A Buffett Biographer as Rock Star

Alice Schroeder recently toured China to promote her Warren Buffett biography, Snowball. It wasn't like a U.S book tour, she writes:

The rock-star treatment I received on my recent book tour in China makes sense only if viewed through the lens the Chinese apply to American culture: Its importance is relative to whether it can make you rich.

Which is why Warren Buffett is no mere Oracle in China; he is the “GOD OF STOCKS” (usually translated this way, in uppercase). Buffett is probably the most popular American in China other than President Barack Obama.

The Chinese don’t give a hoot about Obama’s politics; his appeal is his power, through which he, like Buffett, can make you rich. Faith in Obama’s ability to create wealth on a personal level is so strong that one Chinese author has even capitalized on it in a book: “Get Rich With Barack Obama’s Change We Can Believe In Principle.”

It is just as strange that Buffett, the man of patient capital accumulation, has been so fetishized in China, the land of instant everything. The tour gave me a window into the attitude of Chinese investors. It resembled no book tour imaginable in the U.S., consisting of marathon two-plus-hour press conferences and six-hour “forums” (a speech of at least 60 minutes, followed by a panel, then audience questions and answers followed by a book signing and a banquet) in Beijing, Nanjing, Shenzhen, and Shanghai.

My Unrequited Emails of 2008

For ages poets have sought to find the words to explain the pain and sadness of unrequited love, I have no such task before me. However, I must now put fingers to keyboard to explain my 2008 experiences of unrequited emails.

It has happened twice this year, and as the last few hours of 2008 tick down, there is a certain finality to the fact that responses to these emails I will not receive.

I sent the first such email in mid-October to Jackie Wilson, who is Warren Buffett's new media contact. You can read the email, here. In my brief conversation with her, before I sent the email, it was clear that Buffett's folksy charm was not something she specialized in. It was clear Buffett hired her as, well, a buffer. But one has to wonder, how long Wilson will survive at Berkshire Hathaway's worldwide headquarters. Wilson has the concepts buffer and abrasive confused, and, from Alice Schroder's biography of Buffett, it is plenty apparent that Buffett doesn't like abrasive. Wilson may walk on egg shells around Buffett, but some of that abrasiveness must show through. And a little birdie has suggested to me that Wilson is much more interested in how the "Jackie Wilson" name is percieved rather than the name "Warren Buffett". If Buffett figures this all out, then Buffett may well end up giving her the John Gutfreund treatment, before 2009 is over.

My second unrequited email was sent to Austan Goolsbee, an economist and Obama advisor, he proclaimed that Obama likes to hear differing views and wants to bring different views to the table. Since this was the case, according to Goolsbee, I wrote to ask him why this diversity of views did not include any Austrian economists. Goolsbee has failed to respond. Here is the original email to him.

And so, the year closes, with basic questions unanswered by those who should know the answers. Perhaps Goolsbee and Wilson should keep in mind the words of another Wilson, Earl Wilson, when he said,“Snow and adolescence are the only problems that disappear if you ignore them long enough,” and my emails are not about snow or adolescence.

Book Review: The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

For those looking for a guide to how Warren Buffett picks stocks, The Snowball: Warren Buffett and the Business of Life by Alice Schroeder will be an initial disappointment.

It is not a "how Warren Buffett pick stocks" book. It is a near-full biography of Buffett (I will explain why I say near, rather than full, in a moment). If you want to learn about seemingly everyone Buffett has come in contact with over his lifetime (including mini-biographies of these people). This is the book. You will learn, for example, about Rose Bumpkin's journey from Russia to America.

You will learn that at one point Buffett was juggling four women in his life, his wife Susie, who was living in San Francisco, his live-in Astrid, Kay Graham of the Washington Post and bridge champion Sharon Osberg. Possibly sleeping with all of them. Schroeder does leave that to your imagination.

