Paulson vs. Buffett

By James Kwak

Bloomberg has a new story out comparing the investment terms achieved by TARP with those achieved by Warren Buffett when he invested $5 billion in Goldman (GS) back in September. The results aren’t pretty for the U.S. taxpayer: The government received warrants worth $13.8 billion in connection with its 25 largest equity injections; under the terms Buffett got from Goldman, those warrants would be worth $130.8 billion. (The calculations were done using the Black-Scholes option pricing formula, which has its critics, but which I think is still a good way of estimating the relative difference between similar options.) That’s on top of the fact that TARP is getting a lower interest rate (5%) on its preferred stock investments than is Buffett (10%), which costs taxpayers $48 billion in aggregate over 5 years, according to Bloomberg.

The difference in the value of the warrants themselves is due to two factors: (1) Treasury got warrants for a much smaller percentage of the initial investment amount; and (2) those warrants are at a higher strike price - the average price over the 20 days prior to investment, while Buffett got a discount to market price on the date of investment.

The comparison isn’t a new one - we recommended that TARP emulate Buffett back in October - but Bloomberg’s analysis has put the performance gap in striking perspective. Simon has a quote in the article, using the word “egregious,” but the really harsh words came from Nobel prize-winner economist Joseph Stiglitz, who said, “Paulson said he had to make it attractive to banks, which is code for ‘I’m going to give money away,’” and “If Paulson was still an employee of Goldman Sachs and he’d done this deal, he would have been fired.”

Now, to be fair, there are some plausible defenses of TARP. One is that on that fateful October day when Henry Paulson summoned the CEOs of nine major banks to Washington, he needed all of them to accept the deal on the spot, so the terms could not be too punitive. While that may be the case, it doesn’t explain why bailouts since then have to be equally generous (since the program is optional, after all) - culminating in the GMAC bailout, where the “warrant” is just the option for the government to lend $250 million more at a slightly higher interest rate.

Another defense I have heard is that the plan needed to leave the banks in a situation where they could attract private capital. I have only limited sympathy for this defense, because it’s not as if private equity funds are lining up to invest in Citigroup (or any other major bank), even after two rounds of generous bailouts. Finally, there is the oft-repeated mantra that the country doesn’t want the government to nationalize banks, and larger warrants would lead to effective government ownership. Here, I think that the clever minds in Washington could come up with a trust-like structure to shield day-to-day operations from too much government meddling (some oversight is arguably a good thing anyway), and a concrete plan for divesting those ownership stakes would go a long way to defusing any worries about creeping socialism.

On balance, I think it’s hard to argue that TARP needed to be as generous to banks and their shareholders as it has been. Broadly speaking, TARP recipients have fallen into two categories: those who didn’t need the capital but took it because the terms were good, and those who really needed it (like GMAC). If the terms were tougher, the former might not have taken them, but that would be fine; the latter still would have taken the money, because the government was the only place they could get it.

So the question remains: Why did Henry Paulson, former CEO of the most respected investment bank on the planet, strike such bad deals for the American taxpayer? I don’t know the man, but I strongly doubt that it was because of any conscious desire to enrich his colleagues. More likely, I suspect it was an unconcious product of the conventional wisdom, so strongly rooted these last twenty years, that government involvement is bad and should be minimized at all costs - even to the point of avoiding any possibility that the taxpayer might make money in dealings with private-company shareholders.

Comments

[Robert Perrego:]

Hey Ricard - I thought you were right about your Paulson comment but man do the Buffet groupies get testy.

Do you dispute Buffet preaches one way to invest meanwhile he gets deals no one else can? That is a bit hypocritical especially when he violates his own 'rules' and he tells us we should follow his doctrine. No thanx - I do just fine trading.

Jan 09 06:20 PM

[Robert Perrego:]

hey ricard the only long investment I have held since April is the GLD - every other trade this year was short side except until the last week with a little bottom picking. figure it out.

Jan 09 06:24 PM

[Robert Perrego:]

check out the post I had here on SeekingAlpha - called a bottom in the GLD - check the chart. nailed it! proof - take a look. article archives have it there plain as day.

