Warren Buffett's annual letter
Can a nice guy get rich? It's hard to read Warren Buffett's annual letter to shareholders without thinking that, yeah, against all reason, it really is possible for a nice guy to get rich. (You can download the letter at berkshirehathaway.com. There's always a few good one-liners in there and it's generally very educational besides. And I don't mean educational like your math teacher's lectures on calculus: he actually has a talent for making economics and accounting comprehensible, even to people like us.) Of course, he may just have really good PR, and there are, no doubt, one or two skeletons lurking somewhere in his apparently pristine closet, but this is a man you can't help liking. (Of course, his friend Bill Gates is an entirely different kettle of fish; and they do say you can tell a man by the company he keeps...)
This year, Father Warren's lecture is on the trade deficit. No doubt you've seen the headlines about America becoming a "sharecropper society" as we struggle to pay the interest on all the money we've borrowed from foreigners to finance our spending. He's forecasting a decline in the dollar as a result. No big surprise there. Every day, we spend $1.8 billion more on foreign goods than they buy from us. That's basically how much our debt to them goes up every day. Mounts up after a while.
A couple of years ago, he sounded the alarm on "derivatives" as a financial weapon of mass destruction that was liable to blow up at some point. We still haven't seen that prediction come true, but then he does tend to be early on these things -- remember how everyone thought he'd lost his touch when he refused to join in on the dotcom frenzy? The derivatives market has done nothing but grow ever since. (See, eg, the post on securitizations. There's also been pretty impressive growth in so-called Credit Default Swaps, of which more, perhaps, anon). Meanwhile, the General Re subsidiary is still, after three years, busy unwinding its derivative positions in what is supposed to be a highly liquid market. If this is liquid, Buffett implies, what kind of a meltdown can we expect when everyone wants to unwind at once? Scary thought. An interesting question to ponder: how would you play this one if you thought it was coming tomorrow?
BTW, M. Buffett puts in a plug for The Financial Times as good reading material for those who are interested in these things. Me too. And it's not just financial news. There are a couple of very entertaining columnists, among them Lucy Kellaway and Peter Apsden. The weekend section is great. The crossword, for those who like the English-style cryptic, is a relatively easy one and fun to do (we especially enjoy compiler Cinephile, an 80+ year old retired vicar). Best of all, perhaps, is the Martin Lukes column on Thursdays (it's kind of a Dilbert thing, only told in e-mails rather than pictures, and makes you squirm almost as much as watching that other Brit feature, The Office TV series).
ESPN has launched a free online poker game, and got more than 30,000 people to sign up in the first couple of days. Course, it's not a real-money game. For that you have to go to partypoker.com. Which, incidentally, is rumored to be getting ready for an IPO, most likely in Europe. (Best thing about this one are its founders' names: Ruth Parasol and Anurag Dikshit. I kid you not). What is it with the sudden reawakening of poker? I thought it had gone out of style in the 50s. (By the way, as I recall, Warren Buffett boasts of having put himself through school partly on poker proceeds. "In every poker game", he says, "there's a patsy. And if you can't figure out who the patsy is, then you're the patsy").
This year, Father Warren's lecture is on the trade deficit. No doubt you've seen the headlines about America becoming a "sharecropper society" as we struggle to pay the interest on all the money we've borrowed from foreigners to finance our spending. He's forecasting a decline in the dollar as a result. No big surprise there. Every day, we spend $1.8 billion more on foreign goods than they buy from us. That's basically how much our debt to them goes up every day. Mounts up after a while.
A couple of years ago, he sounded the alarm on "derivatives" as a financial weapon of mass destruction that was liable to blow up at some point. We still haven't seen that prediction come true, but then he does tend to be early on these things -- remember how everyone thought he'd lost his touch when he refused to join in on the dotcom frenzy? The derivatives market has done nothing but grow ever since. (See, eg, the post on securitizations. There's also been pretty impressive growth in so-called Credit Default Swaps, of which more, perhaps, anon). Meanwhile, the General Re subsidiary is still, after three years, busy unwinding its derivative positions in what is supposed to be a highly liquid market. If this is liquid, Buffett implies, what kind of a meltdown can we expect when everyone wants to unwind at once? Scary thought. An interesting question to ponder: how would you play this one if you thought it was coming tomorrow?
BTW, M. Buffett puts in a plug for The Financial Times as good reading material for those who are interested in these things. Me too. And it's not just financial news. There are a couple of very entertaining columnists, among them Lucy Kellaway and Peter Apsden. The weekend section is great. The crossword, for those who like the English-style cryptic, is a relatively easy one and fun to do (we especially enjoy compiler Cinephile, an 80+ year old retired vicar). Best of all, perhaps, is the Martin Lukes column on Thursdays (it's kind of a Dilbert thing, only told in e-mails rather than pictures, and makes you squirm almost as much as watching that other Brit feature, The Office TV series).
ESPN has launched a free online poker game, and got more than 30,000 people to sign up in the first couple of days. Course, it's not a real-money game. For that you have to go to partypoker.com. Which, incidentally, is rumored to be getting ready for an IPO, most likely in Europe. (Best thing about this one are its founders' names: Ruth Parasol and Anurag Dikshit. I kid you not). What is it with the sudden reawakening of poker? I thought it had gone out of style in the 50s. (By the way, as I recall, Warren Buffett boasts of having put himself through school partly on poker proceeds. "In every poker game", he says, "there's a patsy. And if you can't figure out who the patsy is, then you're the patsy").
posted by econoclast at 3:00 PM
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