You will learn that Buffett is a wimpy kind of guy, who hates personal confrontation, but somehow ends up firing people throughout his career.You will learn that Buffett was much more involved in many companies than the general impression he gives of being hands-off, but that at other times he has been very much hands off.

When John Gutfreund was replaced at Salomon Brothers during the height of the Treasury Bond scandal, Buffett's approach to notifying the new CEO at Salomom was unique. The new CEO would be Deryck Maughan. Buffett called Maughan away from a group that had been waiting on the trading floor to hear news of what was going to happen. He pulled Maughan into an elevator and said to him, "You've been tagged". And then with no further conversation, he took Muaghan down the escalator into a press conference. Following the press conference, Maughan asked Buffett if there was any particular direction he wanted to take the firm and Buffett responded with a "No", and then Buffett hopped into a taxi.

As for investors, and those who want to learn more about how Buffett operates from an investment perspective, there are plenty of nuggets of fascinating new information, but you are going to have to pick those out from the massive amounts of detail about other aspects of Buffett's life. But for the serious investor, I think it is very much worth the effort, though effort it will be.

One chapter that is titled, Winter, I recommend skipping, unless you are into minute details of the surgeries and radiation that Buffet's wife Susie had to go through to battle her cancer. As with everything else in the book, it is detailed. You will learn in detail about the tube that was inserted down her nose, about the fact that she would possibly lose all of her taste buds, that doctors marked on her arm where they would take parts to replace sections of her mouth that they were removing. You will learn how the tube gets clogged up, the color of the goo etc. It's a chapter full of this kind of detail. If there were any investment tips in the second half of this chapter I missed them, since I am not into such gory details and skipped the second half of the chapter.

As for why, with so much detail, I write that this is a near full biography and not complete, I think Schroeder pulled her punch in at least one situation. There was a deal that went down where Buffett spent x millions to buy a company from a friend of Buffett's and Buffett's partner Charlie Munger that saved the friend's butt big time.

Indeed, one book about Buffett, that I'm guessing I probably read it about ten years ago (and I can't seem to find which one) suggested that Buffett spent the millions on the purchase even though the business wasn't worth it, just to bail the friend out.

In Schroeder's book that carries so much detail that we learn the color of the goo that was in the tube of Buffett's wife's nose, the fact that this deal isn't even mentioned is odd, to say the least. Punch pulled? I think so.

That said, Schroeder has done a Herculean job of painting a near-full picture of Buffett. It is an incredibly thorough biography. She clearly was able to get Buffett to open up in a way that few people would. I'm sure Buffett has to be thinking now, "Why did I tell her all that?"

It has to be ranked, as a biography, as one of the best biographies ever written. For investors, it will take a reading or two times (at least)to find Buffett's many pearls of investment wisdom contained in this book. I generally don't read with a highlighter, but for investors, this is certainly something you would want to do with this book, so that you can highlight, for review, the investment book within the complete biography.

Juicy Cameo Roles for Warren Buffett and Blago's Wife in Criminal Complaint Against Blago

Gawker finds this in the criminal complaint:

ROD BLAGOJEVICH said that the consultants (Advisor B and another consultant are believed to be on the call at that time) are telling him that he has to "suck it up" for two years and do nothing and give this "motherfucker [i.e., Obama] his senator. Fuck him. For nothing? Fuck him." ROD BLAGOJEVICH says. He[ states that he will put "[Senate Candidate 4]" in the Senate "before just give fucking [Senate Candidate 1] a fucking Senate seat and I don't get anything."

According to the affidavit, he "suggested [that Obama's people start] a 501(c)(4) organization (a non-profit organization that may engage in political activity and lobbying) and getting 'his (believed to be the President-elect's) friend Warren Buffett or some of those guys to help us on something like that.'

The Business Sheet found this:

In another call between ROD BLAGOJEVICH and Deputy Governor A that occurred a short time later on November 3, 2008, ROD BLAGOJEVICH and Deputy Governor A discussed an editorial from the Chicago Tribune regarding the endorsement of
Michael Madigan and calling for a committee to consider impeaching ROD BLAGOJEVICH.