Jan 09 06:27 PM

[Ricard:]

There is nothing in what Buffett has done that should encourage an astute investor to buy GS or GE common when he consummated those deals. The deals he got were special, just like the bailout banks are getting are special. He has explicitly lamented that the public would not be able to get the deal he got on the preferred, much like how he found reason to dispute our current tax code, given that he pays less tax than his employees do as a percentage of income. He's not telling anyone that they need to follow his doctrine - the fact that you feel compelled to do so is probably due to his exemplary investment performance. He's rather tight-lipped about his investments, especially in the short term, which makes sense, unlike the crap that Cramer spews out. He's even gone so far as to explicitly tell folks for years that BRKA will not come close to achieving the performance it has historically achieved, one reason being the law of large numbers. I find no hypocrisy here, except for what is built into the system. I'm not at all sure what you have against him, really. Good luck with your trading.


On Jan 09 06:20 PM Robert Perrego wrote:

> Hey Ricard - I thought you were right about your Paulson comment
> but man do the Buffet groupies get testy.
>
> Do you dispute Buffet preaches one way to invest meanwhile he gets
> deals no one else can? That is a bit hypocritical especially when
> he violates his own 'rules' and he tells us we should follow his
> doctrine. No thanx - I do just fine trading.

Jan 09 06:34 PM

[John Lounsbury:]

Robert Perrego - - -

You would have influenced many more readers to think and have gotten a much more meaningful comment stream response if you had only said what you did in the comment four comments above that starts: "Before everyone gets to worked up and crazy here I made 3 underlying points..."

You had some significant points to make and your summary makes them. All the other comments distract more than they help your case.

Jan 09 06:45 PM

[Robert Perrego:]

Hey John - you are correct. Thanx for your input.

Semantics got me sidetracked. I do believe Goldman will not trade north of 116 for a very very long time mostly due to their de-leveraging down to 11x as per banking regulations. Leverage blows profits sky high and down at 11x they will not see their stock go north - one exception - they gain a lot of market share with the demise of other b/d's. There is opportunity in that space which makes me that much more keen to watch Raymond James and their smaller cap brethren who did not get wiped out in the CMO and CDS mess.

If I were warren I would sell those warrants to anyone that would give me near the money Ricard seems to think they are worth. I believe them worthless.

The whole sea change on wall street has wiped out many business lines for the b/d's so they need to re-invent themselves and this will take time and right now the market does not seem to want to assign a higher P/E to b/d's.

As far as warren goes - I just get irked by him pontificating what everyone else should do while he has many built in advantages and runs his marketing/image machine and makes good money by reputation alone - he did earn it but don't tell me your method is better than mine while comparing apples to oranges. I started day-trading in 1998 at a pro shop and moved over 200,000 shares a day some days. I put up $10,000 and had taken well over $1 million out of the market by 2004. That is a pretty solid return and now I position trade my money while pursuing other endeavors and turned a measly 4.2 percentage points profit in 2008 - which is better than getting smoked for 30+ percent I guess.

That GLD trade I posted here put me over the top - and I bought calls and the ETF - leveraged and as they say - gold itself pays no dividends, has no fundamentals in and of itself and is not a value play.

But it worked.

Jan 09 07:41 PM

[a fellow bo...:]

Too bad Paulson didn't use the same sense of urgency propping up the value of american's homes as he did his wall street buddies

Jan 09 08:45 PM

[Ricard:]

I think the key is to show some respect for people with a proven track record. There isn't much reason to go out and ruthlessly trash someone's reputation just because they earned it. Perhaps one day you will earn yours, Robert, but it took Buffett more than 40 years to earn that 20% average yoy return. You have 39 more to go. Remember this day too, because if you do earn it, you'll have people like you to deal with in the future. I hope you are more civil then.

BTW, I don't own BRKA, and neither am I interested in buying, even if it dips precipitously. It's rather expensive right now based on Graham's principles, probably because of the Buffett premium as you note, and Buffett himself does not have many years left. Now do I go out and show the level of discourtesy towards Buffett that you have shown? You could have been talking about your sick cousin in New York, and I still would have thought less of you, given how much of a tirade you displayed. It was your manner that was offensive, much more than the facts or point of view you displayed.

Lastly, people laughed hard at Buffett throughout 1999, called him outdated, and a relic left for the history books, sometimes with even less civility than what you displayed. They were right on one thing - he made more history from 2000-2002.

Again, good luck with your trading.


On Jan 09 06:45 PM John Lounsbury wrote:

> Robert Perrego - - -
>
> You would have influenced many more readers to think and have gotten
> a much more meaningful comment stream response if you had only said
> what you did in the comment four comments above that starts: "Before
> everyone gets to worked up and crazy here I made 3 underlying points..."

>
>
> You had some significant points to make and your summary makes them.
> All the other comments distract more than they help your case.

