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Posts Tagged ‘Warren Buffett’

Steve FrankOn the September 30, 2012 episode of Exposing Faux Capitalism with Jason Erb, I interviewed Steve Frank of CAPoliticalNews.com, and in the second hour, I covered the following articles:

1) Warren Buffett: “The decision to make Tim Geithner the Secretary of Treasury was a terrific decision.”

2) Warren Buffett’s inconsistencies

3) Pumping up gold is good for the Ludwig von Mises Institute’s bottom line with their nearly $3 million in gold bars

4) Lee Rogers’ last Live Free or Die Radio broadcast: December 21, 2012

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President Barack Obama and Warren Buffett in t...

I didn’t have as much patience as some did, and tuned out near the beginning when he talked about spending money to hire teachers and police officers, and instructed the States that they need to make high school mandatory until age 18.

Here in Canada, our Prime Minister wouldn’t dare get involved in the provincial issue of education to the degree Obama did.

He indirectly brought up Warren Buffett, who pays a lower effective tax rate that his secretary. I wrote an article in 2010 about Buffett’s three major inconsistencies. He said derivatives are weapons of financial mass destruction, yet subjected his shareholders to billions in losses from them, he said you shouldn’t buy banks, since they can cook their books 10 ways from Sunday, yet he bought a big share in Goldman Sachs and then Bank of America, and he said not to invest in capital-intensive businesses, only to make his largest-ever investment in a highly capital-intensive railroad.

Since then, Buffett has claimed that making Tim Geithner the Treasury Secretary was an excellent decision, and that Bernanke did a great job since the 2008 financial collapse, and deserved his reappointment.

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Combination of four currency symbols

Warren Buffett correctly points out that he pays less tax as a percentage of his income than his secretary does, as a result of her receiving nearly all of her income as personal income, while Buffett receives most of his as capital gains and dividends.

Thanks to the Bush tax cuts that were extended by President Obama, the man who promised change, long-term capital gains and dividends are taxed at only 15%, compared to a top rate of 35% for personal income over $200,000.

This is portrayed by the business community as a good thing, and even by some people making far less than $200k a year, with the justification that it’s important to promote investment.

I used to have the view that the government providing a preferential incentive for investing was a good thing, until I gained a better understanding of the proper role of government, and how preferential government incentives can lead to artificial boom-and-bust cycles.

You have three options with your money: You can either spend it, save it, or invest it.

Is spending a lot of your new money ever a good thing compared to investing it? Yes, for example, in the case of high inflation and low interest rates — as is increasingly becoming the case in 2011.

But why bother spending your money now when you can get a big tax advantage on dividends and capital gains, and can even claim any interest paid on borrowed money for such investments as a tax deduction?

Instead of spending your money and possibly putting more people back to work, more money is given to companies so that the executives at the top can award themselves more in stock options and bonuses, and hedge fund managers can make a killing off of manipulating the market, as Jim Cramer candidly admits.

If the market feels that more spending or saving is the order of the day, what business is it of government to create an artificial demand for more investment?

The problem of over-investment is acutely seen with so many would-be retirees who are dependent on their investments for retirement, and got a rude awakening in late 2008 when they depended on a government bailout in order to prop up the market back to its pre-2008 crash levels. Had they not been given an artificial incentive to invest, many would’ve made savings more of a priority, and put their money into less risky places than in a housing market propped up by junk mortgages sold as triple-A securities, and a stock market propped up by the financial services sector with its fraudulent financial vehicles.

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Warren Buffett speaking to a group of students...

Warren Buffett showed his bankster and Wall Street insider sympathies on the September 30, 2011 episode of Charlie Rose.

At 26:54, he said:

The decision to make Tim Geithner the Secretary of Treasury was a terrific decision.

Yes, that’s correct. He’s talking about Tim Geithner, the guy became U.S. Treasury Secretary despite not even being able to figure out TurboTax, the guy who made Chinese students laugh when he tried talking up the dollar, the guy who issued a debt limit threat, and the guy who claimed the U.S. would never lose its triple-A credit rating a year before it did just that.

Seriously, Warren? Are you telling me that kind of track record got your company to where it is today? Oh that’s right — you turned your back on the principles that made your company great, as I outlined in this article.

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Ludwig von Mises

From today’s LewRockwell.com article, The Duplicity of Warren Buffett, Eric Englund wrote:

Although far from legendary, Warren Buffett’s cognitive dissonance, regarding taxes, is maddening. On the one hand, he celebrates the Sixteenth Amendment and brags about the billions of dollars Berkshire Hathaway pays in federal income taxes – after all, Buffett is self-described as Uncle Sam’s “grateful nephew.” Yet, on the other hand, he basically refuses to lend money to Uncle Sam for fear that the federal government will pay back the loans with cheaper dollars; which is, as Ron Paul describes, the inflation tax.

What did Ludwig von Mises say about inflation as a tax?

People sometimes call inflation a special way of “taxing” a country’s citizens. This is a dangerous opinion. And it is wholly untrue. Inflation is not a method of taxation, but an alternative for taxation.

For more on Warren Buffett, see my article, Warren Buffett’s inconsistencies.

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New York stock market index

When I applied for a pre-approved mortgage at the height of the financial crisis in early 2009, the bank asked for the current market value of my assets.

At the same time, many U.S. banks were marking their assets to model, meaning they could decide what to value them at based on a model they created.

While the very banks that marked their assets up based on pre-crash levels  to sell mortgages to customers on the basis of having the collateral, they expected something different from their customers. Namely, the current market value of their assets, which were mostly highly depreciated relative to a year prior.

The world’s richest man as of the end of 2010, Warren Buffett, before he turned his back on his principles, wrote in 2002:

In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.

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I saw this article by David Olive of the Toronto Star today that highlights Warren Buffett’s inconsistencies between his investment approach  in principle, and in practice.

Some highlights are:

  • He said not to buy banks, because of their ability to  doctor their numbers so much, as we saw with the financial meltdown of 2007-2009 and beyond, yet is a major investor in several banks.
  • He said not to make acquisitions with undervalued company stock, yet did exactly that with his company’s largest ever acquisition of Burlington Northern Santa Fe, for $26.4 billion.
  • He called financial derivatives “weapons of financial mass destruction,” yet invested in them heavily and subjected shareholders to $4.6 billion in associated losses in 2008.

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