Old Wizard

Questioning Berkshire Hathaway's BYD Purchase: Long-Term Economics?

Here is another indication that the espoused strategy by the administration to create new and higher paying jobs that last may be travelling along some bad assumptions. We have Warren Buffet making a big bet on a Chinese car company that also has a history in the lithium battery science and manufacturing. Will that company have union rules , the corporate tax structure and universal health care comparable to its competitors in the USA. Further will it contend with the US's safety regulations to establish its electric cars and higher energy lithium batteries? The current energy and investment strategy we are employing seems destined to fail on two accounts; creation of new jobs and reduction of our negative current account, a third of which is driven by the trade imbalance with China, if Buffet's bet proves correct. Ford is already negotiating with a Chinese company to provide batteries for its new electric car. The antedote is natural gas-driven automobiles. Conversion of existing models would be the quickest way for GM to get healthy, for new job creation, reduction of current account negative balances and reliance on foreign oil and reduction of carbon dioxide emissions. If buffet thought a US company would be a leader in high voltage, safe lithium batteries and electric cars wouldn't he make that bet on a US company? If the strategiy the administration is following results in more economic dominance by China and makes us more dependent on their loaning us money, will that portend better times for our people?

My Thoughts on Oil

Fitz, After reading the immediate above comments, I thought I'd bring the discussion back to energy policy rather than diverting the discussion on the trade-offs of buying domestic as opposed to foreign oil companies in the event of predicted dollar value decline. The discussion is interesting, but I wonder how many purely domestic oil companies there are. Frontier oil comes to mind, but relative to the total value of so called domestic oil companies they are miniscule. The question I'd like to put on the table is what would have happened to our domestic car companies had we embarked on a crash program to convert existingvehicles and those being produced to natural gas driven vehicles. Further what would have been the impact on the existent dealer, parts supply and maintenance facilities and the unemployment picture? What if the country spent 50b starting in Jan.09 implementing this policy, would GM or Chrysler still have gone into Bankruptcy and would this not have served as a better transition to the car of the future than to artificially force a premature transition to plug-in electric vehicles? Even if these companies had to go to chapter 11, is it not still a better way to go than to spend billions more to convert existing plants to electric car manufacture and ,as Ford is already singaling, buy their required batteries from China in order to gain total price parity and time to market with Japanese already unerway competition. I'd be interested in your take, fitz, and the rest of the folks.

My Thoughts on Oil

Fitz, Glad to see you still working for some logical approach to our energy problem contrary to what is coming out of our government officials. Dr. Chu continues to be almost ludicrous in his approach. You are probably familiar with his recent remarks concerning energy saving strategies. He advanced the thought that if we painted all our roofs white and our roads a light color we could save almost 11 years worth of oil. Maybe this is the start of a comprehesive energy strategy and if we gave our unemployed folks a year's worth of paint and brushes and paid them to paint roof and roads ,we would have a real stimulus plan. Like so many things coming out of Congress and the administration there is no cohesive plan for any of our major problems and only vague and confusing solution details and time horizons. I checked again my original data concerning wind and solar generating capacity. As of the last official gov. statistics, the electrical generating capacity of the US today is app 1 trillion megawatts. That emenating from wind and solar is about one fifth of 1%. Doubling this in 3 years, as is the president's goal, is insignificant. Projections on that site state that electrical generation from coal will increase from 51% to 56% in 20 years, while staying constant for natural gas electricity generation. Since electrical generation capacity is also projected to increase over this time period,carbon emissions should also increase; hence the arm waving statements concerning clean coal. I don't believe that environmental purists understand that these are official gov numbers. Further, the amount of existing electrical generation from wind and solar is many times smaller than that obtained by burning wood and wood proucts. All investers should understand that even if we increase electrical generation from wind and solar by a 1000 times what it is today in 10 years it would still provide only 2% of today's capacity. An exoponential expansion like doubling every 3 years will result in less than 50 times more. The numbers don't close with a meaningful solution and either require a much bigger investment now or another strategy. For one of the above commentors, the amount of oil we import from the mid east, Venezuela and to a small amout Russia is somewhere between 5 and 6 million barrels a day. We could eliminate all or most of this amount, if we converted approximately half of our gasoline -driven vehicles to natural gas. This could be achieved in 5 to 7 years and would be a solution that would create american jobs using a commodity that is domestically provided, reduce co2 emmisions and would decrease our negative current account balance by over $200b a year, assuming an oil price of $100/ barrel over that period. Should that price average $150/barrel, the reduction would be well over $300b a year. This solution is clean, understandable on its face and is accomplishable. Electric and plug in cars are not easily connected to a comprehensive solution, nor a timetable that solves the energy, polution and the country's negative operating cash flow, the latter being at the heart of our structural economic problem. Our place in the world and our whole way of life is hanging in the balance and the current approaches to our problems are more political and unconnected solutions rather than aimed at real problem solving. We need better leadership than we have had over the last 20 years at all levels who are motivated by service,rather than the maintenence of power and the ability to be reelected. If the media was competent and objective, maybe they could truly inform the public and reelection would be tied to real problem solving, but listening to multiple outlets and reading major newspapers is not reassuring.

Warren Buffett's Sun Valley Thoughts on the Economy and Elections

We are not talking about business decisions, when we encourage higher taxes by saying that I wouldn't mind paying more taxes in the context of a political campaign. I don't see in anything that Buffet is doing that solves the large negative cash flow that our importation of 12 million barrels of oil, a large portion of which, is controlled by a cartel. Conservation is a bogus answer because the cartel simply reduces supply. Unless we can conserve on the order of 5 million barrels/day, another solution is required. I don't care what is motives are, pushing for a real solution beats making money by selling out an american icon company to a foreign investor which has a negative effect on the current account and eventually american jobs. Why doesn't Warren Buffet invest in a windmill farm?

Warren Buffett's Sun Valley Thoughts on the Economy and Elections

Since Warren Buffet is a Democrat, who pays taxes at the 15% rate,and a raise of the social security and medicare payments will be insignificant to him, I think it only fitting that he set up a revolving , multi-billion dollar fund to help the poor distressed middle class homeowners who face the loss of their homes. I just read that he is encouraging the takeover of budweiser as a large stockholder. The belgian co. is reputed to have upped the offer. As an American, I'd like to know how this helps the country reduce the ever increasingly negative current account balance. He has gone on record as not minding paying more taxes. Why not? If I only paid 15% on my income I wouldn't mind paying more either. Unfortunately, my retirement pay is taxed at a much higher rate. In contrast, T. Boone Pickens has gone on the offensive to construct a solution to our energy problem, one which if it isn't solved soon will bankrupt this country. I don't know his political affiliation,but his standing has rien in my eyes and warren Buffet's has gone the other way