>

Jan 09 09:18 PM

[Vox Rationalis:]

Robert Perrego BS, Part 2:

"[T]here are probably 100 companies that have outperformed Berkshire over the past 10 years. Berkshire is up 22% in Ten years..."

First off, you're wrong about the number. According to Yahoo, BRK-A closed at $65,300 on January 8, 1999. This might be difficult math for you, but $94,750 is 45% higher than $65,300. Let's shift it to full calendar years for convenience. For December 31, 1998 to December 31, 2008, BRK Now, that's still a lousy 3.8% annual return. But when compared to the S&P 500, which averaged -1.4% including dividends, it's not so bad, is it? Beating the market at an annual clip of 5.27%?

"...you will find a LOT of stocks that have outperformed Berkshire by a big margin."

Sure. But since we're being arbitrary about the timeframe, how about we make it a 9-year history instead of 10? For the last 9 calendar years, BRK's averaged a 3.3% gain, against the market's -3.2% total annual return. Buffett wins by 6.7% per year. Sure, there will always be those that beat BRK. But over time, he's been better than just about everybody.

"you looking to make money or fawn over the past? Here and now is what pays."

Then why are you bringing up the 10-year period?

“[in the last 10 years] DOW is off under 10% while Berkshire is off over 20%.”

You know, you really should do some research and give things some thought before you go making assertions. First off, you should reinvest the dividends if you’re comparing a dividend-paying company with a non-dividend payer. Apples to apples, you know. Secondly, your numbers are very, very wrong. According to Yahoo, 10 years ago DOW’s price was 95.06 – it’s since split 3-for-1. Assuming a 15% tax on dividends (which is low for the first few years), reinvesting all of the dividends for the last ten years would have turned one share into 3.35 shares. So $95.06 invested in DOW at the close on 1/8/99 would be worth $53.80 today – a decline of 44.3%. BRK was $65,300 on 1/8/99, and closed at $94,750 today. A gain of 45%.

Oops.

Since sometimes you say only the present matters, let's compare BRK against DOW for the last year: BRK – down 27.3%; DOW – down 54.4%.

Oops.

“Warren is a marketing machine…”

“A marketing machine”? Have you ever seen a BRK annual report? On the outside it looks like a high school literary magazine.

“…but I have been trading on wall street for 15 years now and I see through it.”

You trade on Wall Street and got DOW that wrong?

“So I found one - Jim Simons - look him up - beats Warren on a bad day. How many more do you want me to find?”

Don’t care. You found the BEST one. It’s downhill from there. Oh yeah – and you can’t hire Simons to manage your money. You can buy BRK-B in increments just over $3K.

Gee, I hope I got all my numbers right. It’s embarrassing to be very wrong, isn’t it?

DISCLOSURE: Long BRK.

Jan 10 12:47 AM

[Robert Perrego:]

Actually the $10,000 I put down in October 1998 until now shows I have beat warren for 10 years now.

Note that I took money out every year to live off and enjoy which lowers the capital base from which to compute the return and my 'dividends' were not reinvested. I don't have the exact numbers each year, just money out over the time span. As a pro daytrader I was leveraged each day to an extremely high level but money still kept coming out of the market.

100x initial investment over 10 years (even though was above). What does that compute to?


On Jan 09 09:18 PM Ricard wrote:

> I think the key is to show some respect for people with a proven
> track record. There isn't much reason to go out and ruthlessly trash
> someone's reputation just because they earned it. Perhaps one day
> you will earn yours, Robert, but it took Buffett more than 40 years
> to earn that 20% average yoy return. You have 39 more to go. Remember
> this day too, because if you do earn it, you'll have people like
> you to deal with in the future. I hope you are more civil then.
>
>
> BTW, I don't own BRKA, and neither am I interested in buying, even
> if it dips precipitously. It's rather expensive right now based
> on Graham's principles, probably because of the Buffett premium as
> you note, and Buffett himself does not have many years left. Now
> do I go out and show the level of discourtesy towards Buffett that
> you have shown? You could have been talking about your sick cousin
> in New York, and I still would have thought less of you, given how
> much of a tirade you displayed. It was your manner that was offensive,
> much more than the facts or point of view you displayed.
>
> Lastly, people laughed hard at Buffett throughout 1999, called him
> outdated, and a relic left for the history books, sometimes with
> even less civility than what you displayed. They were right on one
> thing - he made more history from 2000-2002.
>
> Again, good luck with your trading.

