Full official summit statements by both President Obama and President Hu JinTao:

Warren Buffett, 79 years old and the world's biggest and smartest investor, yesterday Nov 3, 2009, announced in a big way that his Berkshire Hathaway (BRK.A) is acquiring Burlington Northern Santa Fe (BNI) for $26 Billion. The detail of the transaction can be found here on CNBC. Berkshire will acquire the 77 percent stake in Burlington Northern Santa Fe that it doesn't already own for $100 a share in cash and stock. CNBC interviewed Warren Buffett on his reasonings on his latest and biggest deal as well as his take on the economy:

USD currency value will not likely continue to decline rapidly vs.the Yen nor the Euro nor the Ren Mi Bi from now in Oct 2009 to mid 2010. It is in the best interests of China to keep the USD strong or at least stable/stagnant against other key global currencies as well as the Ren Mi Bi. Why? It is simply because China's central bank holds way too much USD-denominated US-Treasury bonds as reserves, and therefore any further decline in USD value will not be good to China's wealth.

It is also in the best interest of Japan not to let the USD keep falling since the expensive Yen is now taking a toll on Japanese exports/ (Who wants to import and buy Japanese products in the US if the exchange rate is way too high?) Japanese exporters are facing not only an expensive Yen vs. USD exchange rate but also significant competition from Chinese exporters and other Asia Pacific exporters. Furthermore, Japan is the second biggest holder of USD-denominated US-Treasury bonds behind China. Hence, the catastrophic view by many forex forecasters that USD will continue to decline rapidly (after a huge 15% decline so far in 2009) is, in my view, too pessimistic and unwarranted at least between now and mid 2010.

• The percentage of households earning less than 30,000 USD per year is an astounding 20.0% of all US households; and this 20.0% of low-income earners contribute to extremely high delinquency rate (approx. 22.5%) and default rate (approx. 38%) (sources: Equifax, Moody's). This trend does not seem to stop either any time soon as unemployment rates are expected to be persistently high (likely above 10% for considerable numbers of years - 2-5 years).
• Recent upturn in home prices during the summer 2009 is a seasonal upturn and likely a temporary one; home prices will likely decline again in the Fall 2009 and Spring 2010 at minimum (at slower declining rate than before).
• Over a longer period, inflation-adjusted and USD-depreciation-adjusted home prices will likely be stagnant in the next 10 years; this is in line with our view few months ago that the economic recovery will not be driven by real-estate markets anymore as mortgage-backed securities markets and general credit environment will likely never recover to the level consumers enjoyed in the 2000-2007 time frame.
• Investors and business persons must be vigilant and ready to live with the following trends:
  • USD will likely depreciate by 5% per year in the next 10 years vs. key global currencies (note: USD has declined 15% so far in 2009; hence 5% annual depreciation is actually an aggressive projection).
  • Slight (but likely quite sure) evaporation of wealth due to modestly higher than average inflation rate going forward.
  • Real-estate will likely not be the best vehicle to build one's net-worth as home price appreciation will be painstakingly slow and long. The days of easy money in real-estate are clearly over for a very long-time.
  • Despite a recent upturn in US stock markets which has somewhat helped a majority of US households recoup part of the losses they have experienced, the upturn so far, when adjusted for USD depreciation vs. other global currencies, is unfortunately very low (still a negative) and even worse, many emerging markets have clearly outperformed US markets by significant margins since Lehman Brother's collapse.
    

In our view, investors relying only on USD-denominated assets in US markets to provide them with decent investment returns will be disappointed and will find themselves exhausted fighting many negative trends not in their favor for at least a decade. One shall not forget this potential outcome: US stocks may continue to go up not only because US economy is getting better but also to keep up with the fact that US Dollar continues to depreciate. Unfortunately, this 'feel-good' scenario could potentially over the long-term generate absolutely zero currency depreciation-and-inflation-adjusted return. If the US stock markets were to increase by 50% in the next 5 years and during the same period, the US Dollar currency index value were to depreciate by 50% vs. other key global currencies, wouldn't it be a zero return? Hence, prudent long-term investors should diversify globally.

Via: McKinsey Quarterly

Our view:

The Chinese government will continue to find ways to stimulate internal demand for products and services to rejuvenate the Chinese economy. The Chinese government will likely continue to reduce their country's investment in assets that are denominated in developed-yet-poor countries' currencies over the long-term and slowly but surely reallocate significant percentage of their surpluses to a.) their own internal projects and programmes to stimulate internal demand and b.) strategic investment in assets located in other resource-rich emerging countries and frontier countries, and c.) reduce China's reliance on export to developed countries. However, the success of this huge long-term effort is unclear since Chinese people like to save significant percentage of their income. The Chinese people's saving habit is highly cultural and hence very hard and slow to change. Therefore, we expect Chinese government to face an uphill battle to increase private domestic demand for many years to come.