During the call, ROD BLAGOJEVICH's wife can be heard in the
background telling ROD BLAGOJEVICH to tell Deputy Governor A 'to hold up that
fucking Cubs shit. . . fuck them.' [Note: The Tribune owns the Cubs and was looking for public money] ROD BLAGOJEVICH asked Deputy Governor A what
he thinks of his wife's idea.

Deputy Governor A stated that there is a part of what ROD BLAGOJEVICH's wife said that he 'agree[s] with.' Deputy Governor A told ROD BLAGOJEVICH that Tribune Owner will say that he does not have anything to do with the editorials, 'but I would tell him, look, if you want to get your Cubs thing done get rid of this Tribune.' Later, ROD BLAGOJEVICH's wife got on the phone and, during the continuing discussion of the critical Tribune editorials, stated that Tribune Owner can 'just fire' the writers because Tribune Owner owns the Tribune. ROD BLAGOJEVICH's wife stated that if Tribune Owner's papers were hurting his business, Tribune Owner would do something about the editorial board.

Gawker also reports:

Obama's team knew all along that Blagojevich was under federal investigation, and so therefore they were wary of actually giving him anything. They couldn't know the arrest would come before inauguration, but everyone knew it had to come eventually (unless Obama fired Patrick Fitzgerald as soon as he took office, which would've been a public relations nightmare). So while Rod still controlled (and still does control!) who gets the seat, there was a limit to what Obama's team would do to get their person appointed.

Who Knew? Steve Jobs Is An Original Goldbug

I'm working my way through Snowball, the 960 page biography of Warren Buffett written by Alice Schroeder, and came upon this bit of interesting information on page 470:

A brash new trustee at Grinnell[College], Steve Jobs...tried to talk the investment committee into selling all stocks and buying gold...the investment committee demurred, and Grinnell did not buy gold.

It appears Jobs' recommendation occurred in mid-1979. At the time, gold was trading between $247 and $340. And, of course, n early-1980, spot gold traded as high as $830 per ounce.

It would have been one hell of a trade if Grinnell bought the gold and then sold into the strength the gold price displayed in early-1980.

Buffett and Jobs were both on the Board of Grinnell.

Fear At Berkshire Hathaway?

A trader friend reports that Berkshire Hathaway's cost for credit default swaps (CDS) has soared to $475,000 per $10 million which was higher than Citicorp’s at it's peak fear period, which was about $380,000 per $10 million.

This is still isn't red light danger level for Warren Buffett's holding company, but is indicative of nervousness, and awareness that he may be holding some toxic derivatives.

Warren Buffett and Women: Case Closed

In August, I wrote:

Warren Buffett prefers being interviewed by women. I can't think of a time that Buffett has sat down for a major television interview by a male. It's the same with major magazine articles, always women. When Buffett wanted research coverage for Berkshire Hatahway in the late 1990's, he turned to a female.

His latest favorite at CNBC appears to be Becky Quick. Quick travelled with Buffett to Asia. When it comes to print, Janet Lowe at Fortune has been his long time choice for interviews. For the research report in the 1990's he called upon Alice Schroeder. And, now, when he has decided to give additional access for a biography, he gave that access to a woman. The same Alice Schroeder he cooperated with for the research report.

I followed this up with a comment in September:

...word is out that another Buffett biography is due out in January 2009. Same modus operandi, Buffett co-operating with a woman. This time Janet Tavakoli.

Tavakoli wrote me earlier this week and said that if Buffett gave her preferential treatment it wasn't because of her gender.

I responded to Tavakoli that I wanted to make it clear that I was not questioning the competency of the women he chooses to work with, but that I continued to believe that he preferred working with women rather than men, when it comes to public type appearances.