Jan 10 11:20 AM

[Robert Perrego:]

There are a lot of Hedge Funds that have made better than 4% a year over the past ten years. There are even more individual investors that have beat that 4% return. Simons not only beats Warren's performance each year BUT the short term nature of his trading and use of the short side makes me think he did not get smoked this year and now the return Simos had over the last 20 years compared to warrens last 20 years is not even close.

There is a whole new subject to debate in here concerning the speed at which technologies change and new industries and companies eat at old companies profits in here with a much different and shorter cycle market. Even Google - a relatively new company, is now treading into traditionally profitable areas of Microsoft and eating their lunch - and this is Microsoft, one of the greatest success stories and best technologies in history. This fundamental change in the market and nature of companies could make buy and hold even less effective and more irrelevant in the future.

Warren's marketing machine - I don't care about his annual report cover and was never referencing that. I am talking about the fact that he routinely gets on TV saying trading is inferior and he has even cited the short term hedge fund traders as a problem in the market while the hedge funds that employ that very technique sidestepped this latest calamity almost completely and based on 10 year returns dominate warrens returns by as much as a factor of 10.

All the stories you hear about hedge funds going belly up? Most of those were funds that were in the CDS market and leveraged debt trading to enhance other returns and investments. The hedge funds that were NOT buy and hold or more private equity type strategies and were faster money MADE money short. Many had poor performance through April and May but then cleaned up on the volatility in July, August, September and October on the short side and posted positive returns in 2008 (or at least not crippling returns that destroyed years of positive returns) when combined with years of earlier returns outdistance Warren dramatically.

I know many of these hedge funds and their traders and they have been at it since 2001 and 2002 and some from the mid nineties. I know many day traders that have been beating warrens buy an hold since 1998.

So do these traders and managers get on TV telling you buy and hold is inferior? Criticize Warren?

No - because when you do you get a whole lot of people like you that knee jerk argue and its not worth it. For example see how many people got all fired up here?

More to the point - warren has influenced many people to buy and hold through this latest mess while dumping that philosophy when technical charts broke down in April, May and June would not have their portfolios at levels from years earlier. You lose 50% and that means you have to return 100% to get your money back. Rule #1 in trading - don't lose first, control your losses. Buy and hold is, by nature, in opposition to that rule.

His following has increased and been greatly hurt by his 'marketing machine' which is intended to boost the performance and stature of BRK and his method while a trading and shorter term strategy has greatly outperformed him over the last 10 years owing in most part to the recent market calamity.

The individual investor that clung to their 'value' stocks over the past year are far under-performing those that listened to the market and traded it over the past decade.


On Jan 10 12:47 AM BS Detector wrote:

> Robert Perrego BS, Part 2:
>
> "[T]here are probably 100 companies that have outperformed Berkshire
> over the past 10 years. Berkshire is up 22% in Ten years..."
>
> First off, you're wrong about the number. According to Yahoo, BRK-A
> closed at $65,300 on January 8, 1999. This might be difficult math
> for you, but $94,750 is 45% higher than $65,300. Let's shift it
> to full calendar years for convenience. For December 31, 1998 to
> December 31, 2008, BRK Now, that's still a lousy 3.8% annual return.
> But when compared to the S&P 500, which averaged -1.4% including
> dividends, it's not so bad, is it? Beating the market at an annual
> clip of 5.27%?
>
> "...you will find a LOT of stocks that have outperformed Berkshire
> by a big margin."
>
> Sure. But since we're being arbitrary about the timeframe, how about
> we make it a 9-year history instead of 10? For the last 9 calendar
> years, BRK's averaged a 3.3% gain, against the market's -3.2% total
> annual return. Buffett wins by 6.7% per year. Sure, there will
> always be those that beat BRK. But over time, he's been better than
> just about everybody.
>
> "you looking to make money or fawn over the past? Here and now is
> what pays."
>
> Then why are you bringing up the 10-year period?
>
> “[in the last 10 years] DOW is off under 10% while Berkshire is off
> over 20%.”
>
> You know, you really should do some research and give things some
> thought before you go making assertions. First off, you should reinvest
> the dividends if you’re comparing a dividend-paying company with
> a non-dividend payer. Apples to apples, you know. Secondly, your
> numbers are very, very wrong. According to Yahoo, 10 years ago DOW’s
> price was 95.06 – it’s since split 3-for-1. Assuming a 15% tax on
> dividends (which is low for the first few years), reinvesting all
> of the dividends for the last ten years would have turned one share
> into 3.35 shares. So $95.06 invested in DOW at the close on 1/8/99
> would be worth $53.80 today – a decline of 44.3%. BRK was $65,300
> on 1/8/99, and closed at $94,750 today. A gain of 45%.
>
> Oops.
>
> Since sometimes you say only the present matters, let's compare BRK
> against DOW for the last year: BRK – down 27.3%; DOW – down 54.4%.
>
>
> Oops.
>
> “Warren is a marketing machine…”
>
> “A marketing machine”? Have you ever seen a BRK annual report?
> On the outside it looks like a high school literary magazine. <br/>
>
> “…but I have been trading on wall street for 15 years now and I see
> through it.”
>
> You trade on Wall Street and got DOW that wrong?
>
> “So I found one - Jim Simons - look him up - beats Warren on a bad
> day. How many more do you want me to find?”
>
> Don’t care. You found the BEST one. It’s downhill from there.
> Oh yeah – and you can’t hire Simons to manage your money. You can
> buy BRK-B in increments just over $3K.
>
> Gee, I hope I got all my numbers right. It’s embarrassing to be
> very wrong, isn’t it?
>
> DISCLOSURE: Long BRK.