According to the Wall Street Journal, Steve Jobs had a liver transplant 2 months ago in Tennessee. He is recovering well according to the paper and plans to return to work later this month. Here is the link to the source: WSJ (06/20/2009)

Steve Jobs is known for being a very workaholic & innovative entrepreneur co-founding & running two hugely successful technology companies, Apple (AAPL) and Pixar (bought later by Disney (DIS)). He is an expert innovator and very passionate on innovation and technology advancements. His work ethics and visions are legendary. Unfortunately, the health of a human being is never certain no matter how much success and money a human has. We all should be grateful for his huge contribution so far to the technology & media landscape and wish him a great and sustainable health recovery. Steve Jobs' life story is inspirational. He came from a humble beginning. He was an orphan and a college drop-out.

People love to play games for the sake of excitement. Hence, it is not surprising that many individuals (especially the ones who think they are smart) generally like to manage their own investments thinking they can outperform key market indexes year after year.

Unfortunately, many tried and failed. Many more are still trying without meaningful results. Hence, the majority of them finally (after multiple trials & errors & failures) eventually hire qualified investment managers whom they trust to manage their investment assets. They invest in mutual funds, hedge funds, and separately managed funds. All these funds obviously have performance and/or asset management fees as the investment managers/advisers and their employees and organizations need to make a living and profit managing other people's money. However, it is a fact that the majority of investment managers clearly overall have not been able to outperform the major market indexes over the long-term net of fees (there are all kind of fees such as: asset management fees, performance fees, sales fees, administration fees, fund distribution fees, etc.) While these fees are good for the providers, they are not that friendly for the investors.

Warren Buffett once said "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." We read this quote again and again, and now even more convinced that the US and global markets are on the road of true recovery (albeit a slow one in the developed countries). The US market bottoms have been reached twice in October 2008 and March 2009 (appears to be double bottoms already.) Unless traders and investors are waiting for tripe or quadruple bottoms (unlikely in our view), we are already in early recovery phase (at least from stock markets level since markets are discounting mechanism). The economy is also getting a bit better.

Folks, despite all the bad economic indicators and market news, we are not in a very dire shape as most market pundits want to you to believe. The fact you can still read this article, comment and read many other websites, means you have fairly good access to internet and computers and some money to spend. For Americans in general, you are better off living in the United States than in many other countries. At the very least, the legal structure, democratic system, and entrepreneurship are still strong ingredients of the US. For Americans (or even immigrants staying in the US legally or illegally), do you really think US is a bad place to work, live, prosper, and enjoy? Think twice.

We continue to be cautiously positive on the US households' ability and resiliency to withstand the current size and level of their debts. Here is why:

1. United States' public debt as % of GDP is 60.8%, lower than many other developed and emerging countries (see appendix A below). US rank is lower than Canada, Japan, Germany, India, and Singapore.

Consumer confidence and investor confidence are key indicators to watch. Both have been increasing for the past few months. This trend can cause positive feed-back loop cycle that is beneficial to the markets.

No wonder the markets have been increasing for the past few months. There are no strong reasons why this bullish mode cannot continue. And more importantly, even after multi-month increases, the level of consumer confidence is still low and has plenty of upside. The recovery surely will not be a smooth ride, but it is clearly in progress.

Recently, there has been plenty of news regarding the potential credit rating downgrade on the United States.

Is this potential downgrade worrisome? Yes. Is this going to end the current bullish trend? Not too much, in our view.

The chart of American credit card debt (source: the business insider) is not pretty.

However, we disagree with negative tone of many market pundits on the increasing amount of American credit card debt.

Based on various economic and market data and graphs that we analyzed, we consider the following scenarios are likely to happen in Q2 and Q3 2009:

• Higher unemployment rates
• Higher credit card default rates
• Higher foreclosure rates
• Higher bankruptcy rates
• Lower housing prices
• Lower housing starts
• Lower commercial building occupancy rates
• Lower retail sales and income for most luxury retailers
• Stagnant or lower wholesale price index
• Stagnant or lower mortgage rates
• Stagnant or lower aggregate corporate earnings
• Stagnant or lower inflation rates

U.S. (as well as other cash-strapped developed countries) economic recovery will mimic emerging markets' economic recoveries.