So here's the latest (and hopefully final) installment in this saga. I have just started reading the great biography of Buffett by Schroeder (She gets Buffett to open up to a remarkable degree) and this is what I found on pages 178-9:

The more time he spent with Susie [Buffett's first wife]and her family, the more they influenced him

"Warren," said Doc Thompson [Buffett's father-in-law], who handed down advice with the authority of the Sermon on the Mount, "always surround yourself with women. They're more loyal and they work harder. His son-in-law hardly needed to be told that.

I rest my case.

Note: In an email exchange, Tavakoli notes that Buffett has been interviewed by Charlie Rose and Brian Sullivan. I can't comment about the Sullivan interview(s) as I have never seen them, and, for that matter, never seen any Sullivan interview. However, as far as Rose goes. His show is among my favorites, but he is the most gentle interviewer on television, which probably does more to prove my point than anything.

On Warren Buffett and Women

Janet Tavakoli's new book Dear Mr. Buffett: What An Investor Learns 1,269 Miles from Wall Street is due out January 9. In September, I wrote:

Last week, we noted that a new book on Warren Buffett was due out, The Snowball: Warren Buffett and the Business of Life.

In our post we noted that Buffett gave unique access to the author, Alice Schroeder, and seemed to give preference to women over men when it came to interviews and the like.

Now word is out that another Buffett biography is due out in January 2009. Same modus operandi, Buffett co-operating with a woman. This time Janet Tavakoli.

Tavakoli emailed me this morning saying that if Buffett gave her preferential treatment it wasn't because of her gender. Now although I still do believe Buffett favors women in these type situations, I do want to make one thing clear. I am not saying that because Buffett chooses to deal with women in these situations that these women are somehow less competent than men. In fact, I have just started reading Snowball, and not only is the author, Alice Schroeder, a talented writer, I marvel at her ability to get Buffett to open up about himself. Forget waterboarding. Schroeder knows how to get it done.

As for Tavakoli, this is quite an impressive resume.

The Early Warren Buffett

I still haven't gotten around to reading the near 1,000 page Warren Buffett biography, The Snowball, though it's on my reading list.

However, I had a few minutes to kill yesterday, before a meeting, and wandered into a bookstore and happened upon the book. Glancing through the early chapters, I found a hilarious account of a young Buffett attempting to become a weight lifter.

Then there are tales about another part of the young Warren Buffett that have never been public before.

Buffett, along with a buddy,create slugs to get sodas out of vending machines for free. Author Alice Schroeder quotes him as saying his philosophy was "cash in, slugs out".

There was also a reference to some type of shady moves by Buffett at Sears, but, in the time I had, I couldn't find the story to which the reference was made. Stay tuned.

The Obama Press Conference: John Maynard Keynes and the Oligarchs Are Alive and Well

John Maynard Keynes and Oligarchs appear to be alive, well and ready for the Obama Administration.

In Barack Obama's first press conference, since winning the presidential election, Obama sounded like a typical big spending Democrat. In opening remarks, he called for a "rescue package" for the middle class, unemployment extensions and other fiscal stimulus. He also said that something had to be done for the automobile industry since it is "the backbone of the country." Somewhere, John Maynard Keynes and Marx are blushing.

Obama did not address how any of these proposals would be paid for.

I took special note of some of the members of his "economic transition advisory team", most of whom stood behind him as he promised to do vasts sums more spending than Imelda Marcos ever did during a good shoe shopping trip to New York City. It was a politically correct mixed crowd that included many women, a Latino and even another African-American, interspersed with oligarchs. Just what you need to fight a downturn in the economy, a politically correct group and oligarchs.

The oligarchs we were told included Warren Buffett (who, golly shucks, usually just represents himself) and Robert Rubin (former Goldman Sachs CEO, now running the Rubin/Citigroup wing of Goldman),but both failed to appear in chorus line fashion behind Obama for the press conference, as did the politically correct and other oligarchs and oligarch representatives.

At the press conference chorus line, the towering Paul Volcker was there, who has been a career long Rockefeller operative. The tiny Robert Reich was there, who was most likely invited as a reward for his regular bashing, on his blog, of Hillary, during the primaries.

