late,” we ventured.

“Bunch of drunks probably,” he said, “Present company excluded.”

We chatted for a bit longer and gradually realized that the America this man went to fight for as a young man was a much different country than the America he was travelling through now. For example here in the Baltimore you see conflicting signs about America’s fortunes. On the one hand, real estate prices in the region have fallen less than in other places. Government is a growth business. There is always a migration of transient opportunists and conmen making their way to Washington and living in its suburbs.

On the other hand Baltimore itself – once the great Eastern port where the ocean met the railways – is a shell of its former itself in a quite literal sense. Baltimore’s outer suburbs used to be working class houses for the families of men who made commerce work in the city. The raw materials and finished goods of the interior of the country were unloaded from trains and on to ships and sent abroad.

The sheer productivity of 19th century American generated huge profits and surplus capital. That capita funded more business and built better infrastructure to facilitate more trade. It also built some beautiful 19th century mansions in Baltimore’s Mt. Vernon neighbourhood, some of which are now home to your editor’s parent company.

Even as you travel down the Chesapeake Bay to some of the earliest European settlements on the Eastern Seaboard, you the tobacco farms that grew some of America’s most profitable exports to Europe. And that time, and for a long time thereafter, it was mostly raw materials. Later, it was finished goods and cars and higher value-added goods with bigger profit margins for producers.

It would be unfair to say America doesn’t make anything. But you get the feeling that its biggest export for the last twenty years has either been the idea of America itself (the brand) or the dollar. Not that it hasn’t been a good trade. Trading dollars for goods and services gets you an awful lot of goods and services.

But what if the rest of the world isn’t interested in making that trade anymore?

Apologies in advance if we’re a bit scattershot this week. It’s the one time a year we get to catch up with our colleagues from around the world to hear how business is going. It will also be interesting to see what people who live here every day are saying about the economy and the future. And at the very least, it will fun to watch Kris Sayce eat as many cheeseburgers as possible during his short stay in the spiritual home of the cheeseburger. Until tomorrow.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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65 Comments on "Buffett Commands"

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Ross
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Buffet can’t afford a double dip – he bought a railway! The oracle of the inside run is so far up the QE position that he thought he better put a bung in it.

Rod
Guest
No chance of a double-dip recession ? Business “coming back” ? ha ha I guess he’s off with the fairies skipping off down the yellow brick road holding hands with Obama then. Perhaps he needs to talk to Celente… The US is officially in economic depression, growth is virtually non-existent, domestic GDP is sweet FA, unemployment figures are catastrophic (U6), 20% of the population are at poverty level, the next wave of sub-prime crises is due followed by prime residential, commercial, the student loans repayment crisis, student jobs, foreign pullouts of treasury bonds, ever-increasing debt levels circa $80T now, widespread… Read more »
Biker
Guest

But wait… there’s more. Oprah is about to mount a ginormous fact-finding mission, bringing new colonists to the shores of the GSL… . ;)

Davo
Guest

Better check that Oprah’s purchased a return ticket.

Biker
Guest

OK. Checked that… she hasn’t!~ Will this become the long-fabled ‘Plane People’ migration we’ve all read about?! ;)

Our Ozbuck looks pretty good, Davo.

Son1, who has just flown to from Munich to Venice, is enjoying the record Oz/Euro exchange rate… . :D

Davo
Guest

Hi Biker,
Spent $6K on USD last week, when the rate was .9207, so I’m a bit behind, but happy enough with that result.
Shame the bank rips 3 percentage points off you, so real exchange rate was .8907.
Last time we went to US 4 years ago, rate was around .76.
So I’m hoping it stays high until Christmas.
Notice the AUD/NZD rate has crept higher lately too.
Cheers

Biker
Guest

You’re doing OK, Davo… . :D

Maybe the QE2 may mean it’s an even better bet mid-’11, when we go next… .

Davo
Guest
I’d love to travel in the middle of the year, but workload is a killer then, so forced to go when it’s freezing. It’s about the only time I wear the cold weather gear, except for the odd day here and there in July/August. School holidays restricts us as well, but only until end of 2012. I know a woman whose parents took off 14 years ago, when she was in year 10, with older siblings, and have travelled on the cheap for 11 months a year since. Kids survived fine on their own. They take a motor bike and… Read more »
bearamundi
Guest

Pulled the trigger davo, better exchange rate than before.

Latest ‘Keiser Report 77’ has a 15 min interview with the (in)famous Steven Keen. Brilliant stuff!!

Biker
Guest
You’ll enjoy the freedom which arrives when the kids finish school, Davo. We’re fortunate to have reached an age where we can now manage to enjoy the NH summer, then stay on for winter… White Christmas, etc. The beginning of summer will be spent on Gabriola Island, where the family has had a holiday cottage for over six decades. Sweet spot in the Gulf. This time we’ll include a few weeks in _eastern_ Mexico. I’d like to pick up a hire bike there. Busing around western Mexico was a poor substitute last year… . I may even ship one of… Read more »
Biker
Guest

“Pulled the trigger davo, better exchange rate than before.”

