Buffett's Portfolio Moves and China's Slated Investments

by: Philip Davis

What would Warren Do?

I’m a big Buffettt fan and I’m always interested in his portfolio moves. Lon Juricic from StreetInsider notes that the latest 13F reveals the following changes between 9/30 and 12/31:

New Positions:

  • Ingersoll-Rd (NYSE:IR) new 636,600
  • Unitedhealth Group, Inc. (NYSE:UNH) new 1,021,400
  • U.S. Bancorp (NYSE:USB) new 23,307,300 (stake disclosed yesterday in delayed filing but firm held 6.1M shares at 03/31/06, 22.1M shares at 06/30/06 and 23.3M shares at 08/30/06)
  • Raised Positions:

  • USG Corporation (NYSE:USG) from 16,700,992 to 17,072,192
  • Wells Fargo (NYSE:WFC) from 190,641,600 to 204,022,100
  • Why does this give me the feeling that Warren does what I do, we have so much reading to do that we end up sorting things alphabetically and then we end up bunching up picks that are near each other…

    Reduced Positions:

  • Ameriprise Financial Inc. (NYSE: AMP) from 19.26 million shares to 8.27 million shares
  • H & R Block (NYSE:HRB) from 10,971,000 to 4,113,400
    Watch out - we have this one, although that explains the weakness.
  • Comcast Corp (NASDAQ:CMCSA) from 11,110,200 to 8,000,000
  • OSI Restaurant Partners, Inc. (OSI) from 1,818,800 to 0 (buyout)
  • Pier 1 Imports (NYSE:PIR) from 3,290,000 to 1,483,400
  • Sealed Air Corporation (NYSE:SEE) from 677,700 to 0
  • Target Corp (NYSE:TGT) 745,700 to 0
  • =====================================================================

    But let’s forget about Berkshire, Buffett is old news and the biggest name on the investment scene for the rest of this decade is my new man Lou Jiwei!

    "Who?" you may ask - and you’d be close because he has a cousin named Hoo, but Lou Jiwei is the man slated to become the Deputy Secretary-General of the State Council (China’s cabinet) and the former Vice-Minister of Finance will be put in charge of investing China’s $1.07T in cash.

    Did I say $1.07 Trillion? That’s $1,007,000,000,000. For perspective, do you remember 30 seconds ago when you were oohing and ahhing (you know these are words even if my spell checker doesn’t!) over where Mr. Buffett is moving his $167Bn around. Let’s not forget that Berkshire Hathaway "only" has $44Bn in cash to deploy. Mr. Jiwei can make $44Bn this year by putting his cash in a money market account!

    This is probably the most important financial story of this decade as even a conservative equity strategy would likely include at least $200Bn of U.S. equity investments (they’re already heavily invested in China!).

    Kudos to Super Banker (Paulson) who should be cashing the world’s largest broker commission for flying out to China and convincing Wen Jiabao to do what our congress won’t allow the President to do, play the markets! While giving Bush a few Trillion in Social Security trust accounts probably is a very bad idea, Paulson closed this deal back in December when he and Bernanke flew to China and carried out my master plan.

    As I said at the time:

    "So Hank Paulson, my nominee for the Mr. Potter look alike contest AND former head of Goldman Sachs, is off to China next week to prop up the dollar and, after much discussion, I’ve decided to let him use my Roach Motel Theory">Roach Motel Theory as a Weapon of Mass Dollar Destruction (WMDD) against the Chinese."

    "Why will they listen? Ah, that’s where the old Roach Motel Theory kicks in - not as it applies to oil, but as it applies to dollars. The Chinese have a Trillion U.S. dollars! While they may threaten to diversify them into something more stable Mr. Paulson is going to point out to them that they are not the only roach in the motel."

    "Ha ha! So the devaluing U.S. dollar will hurt China, Europe (the least), OPEC AND every one of that top 10% of the world’s richest people who have 85% of the dollars that are floating around. I challenge you to find a government, no matter how communist, that can afford to ignore them!"

    "So we will keep printing dollars and China will keep buying them, as will everyone else and, now that we have pushed commodities to the limit, they will start using those dollars to buy other American goods and services - maybe even an iPod! Meanwhile for us investors, that ever expanding money supply has to go somewhere and we may be heading into a very, very soft landing on a very big pile of U.S. dollars!"

    Well that was December 9th, I think three month’s notice is plenty for me to give you guys before the Wall Street Journal agrees with me on page one!


    How did China become the world’s fastest growing economy? Don’t ask American corporations - as we have said many times, stock buybacks are not the solution to America’s problems.

    The real answer is one that will shock the average American corporation: Surprise – It’s Research and Development! Come on, think way back in time, and try to remember when we were proud of that kind of stuff rather than considering it to be an embarrassment on the expense ledger…

    China remembers and they became the world’s # two investor in R&D, inching out Japan at $136Bn. The U.S. is still # one with $330Bn spent, but that’s out of a $12T economy vs. China’s $3T. The average Chinese company spends twice as much as the average U.S. company. Our drug companies alone account for almost half the spending so it’s much worse than you think. But wait, it’s worse than that – due to wage differentials, China has 926,000 researcher vs. just 1.3M in the US. China is growing R&D at a rate of 10% a year while the U.S., through aggressive M&A activity, has been cutting back since 2000…