An oligarch stepped a bit out of the shadows for the chorus line, Chicago-based Penny Pritzker, who was an early Obama backer, was there. Pritzker served as Obama's National Finance Chair. She and her husband hosted a $28,500 per plate fundraiser for Obama's campaign in Chicago with Warren Buffett and his wife, and Obama advisor Valerie Jarrett. She is also a member of the Council on Foreign Relations. She is 135th richest person on the Forbes 400 list of "America's wealthiest," with an estimated net worth of $2.8 billion US. If one was forced to come up with one name that Obama answers to, Penny Pritzker would not be a bad choice. They are on each others cell phone speed dials, guaranteed.

The Chicago Political Machine was well represented by Mayor Richard Daley's brother William, who also is a member of the executive committee at JP Morgan Chase.

Google's Chairman Eric Schmidt was part of the chorus line.

Much to my surprise, Los Angeles Mayor Antonio Villaraigosa was the token Latino. Readers will recall I had a Q & non-A encounter with the mayor, only a few weeks back.

In short, no one in this group strikes me as the type that understands Say's Law, never mind the business cycle. They all are very good, though, at protecting the very powerful interests that they are aligned with, nothing else. The oligarchs are sleeping very well tonight.

Alert: Obama Press Conference

US President-elect Barack Obama and Vice President-elect Joe Biden will hold a news conference at 2:30 EST on Friday after meeting with their team of economic advisers to discuss the transition to the White House.

Obama and Biden will be joined by economic advisers, including former Treasury Secretaries Lawrence Summers and Robert Rubin, former Chairman of the Federal Reserve Paul Volcker, former Securities and Exchange Commissioner William Donaldson and several others. Berkshire Hathaway Chairman Warren Buffett will participate via phone.

All major networks are expected to carry the press conference live.

Obama's Core Belief System

The soundbites off the release of the Obama Chicago Public Radio interview, do not surprise U.S. News and World Report's James Pethokoukis:

This should be a Saturday Night Live sketch. Use the court to redistribute wealth? Really? The Warren court was not radical? Really? Anyone could craft a theoretical justification to use the court to spread the wealth? Really? This all strikes me as highly weird...Keep in mind, now, that every Obama economic adviser I can think of—Warren Buffett, Austan Goolsbee, Jason Furman, Robert Rubin, Lawrence Summers, Jared Bernstein—thinks that we need higher income and investment taxes to deal with income inequality and that tax rates would pretty much have to double before they would hurt the economy. So Obama's comments reflect a core belief system that he's apparently held for years and continues to hold.

Will we yearn for the days gone by when only the banks were nationalized and Paulson stuffed billions into the pockets of his crony buddies?

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.

Barack Obama, Paul Volcker and Warren Buffett

It appears that Paul Volcker will be a major influence in a Barack Obama Administration.

WSJ this morning has a front page article by WSJ reporter Monica Langley describing the development of their relationship. The Volcker connection should calm markets a bit if there is an Obama Administration, since he seems to be taking advice from Volcker and Warren Buffett. Volcker is even more respected on the Street than Buffett.

Volcker, however, as I pointed out recently, despite his image as an inflation slayer, is an inflationist and interventionist. Buffett is pretty much out of the same mold. He has supported the recent moves by Treasury Secretary Paulson and Fed Chairman Bernanke. Curiously, while supporting Treasury and Fed moves, Buffett in his recent WSJ piece even pointed out the inflationary ramifications of the policy:

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.

Another Billionaire Bit By The Economic Squeeze

We recently reported on the possible liquidation by 85 year old billionaire Sumner Redstone of parts of his huge portfolio as a result of current financial conditions.

Although not in as tight a position, 91 year old billionaire Kirk Kerkorian has sold part of his stake in the Ford Motor Company and may divest his remaining shares

The Tracinda Corporation, Kerkorian’s investment company, said this morning that it sold 7.3 million shares of Ford on Monday at a huge loss and intended to further reduce its remaining 6.09 percent stake.