Jan 10 11:51 AM

[Robert Perrego:]

So if you are long BRK - how are you doing in it? how long have you held it?

DISCLOSURE: Long GLD, small position. Closed all my shorts and other longs. making money.


On Jan 10 11:51 AM Robert Perrego wrote:

> There are a lot of Hedge Funds that have made better than 4% a year
> over the past ten years. There are even more individual investors
> that have beat that 4% return. Simons not only beats Warren's performance
> each year BUT the short term nature of his trading and use of the
> short side makes me think he did not get smoked this year and now
> the return Simos had over the last 20 years compared to warrens last
> 20 years is not even close.
>
> There is a whole new subject to debate in here concerning the speed
> at which technologies change and new industries and companies eat
> at old companies profits in here with a much different and shorter
> cycle market. Even Google - a relatively new company, is now treading
> into traditionally profitable areas of Microsoft and eating their
> lunch - and this is Microsoft, one of the greatest success stories
> and best technologies in history. This fundamental change in the
> market and nature of companies could make buy and hold even less
> effective and more irrelevant in the future.
>
> Warren's marketing machine - I don't care about his annual report
> cover and was never referencing that. I am talking about the fact
> that he routinely gets on TV saying trading is inferior and he has
> even cited the short term hedge fund traders as a problem in the
> market while the hedge funds that employ that very technique sidestepped
> this latest calamity almost completely and based on 10 year returns
> dominate warrens returns by as much as a factor of 10.
>
> All the stories you hear about hedge funds going belly up? Most
> of those were funds that were in the CDS market and leveraged debt
> trading to enhance other returns and investments. The hedge funds
> that were NOT buy and hold or more private equity type strategies
> and were faster money MADE money short. Many had poor performance
> through April and May but then cleaned up on the volatility in July,
> August, September and October on the short side and posted positive
> returns in 2008 (or at least not crippling returns that destroyed
> years of positive returns) when combined with years of earlier returns
> outdistance Warren dramatically.
>
> I know many of these hedge funds and their traders and they have
> been at it since 2001 and 2002 and some from the mid nineties. I
> know many day traders that have been beating warrens buy an hold
> since 1998.
>
> So do these traders and managers get on TV telling you buy and hold
> is inferior? Criticize Warren?
>
> No - because when you do you get a whole lot of people like you that
> knee jerk argue and its not worth it. For example see how many people
> got all fired up here?
>
> More to the point - warren has influenced many people to buy and
> hold through this latest mess while dumping that philosophy when
> technical charts broke down in April, May and June would not have
> their portfolios at levels from years earlier. You lose 50% and
> that means you have to return 100% to get your money back. Rule
> #1 in trading - don't lose first, control your losses. Buy and hold
> is, by nature, in opposition to that rule.
>
> His following has increased and been greatly hurt by his 'marketing
> machine' which is intended to boost the performance and stature of
> BRK and his method while a trading and shorter term strategy has
> greatly outperformed him over the last 10 years owing in most part
> to the recent market calamity.
>
> The individual investor that clung to their 'value' stocks over the
> past year are far under-performing those that listened to the market
> and traded it over the past decade.

Jan 10 12:48 PM

[The Proclaimer:]

Bottom line: Those that bought and held did what was best for the country . The rest were only selfserving opportunist! period.

Jan 10 01:30 PM

[Robert Perrego:]

Best for the country was losing money? the markets efficiency is predicated upon individual entities doing what is best for themselves (as long as no manipulations or law violations) and this makes for an efficient market and accurate pricing. blind dear in the headlights buy and hold is not patriotic - its unwise and inefficient.


