Thursday, October 23, 2008

In Defense of Warren Buffett (Sort of)

With defenders like me, Warren Buffett doesn't need enemies, but I feel that I must rise to his partial defense, given the most recent attack on Buffett by Karen De Coster.

De Coster today pens a mostly accurate portrait of the evil side of Warren Buffett.

She is especially strong in calling him a propagandist for government. Since his purchases of Goldman Sachs and General Electric have been coupled with his cheering on the Paulson Plan, what else can be expected? He is clearly among the new American Oligarchs.

She is trying to split hairs,though, and incorrectly at that, when she writes:

..he's telling us that the profits will be there in "5, 10, and 20 years." Is it 5 or is it 20? Or anything in between? Or more than 20 years?
Notice how in her attack she uses the conjunction "or", while Buffett used the conjunction "and". Thus, if we assume that Buffett is attempting to properly use, and has successfully done so, English grammar, then he believes there will be profits 5 years out, and 10 years out and 20 years out.

De Coster gets back on track when she calls Buffett a redistributionist:

In retrospect, Warren Buffett’s posture on political issues shows us that in spite of being a remarkable value investor, he has sanctioned collectivist state hysteria and policies from climate change to taxes to fiscal policy. In fact, his nod of approval for some of government’s most destructive taxation tactics has clearly distinguished him as an unabashed redistributionist.
But, Buffett is one of the most quirky characters to ever come on to the investment scene. While De Coster justifiably attacks the letter for its coming out to serve government interests, the letter also has some of the most sage advice I have seen during this period of financial crisis. Advice that De Coster fails to identify or discuss. Specifically, Buffett writes:

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
There is no other way to interpret this then that Buffett believes significant inflation is ahead and that cash will depreciate while it is in your hands. On this point, Buffett is 100% dead on. As I wrote earlier this week, no truer words have ever been written by an Oligarch.

No comments:

Post a Comment