In a statement, Tracinda said that “current economic and market conditions” and other investment opportunities — in gambling and energy — led to its decision on Ford.

“Tracinda also stated that it intends to further reduce its holdings in Ford common stock,” the company said. “Including the possible sale of all of its remaining 133.5 million shares, depending on market conditions and available sales prices.”

When you get the likes of Redstone and Kerkorian taking huge hits, you know this is a serious downturn. These guys have seen a lot, but they obviously aren't up to date on business cycle theory, or they would have been protecting themselves in July at much higher prices.

Warren Buffett Contradictions

I have always suspected that Warren Buffett often has an agenda when he speaks to the public. But the man is tough to nail down on anything, given his Golly Gee public persona. He's sharp and rarely slips up. He slipped last week.

In his NYT article last week urging Americans to buy stocks, he wrote:

I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds.

He even got a little technical about it:

(This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.)

Which appears to be a problem in the fact department, since in November, 2000 the LA Times reported this:

Warren Buffett, the billionaire investor who caused a stir last year when he bought a big stake in tiny Bell Industries Inc., sparked a rally in Bell’s stock and then quickly sold out for a handsome profit, has once again bought a sizable position in the El Segundo company–again sending its stock sharply higher.

Buffett bought 442,200 shares, or 5.1%, of Bell’s common stock outstanding, according to a filing with the Securities and Exchange Commission. In response Wednesday, Bell’s thinly traded stock jumped $1.06 a share to close at $3.13 on the American Stock Exchange.

Buffett–who controls Berkshire Hathaway Inc., an Omaha, Neb.-based holding company for his investments and operating companies–once again bought the Bell stock with his own money, not Hathaway’s. And as investors learned the last time, that’s an important distinction for anyone evaluating Buffett’s interest in Bell.

The Times article goes on to say:

Despite Berkshire Hathaway’s record of patiently holding stocks, Buffett himself often makes small, quick purchases of stocks with his own money to generate income, according to people familiar with his investment habits. That’s especially true if he’s confident of generating a low-risk, sizable return in short order, they said.

This seems consistent with reports in one or more biographies (I don't recall which) and is probably accurate. His trading in Bell Industries is a fact backed up by SEC filings.

I have long suspected Buffett is operating with cards he isn't showing. He just dropped one on the floor. In my book, he is just smooth operator in the oligarchy.

Cheerleader Warren Buffett Warns On Inflation

Warren Buffett, whom I consider to be part of the new American Oligarch class, has written an Op-Ed piece that is published today at NYT.

In the piece, Buffett takes on the role of cheerleader for the American stock market. He tells us that for the first time he is buying stocks for his personal account.

Buffett's argument in favor of buying stocks is that in the long run they always go up--and he has the data from the 1930's to date to prove his contention. But the one thing Buffett does not point out in his article is that the current United States is much different from the United States of the 1930's to approximately the year 2000. During this period the United States was a growing, sprawling Empire. But, current day America is different. It is stretched thin. The Empire has debt owed to nations around the world. It has domestic obligations in the form of Social Security and Medicare that will soon haunt. And regulations grow on the creative business sector on a daily basis. This isn't the America Warren Buffett grew up in. It is unlikely the stock market will perform the same.

This does not mean there will not be opportunities for investors, but they will be different kinds of opportunities. Those who are quick to identify changes in macro-economic trends and find the stocks that benefit from those changes in trends will do extremely well. Those who truly dig into the fundamentals of companies and find the niche operators that outperform in the overall oppressive environment will also do well.

This does not mean that stocks in general won't go up, it will be a roller coaster period for them because of very strong inflation. The trick will be though to find the stocks that outperform the coming inflation.

Buffett understands very well that this inflation is ahead. He writes in his article:

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.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree.

Truer words have never been written by an Oligarch to the general public.

