Monday, May 4, 2009

Economical Things

Warren Buffet was interviewed (again) on CNBC this morning and asked when he sees the recession ending, what his best/worst investments over the past year were, and when he thinks the bottoms of all the different markets will occur and when we'll see a recovery start to unfold.

That's a pretty tall order, especially when they posed the same questions to him less than a month ago. It seems CNBC's reliance on Buffet (and many times Donald Trump) as the canary in the coal mine failed in late 2007 as the recession hit, but they refuse to acknowledge it. (I don't fault Buffet as few to no one could have predicted the full scale of this downturn and few realized the compounded and convoluted schemes and risks taken over the past decade would unravel simultaneously.) Yet, they still harp on him as the crystal ball-holder who, at times, has been correct in predicting unprecedented changes in fiscal opportunities, crashes, and upswings.

True, he has been the guiding light at the end of the tunnel, but a lot of his investments have a lot of luck involved. He isn't a god of the markets by any means (heck, we could give him his own show akin to Jim Cramer's if he were...wait...), yet he is one of the most successful and popular investors of the past few decades. Instead of relying on his skepticism, and now optimism, why not focus upon his stance as a conscientious LIBERAL when it comes to investments, business taxes, and government vs. the market. While CNBC maintains a hearty conservative stance they still glorify a staunch LIBERAL who supported Obama, supports higher taxes on those making $250,000 (did somebody say buzz-phrase?), which includes him and his company, and supports regulations and the closing of corporate and fiscal loopholes in order to reign in a ballooning national deficit and debt, and curtail free-for-all business expenditures (bonuses, private jets, elaborate office redecoration, etc.).

But they won't focus on that. Only that 'Obama will stifle new business, lending and jobs with his proposed programs!' to quote on CNBC pundit. Buffet disagrees. Raising taxes now, even on the wealthiest is a horrible idea destined to fail and drive us further into this depression, to paraphrase the arguments of several others a few weeks ago. Buffet disagrees. There is a ton of money on the sidelines of this market and people are beginning to jump in in order to profit from this downturn, after nearly a year of seeing all their investments flounder and fail. Buffet agrees with the sidelines opinion, but suggests many who have the kind of money to wait patiently on the sidelines, and those only menially affected by job losses, have little to no cares about when job losses bottom out (which is the true indicator of when money from the sidelines will return) and are only a leading indicator, not the signal and the cure for the end of the recession/depression.

He also sees the Obama administration's $3.6 trillion budget as 'fair,' while the CNBC pundits refer to it as outrageous and 'a path to hell' to echo the opinions of some other foreign leaders. While I agree that it's mighty in size, it does account for the roughly $1 trillion that stood unaccounted for in the past 18 months, which makes up the remaining size of the deficit. What does that mean? Essentially Obama has only increased our 2010 budget by the cost of 6 months in Iraq and Afghanistan, when compared to the cost of the 2009 budget that excluded the wars and other yearly costs, which the former administration referred to as 'incidental.' Seems pretty small in comparison now, doesn't it?

(Should we refer to the wars in Iraq and Afghanistan as 'incidental wars' now? I'm sure veterans would be happy about that. The Happenstance Conflict in Iraq. The Oops Battles of 2001-20??. But that's another idea...)

Buffet also agrees taxes need to be raised to offset inflation and the national deficit, but the scale of roughly $300-$700 a year for the average American family is a small price to pay to ensure jobs and an eventual unemployment rate (when the increased taxes would be enabled) of less than 4%. 4%?! That's incredible. And that's a rate for a world of less spending/more saving, more thrifty shoppers, and more conservative buyers on all fronts.

I doubt we'll see a return to the frivolity of 2005-2006, and I doubt we'll see a turnaround this year. But I do see a bottom this year. So perhaps I'm optimistic, but just not as optimistic as Buffet. Then again, maybe a turnaround to me means something different than to Warren Buffet. Perhaps it's different to me than CNBC. And by that degree, maybe CNBC's idea of a turnaround or 'profit' is different from the majority of Americans. It's time they realized not all business and 'American business' (as they like to run commercials proclaiming and exulting) is multi-million dollar. If I make $10,000 year as a freelance writer, I'm hoping for tax increases and an improved job market. Not a chance to invest $5 million into a booming tech stock.

CNBC, broaden to survive. Expand your idea to fit the current conditions or risk alienating yourselves. The strict conservative ideals of 'yesteryear' aren't robust enough to thrive in this times and in the coming economies. Survive, yes. Prosper, yes. But at what cost to the entrepreneurial spirit?

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