Buffett Takes Advantage of the Wall Street Addicts 25 comments
February 26, 2009
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Poor Obama. Poor Geithner. They are trying to do a very difficult thing. They are trying to reason with a group of investors who are acting more like a group of drug addicts. Wall Street is obsessed with their next fix. They are never satisfied. Because of this, the markets cannot be trusted in their interpretation of news.
The market baited us into believing that we needed to pass an urgent bank rescue plan, and then it baited us into believing that we needed to pass an urgent stimulus plan; the market baits us into believing that once it gets its fix all will be well. Not true. In the heart of a recession there are no quick fixes, but that doesn’t mean there aren’t any long term solutions.
So here we stand. Investors trying to understand Washington and Washington trying to understand investors. The current group of 40 year old / Generation X traders are a mess and Obama knows it. They are so full of fear from the dot.com fiasco and now this that they have lost all rational ability to manage money. From my experience, the majority of these guys lack conviction, they don’t know who to trust, their greed resembles that of royalty, and these panic attacks have removed all sense of toughness from their makeup. This Generation X group wants to replace anything fundamentally concrete with abstract technical analysis. They are all surface and no depth. It’s clear that Wall Street is not at the top of our game and thank goodness we have a smart guy like Obama who is taking action to fix this thing.
At this stage of the game it’s time for Wall Street to check into rehab and heal from its addiction. The time honored virtue of patience needs to replace the short term infatuation with getting the next quick fix. If Tim Geithner needs two more weeks or even two more months to come up with the right banking solution then he should be given all the time he needs. Don’t listen to Wall Street Tim. They will ditch you and move on the minute you finish your speech.
Smart investors feel there is a tremendous opportunity to capitalize on the overreactions we currently see. Just because Wall Street has an addiction problem doesn’t mean all of corporate America does. There are segments of corporate America that have never been more fiscally responsible. Compare Apple’s (AAPL) Steve Jobs who works for $1 a year with a banking executive like John Thain who was running around like a rat trying to secure his $10 million bonus. Look at Apple’s $28 billion in cash. Look at Amazon (AMZN). Look at Google (GOOG). Look at IBM. Just because the financials are out of whack doesn’t mean the entire country is.
Investors would be wise to take a step back and gain some perspective on the new Washington / Wall Street dynamic. Washington is attacking all the right problems, they are working on housing, unemployment, and banking. If they weren’t doing these things, we’d be in serious trouble; but they are. Wall Street just happens to be too sick to notice.
In the meantime the door is wide open for savvy investors to do the unthinkable nowadays, which is to make long term purchases based on Washington’s actions today. It’s the addicts who are laughing at Warren Buffett for buying Goldman Sachs (GS) and General Electric (GE) but I assure you that Warren Buffett will get the last laugh. It’s like Jesse Livermore once said, "Throughout all my years of investing, I've found that the big money was never made in the buying or the selling. The big money was made in the waiting."
DISCLOSURE: LONG AAPL
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On Feb 26 05:42 AM Goushi wrote:
> I can't believe I wasted five minutes of my life reading this CRAP.
One theory as to why the US economy came back after the decade long Depression is that FDR capitulated to the capitalists and started letting them earn profits again. He stifled his old anti-business rhetoric, did away with the "excess profits" tax and let entrepreneurs keep the fruits of putting their capital at risk. Why? Because he needed industry to build the war machine in order to fight the Nazis. Threaten capitalists and you get a recession. Tax profits highly enough and you get a Depression.
In which direction is Obama heading? He sounds more like FDR in 1933 than FDR in 1940.
Get your facts straight and put aside your right wing illusions.
On Feb 26 08:54 AM milkchaser wrote:
> The best thing the gov't could do at this point is to say, "No more
> bailouts. No more stimulus. Those are the rules. Work it out."
> It would be painful, but bad investments would fail. Those unfortunate
> enough to be working for failing companies would suffer (through
> no fault of their own) but that's life. It's not always cherry pie.
> People would move on. Investors would begin to value productivity
> again and not look for illusory gains.