On Jan 10 01:30 PM The Proclaimer wrote:

> Bottom line: Those that bought and held did what was best for the
> country . The rest were only selfserving opportunist! period.

Jan 10 01:57 PM

[The Proclaimer:]

Wow! and people think that I am way out there! You have got to be one of the most shallow people on earth to think that way. I guess that is why you run Mr Buffett into the dirt. I only wish that I could leave that much money to Charity. Mark my words Warren Buffett's moves are in the best interest of Our country AND those Charities. I wish that there were more people like him.

Jan 10 02:59 PM

[Robert Perrego:]

I thought trading and investing and this site was about trying to make money in the market. My mistake. I must also be wrong about the theory of the invisible hand and the actual mechanism that sets prices.

By the way - I am some friends are involved in starting a new 501(c)3. the application for 501(c)3 designation is currently in to the IRS after I have spent months working up the business plan and getting others involved.

The market is about making money. stop being some 'Proclaimer - holier than thou fool'

you don't know me.


On Jan 10 02:59 PM The Proclaimer wrote:

> Wow! and people think that I am way out there! You have got to be
> one of the most shallow people on earth to think that way. I guess
> that is why you run Mr Buffett into the dirt. I only wish that I
> could leave that much money to Charity. Mark my words Warren Buffett's
> moves are in the best interest of Our country AND those Charities.
> I wish that there were more people like him.

Jan 10 03:24 PM

[Robert Perrego:]

Buffet has no responsibility to the taxpayer, his fiduciary duty is to BRK and tax law. Not to the taxpayer.

Jan 10 03:56 PM

[Robert Perrego:]

There are more people like him. I was approached by a very wealthy hedge fund manager and asked to write a business plan for a charity. I spent months researching entrepreneurial giving, changes in how charities have evolved over the years, the changes in the types of charitable givers, etc.. and then more months putting together a new way to market and run a charity in order to be highly efficient and effective. This is one of the 'other endeavors' I mentioned in an earlier post. I am involved.

The Rockefeller, Mellon and Kennedy Foundations give very large amounts of money to charities every year for decades now. Do you know how they made their money? Joe Kennedy was a vodka bootlegger and bear market raider - the reason they created the uptick short law (and ironically the first SEC chairman).

Rockefeller was a Robber Baron - a rail, coal and oil magnate and partially, the way he treated his employees are the reason unions were needed and formed Mellon too. Cocaine cartels in South America give money to local villages as do crack dealers in the Bronx.

The way you make your money and the fact that you give it away are two totally different things and one does not justify or disable the validity of the other.




On Jan 10 02:59 PM The Proclaimer wrote:

> Wow! and people think that I am way out there! You have got to be
> one of the most shallow people on earth to think that way. I guess
> that is why you run Mr Buffett into the dirt. I only wish that I
> could leave that much money to Charity. Mark my words Warren Buffett's
> moves are in the best interest of Our country AND those Charities.
> I wish that there were more people like him.

Jan 10 04:05 PM

[Conan the B...:]

Buffet and many like him have used Tax loopholes which most of us either do not know about or are unable to use.

The AMT affects more and more middle class taxpayers each year.

Buffet does not. For that alone, I do not like the man.

"My Secretary pays more in taxes than I do." Why doesn't he share his knowledge with her?

Jan 11 05:33 AM

[Vox Rationalis:]

paultaut wrote:

"Buffet (sic) and many like him have used Tax loopholes which most of us either do not know about or are unable to use."

No, you just assume he does. Here's the quote from the Brokaw interview a year or two ago:

"[My federal tax rate] came to 17.7 percent. That... is the percent of taxable income, plus payroll taxes, 17.7 percent. The average for the office was 32.9 percent. There wasn't anybody in the office from the receptionist on that paid as low a tax rate. And I have no tax planning. I don't have an accountant. I don't have tax shelters. I just follow what the U.S. Congress tells me to do."

So what we're talking about in the comparison is based on TAXABLE income, which is AFTER deductions (such as provided by your alleged tax shelters) are taken.

"The AMT affects more and more middle class taxpayers each year. Buffet (sic) does not."

You're right - Buffett doesn't affect any taxpayers.

"For that alone, I do not like the man."

Wait - you don't like him because he points out that the truly wealthy pay a lower percentage of their income than the middle class, including those who are being caught by the creeping expansion of AMT? Doesn't his argument help your argument for AMT reform?

Jan 11 12:25 PM