Yes, you called it, Bear. All class. No a*se at all… . :D

bearamundi
Guest
I think I got angry last week because my mate is getting done like a dinner over an investment that failed 12 yrs ago. He went into a top 10 aussie investment which went bust. Lost his entire input. But creditors started chasing him- he is just a Mum and Dad investor, for more money. The guy he went in with declares bankruptcy and now creditors are chasing my mate for his input as well as his. Big warning for me about doing business with the big end of town. Creditors have collected something like 5.1 million nationwide so far… Read more »
Ned S
Guest

And I suggested hedging? Good thing I’m used to being wrong hey! :)

Ned S
Guest

“Good thing I’m used to being wrong hey!” – Which is presumably why I suggested hedging. As a mate once said to me ‘Well you’ll never be rich, but just maybe you’ll never be poor either???’ :D

Biker
Guest

I was wrong once. Cost me (us) $55K. _Never_ again… .

These days, I’m happy with 4.5 – 6.9% after tax. :D

bearamundi
Guest
Yeah, you think you know people and yet they can be so gullible with a fortune of hard-earned. My mate is the guy I ride to work with and for 6 months he’s had the black dog. Go for a coffee to cheer him up and he’s distracted,chewing over this debt. I haven’t made too many mistakes with money, more a case of luck and having a shrewd wife than anything else. It’s my mouth that can get me into trouble. I can say the dumbest/most dangerous things. Better to stay quiet than remove all doubt is my mantra. You… Read more »
Ned S
Guest

“Better to stay quiet than remove all doubt is my mantra” – God love you brother! I do enjoy a good laugh!!! :)

bearamundi
Guest

I reckon!! Ned :)

Biker
Guest

“Yeah, you think you know people and yet they can be so gullible with a fortune of hard-earned.”

If it looks too good to be true, it usually is…

My missus and I have a pact. Neither of us is getting any younger… and the folk we see losing _millions_ are mostly in the ‘seniors’ category.
The deal is that _neither_ of us makes a financial decision without the full and total a$$ent and agreement of the other.

It’s not failsafe, but it’s extra insurance against major lo$$… .

Ned S
Guest
“Neither of us is getting any younger… and the folk we see losing _millions_ are mostly in the ‘seniors’ category.” A few facts have to be faced Biker: * Often the silly buggers with millions to lose will be the more senior types. * If there is any truth in the saying that ‘Hope springs eternal’ (??? – As opposed to reality!) they can certainly tend towards silliness in spite of their many previous life experiences that SHOULD have served to smarty them up. * So Yes, to have a trustworthy co-executor of any family assets of worth is probably… Read more »
Ned S
Guest

-) – Jeez if that non smiley thing works I reckon I’m really good! And if it doesn’t, I’ll just have to keep practising … ;)

Ned S
Guest

_)

Crash ‘n burn most likely?

Ned S
Guest

One last try: -: ???

Ned S
Guest

A question – If our dollar exceeds parity, does that mean we have to put America on the list of nations that receive our financial aid??? :)

Biker
Guest

Try : (

That’s colon first bracket
No space

A smile is opposite

Colon final bracket : )
No space

Cheesy grin is colon capital : D
No space

Biker
Guest

“Often the silly buggers with millions to lose will be the more senior types.”

Vitamin B deficiency (?)

Ned S
Guest

“Vitamin B deficiency” – No such worries for those who teethed on Sao bikkies (or Rusks when the health profs started spruiking) smothered in vegemite mate! :)

bearamundi
Guest

The deal is that _neither_ of us makes a financial decision without the full and total a$$ent and agreement of the other.

Them’s hard terms Biker, you are stuffed mate :)

Biker
Guest

Yep, $tuffed… :D

Bearamundi
Guest
NZ next week, got a boost printing off electronic tickets/hire car/accomodation. From my perspective reality is harsh, and while these little breaks might not be full of joy they are a darn sight better than working. Two days CBD Auckland ($500 a night hotel on discount to $121NZ), then Coromandel and road trip down South (car $29NZ a day, used this company before), with some bush-walkinmg thrown in for good measure. NZ has very good community resources, way better than aussie, probably because like Canada it is a cold country. Take the kids to the playground and it is just… Read more »
Lachlan
Guest

Australia rules Bear ;)
..although Ive heard theres some good alluvial gold lying about in some isolated country in NZ. When are we going Bear? I do know of some locals here who are trying out their luck in isolated parts of PNG but they might lose a their head or a limb or three to locals who live by the machete :(

Lachlan
Guest

Our silver trades looking promising Bear and the PMs seem to be grinding higher despite the usual suspects. The paradigm does seem to be changing albeit in slow motion… since no decent gold correction has taken place since the bottom around 1155USD. Something should have taken place ages ago in this regard.
Caught you Keiser 77 last night too. We have a big gum tree in a paddock here which the big bulls rub on and push against. I imagine ol Keene up top (the koala/AUDbear)…the territorial bulls shaking his tree ;) ;)

Stillgotshoeson
Guest

Silver and Gold doing well…
Not to sure about BHP’s future and the welfare of some in WA

http://www.heraldsun.com.au/business/terry-mccranns-column/marius-kloppers-sells-bhp-billitons-soul/story-e6frfig6-1225924317912

Bearamundi
Guest

Lachlan,

Out of interest I knew the guy who found the Hand of Faith in 1980, that huge nugget of Gold in Bendigo. He was a Dutchie who owned the local bicycle shop. He had a detector but it was found sitting right on top of the ground, 870 ounces I think. He sold his shop (I got some good discounts), said he’d bought all his kids a house each and went bush pretty much.