>
> One theory as to why the US economy came back after the decade long
> Depression is that FDR capitulated to the capitalists and started
> letting them earn profits again. He stifled his old anti-business
> rhetoric, did away with the "excess profits" tax and let entrepreneurs
> keep the fruits of putting their capital at risk. Why? Because he
> needed industry to build the war machine in order to fight the Nazis.
> Threaten capitalists and you get a recession. Tax profits highly
> enough and you get a Depression.
>
> In which direction is Obama heading? He sounds more like FDR in
> 1933 than FDR in 1940.
It is also interesting to read comments from people who are "taking what remains of their portfolios" and entering the market now on a buy and hold strategy. It was slavish obedience to the Wall Street mantra of buy and hold that got you a ruined portfolio.
The time to re-enter US equities is when we start seeing evidence around the world that stability is returning and the upticks in key measures, when analyzed deeply, reveal a true uptick in economic activity and not simply one-of changes due to China buying ore or something. You need signs that the economy a company is operating in will be positive otherwise it is a crap shot how that company will fare.
If you think that waiting for the evidence means that you'll miss the boat then you really don't believe in buy and hold anyway.
On Feb 26 05:42 AM Goushi wrote:
> I can't believe I wasted five minutes of my life reading this CRAP.
Guys like this writer need to get some backbone and guts and write about what really is and could be instead of what their editors tell them to write as they kiss up to their advertisers.
> In which direction is Obama heading? He sounds more like FDR in
> 1933 than FDR in 1940.
Actually Obama is 2 things; what he says (pretty good stuff, eloquently stated), and what he does (pretty bad stuff and mostly anti-capitalist). His direction by the actions taken so far is pretty clear. I would use a Karl Marx analogy rather than a FDR analogy.
> That is simply not accurate history. The US pulled out of the Great
> Depression due to the most massive fiscal stimulus in its history.
> Adjusted for the size of the economy, the Obama stimulus is puny
> compared to the surge in government spending that occurred during
> the years leading to up to WWII and during the war itself.
>
> Get your facts straight and put aside your right wing illusions.
Hey American, while sipping your Cafe' au lait on the Champs, consider that the WWII "Fiscal Stimulus" acted to IMMEDIATELY put millions of people to work. It acted to dramatically improve technology in months rather tthan years. This is slightly different than the Obama/Pelosi (who wrote most the bill) "stimulus" which is mostly a collection of Democrat redistributive wish list items. The key question is: Since its signing, how many jobs has the stimulus created. The FDR era war spending created several million jobs within weeks of implementation.
Regarding the Depression, there is a counter-argument that the recovery got snuffed out in 1937 by a premature attempt to balance the budget. WWII provided a massive debt-financed government stimulus to the U.S. economy. Would we have recovered without the War?
I think we do agree that letting entrepreneurs reap rewards from their risk and hard work is a good idea. My solutions would be to 1) simplify the byzantine tax system (allowing for lower marginal rates), and 2) relieve employers of the costs of health care. Both measures would free up time and energy for productive innovations rather than stifling red tape.
On Feb 26 08:54 AM milkchaser wrote:
> The best thing the gov't could do at this point is to say, "No more
> bailouts. No more stimulus. Those are the rules. Work it out."
> It would be painful, but bad investments would fail. Those unfortunate
> enough to be working for failing companies would suffer (through
> no fault of their own) but that's life. It's not always cherry pie.
> People would move on. Investors would begin to value productivity
> again and not look for illusory gains.
>
> One theory as to why the US economy came back after the decade long
> Depression is that FDR capitulated to the capitalists and started
> letting them earn profits again. He stifled his old anti-business
> rhetoric, did away with the "excess profits" tax and let entrepreneurs
> keep the fruits of putting their capital at risk. Why? Because he
> needed industry to build the war machine in order to fight the Nazis.
> Threaten capitalists and you get a recession. Tax profits highly
> enough and you get a Depression.
>
> In which direction is Obama heading? He sounds more like FDR in
> 1933 than FDR in 1940.
On Feb 26 05:41 AM decoflair wrote:
> Well said, my friend!
As for the argument surrounding FDR, WWII and the Depression; least we forget it also took 40 Million lives; a little more than half the projected unemployment of the current event; no matter what the cost of the current recovery I suspect none of us wish to revisit that metric.