A Fascinating Warren Buffett Interview

The $700 Billion Paulson Plan forced many oligarchs on to television, to promote the bill. Carlyle Group's David Rubenstein appeared on CNBC and Warren Buffett sat down for a one-hour interview with Charlie Rose.

Despite the fact that Buffett has gone over to the dark side by, among other things, aggressively pushing for the Paulson Plan, while he will personally benefit, most obviously, through his recent multi-billion dollar investments in Goldman Sachs and General Electric, he is still a great investor and there are some fascinating observations he makes during the interview.

First, one has to be amazed at Buffett's command of facts. You can see from this understanding of facts part of why he is a great investor. He simply knows more than most investors.

During the interview, he mentioned, for example, that the crisis to date has resulted in the shifting of bank deposits from one institution to another, to the tune of 8% of all bank deposits. Who else in the world knows it was an 8% shift? In passing, he also off the top of his head mentions these data points: The real estate market is roughly a $20 trillion in size, as is the stock market. That Americans import $2 billion per day more in goods than are exported from the U.S. and that at the time of the interview Treasury Bills were yielding .2%.

On another note, he does mention that all the bailout activities will result in higher inflation. A very important warning.

It can be seen that he is also a great communicator. In his easy going "Farmer Joe" posture, he is disarming in getting his message across.It is even difficult to pick up the purpose of the interview. That is until the very end of the interview when Charlie Rose recaps key points, which all happen to be about why the Paulson Plan is a good thing. Rose knows, of course, that he has to make clear the points Buffett really wants to get across, if he ever wants to see Buffett on his show again.

A few other points from the interview.

Buffett doesn't seem to understand business cycle theory, even though he mentions that there are slowdowns in the auto, furniture and jewelry businesses--all in the capital goods area (High end jewelery is a capital good). All of which would be expected given Austrian Business Cycle Theory But, Buffett fails to make the point that these sectors are where weaknesses in the economy would be expected during a downturn.

Buffett also gets on his soap box re: his call for higher capital gains taxes, which clearly indicates how little, at some level, he understands about the importance of capital goods in raising a country's standard of living.

Also note that Buffett emphasises that any mortgages purchased should be at market prices, not face value, which means in no way does Buffett see this as a bailout for banks in trouble. The mysterious goal of unfreezing junk paper as justification for Paulson's $700 billion request remains intact.

The Oligarchs Win...

...not exactly surprising. The Paulson Plan has passed the House and has been signed by GW.

Other than to emphasize that billionaire Warren Buffett, one of the wealthiest men in the world, will likely be a major beneficiary of this bill, I have nothing new to add to what I have already posted on the topic:

Mr. X Has Read the Senate Version of the Paulson Plan...

The Very Clueless New York Times

Warren Buffett As Fear Monger...

Buffett Boosts His Oligarch Credentials, Again

FDIC Insurance Increase: Ground Cover for Paulson Bill

The Paulson Plan Is Dissed, What Next?

The Paulson Plan And The Rise Of The American Oligarch Class

THE BIG LIE: The Supposed Paulson 'Bailout' Plan

The Bad News Bailout

Henry Paulson, American Oligarch

The New Warren Buffet Book, Snowball, Is Out

I stopped into a bookstore this afternoon and noticed the Alice Schroeder biography of Warren Buffett, Snowball, is out. The book is 960 pages. My plate is quite full right now so it is going to be sometime before I get around to reading a 960 page book.

I did skim through the book, however, and my quick impression is that it is a full biography of Buffett and not by any means an investment primer, or an "investment secrets of Warren Buffett revealed" book.

That said, the book appears to be very thorough about the pre-Oligarch Buffett. The pictures in the book alone, indicate the access Schroder must have had to Buffett. They are not the same tired old pics. Schroeder is former research analyst and my guess is the book is packed with anecdotes providing insight into Buffett the investor. On first glance, it probably is a book that will be required reading for any serious investor in common stocks.

I plan to write a full review of the book once I read it, but, again, that will be sometime down the road..

-Robert Wenzel