Lachlan
Guest
Small world eh Bear. Thanks for the article Shoes. I doubt this is a risk for the big miner. Our corporate overlords think this doozy consumption/carbon tax might save our collective backsides…but that will be at the expense of the peasantry and the small enough to fails. In some ways and thinking short term I wish they are right … I’m happy enough with my lot…maybe we can kick the can a few more years. I just detest the lies. Also, longer term this course of action leads toward disaster ie, human nature…driven by fear…will form alliances…will practice deceit…to control…to… Read more »
Biker
Guest

“Often the silly buggers with millions to lose will be the more senior types.”

And, talking of silly buggers, they’re blocking my stuff again, Ned!~ :D

Let’s see if another try gets _this_ through… ;)

Biker
Guest

OK… I get it. They’re blocking a link to a _competitor’s site._

Pity, as it had a very informative article on the use of silver in (90% of) solar panels manufactured. Particularly relevant given Gillard’s comments on solar electrickery in today’s midday news… .

Stillgotshoeson
Guest
Comment by Lachlan on 16 September 2010: Thanks for the article Shoes. I doubt this is a risk for the big miner I think it is a big risk, not just for BHP but all the big miners as well as the WA and Australian economies.. I am not a believer in man made climate change.. I am more of the opionion that climate change is a natural process of the Earth and influenced more by the Sun than any other single “source” I agree we should be looking to reduce emissions for health reasons.. pollutants = higher risk to… Read more »
Stillgotshoeson
Guest

Comment by Biker on 16 September 2010:

OK… I get it. They’re blocking a link to a _competitor’s site._

Trying hard not to communicate with you Biker but I will offer some help here..

post the link minus the http// and we can have a looksie ;)

Biker
Guest

Nope. That doesn’t work, either.

Google: silver use in solar panels

Series of interesting sites, but if I name the specific site, they’ll simply block it again…

Stillgotshoeson
Guest

Comment by Biker on 16 September 2010:

Nope. That doesn’t work, either.

Rapidtrends(dot)com ?

Lachlan
Guest

Mine on BHP is speculation Shoes. When things went pear shaped in the USA the faint smell of corporate oligarchy became a stench. I suspect such is/will be, almost universal. I tend to think that democracy/free society evolves naturally into oligarchy driven by the constant of human nature.
I agree with your climate views and also about reducing pollution. The insanity prevailing now is a group trying to implement a carbon tax to save the earth, who at the same time generate staggering levels of wasteful consumption and unsustainable growth. And yet some people see nothing out of place there.

Lachlan
Guest

Thanks fellas. Saved that site for future reading. Blows me away how lucky are we to have the internet. People without it are left in the dark…in a big way.

Ned S
Guest

Shoes: “we (humans) have the technology and capabilities to re generate semi arid regions of Australia and other countries into forests.. a far better option IMHO at reducing CO2 levels of the earth than a pointless ETS/Carbon Price/Tax.”

If that’s the case then count me in – Shoes for PM!

Lachlan: “Blows me away how lucky are we to have the internet.”

True. And when the RBA and REIQ start publishing their raw data on it free to the likes of me, my joy will be complete … ;)

Biker
Guest

Good link, but not the one I attempted to send.

Shoes for Precious Metals? What else is new??!~ :D

Biker
Guest

Crazy. They block a site pushing silver… and let through Pascoe’s analysis of the Aussie gold price… . :D

Ned S
Guest

“Shoes for Precious Metals?” – Seriously though Biker, if anyone does actually have some clues on how we might be able to return some trees and the megafauna to Lake Eyre and Uluru, then no Aussie should have to give a thought to holding precious metals again any time soon. Except as their run away quickly stash for when those who are envious invade maybe? :)

Biker
Guest
Ernie Bridge’s plan to pipe water south from the Ord was picked up by Colin Barnett, WA’s premier, a few years back, but got little support in WA. Solar pumps could have made it possible. The whole northwest might have been opened up to agriculture, much in the same way as C Y O’Connor’s pipeline opened up the goldfields east of Perth, a century ago. Shoes for PM, Ned? First he’d abolish Negative Gearing, then increase Capital Gains on property. His solution for a crisis? Head for the bush to hide out at dad’s place. _Classic_ leadership style… . :D
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