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The woes in the U.S. financial sector are “poetic justice” for bankers who designed and sold complex investments that have since gone sour, says billionaire investor Warren Buffett…
Buffett, one of the world’s wealthiest people, appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.
“It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,” he said…
Buffett tends to favor companies with relatively simple businesses, strong management, consistent earnings, good returns on equity, and little debt.
You can see why he isn’t popular with a lot of politicians.
It bears repeating that many of those “complex” investments had to be so – because they were grounded in unregulated, unlicensed, uninsured sub-prime loans. Sleaze with sugar-coating.
personally, i think the whole sub-prime thing is a scam. i find it very hard to believe that *all* these banks decided to engage in such an obvious, asinine risk/policy at the same time.
no doubt its part of a bigger, sleazier game in play that will be revealed in due time.
-s
Greed is a lot easier than conspiracy. And it’s legal. Stupid; but, legal.
Warren Buffett didn’t make his money quiet so easily. He had plenty of tax shenanigans mixed in. He also liked buying companies with huge losses so could which he could balance against other companies and pay less taxes. Throw in hoarding cash so he could buy companies cheap when they had to be sold by inheritors.
#4 – are you saying Warren should have mismanaged his money in order to be more competitive with us the disadvantaged?
If so, we should also not take those tax deductions on our returns this year – those are just unfair…
“that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end”
But everybody knows in the “real end” it’s gonna be Mr. & Mrs. Average Taxpayer who pay the price…
#4, MikeN,
Once again. Instead of the message, you shoot the messenger.
Buffet has made his fortune legally and quite openly. He has raised some very good observations that many people would prefer to ignore. Perhaps the most notable might be the need for regulations. Yes, that anathema of Conservatives, the “R” word. If that section of the economy was regulated, then the banks would not be crying now that they need bailing out.
Regulations in themselves are not a bad thing. Most corporations want them simply because they ensure a level playing field. When there are no, or inadequate, regulations then there will be the greedy who wish to exploit that for whatever they may get. Well, until they lose.
Well, its NOT poetic justice–its the iron clad result of bad business decisions UNLESS the government bails them out?
And I’m with #2–hard to figure them all doing it, leming behavior indeed, even if some of them weighed the risk and said “Well, I’ll still get my golden parachute and maybe Hilliary will bail us out for the good of the ignorant but innocent home buyers.”
Still shocking what stupidity BushCo deregulation has shown our business masters to possess. Faith based business insights.
#9–Uncle Ben==perhaps I shouldn’t speak for Mike as I actually don’t know what he IS referring to, but as a matter of tax law, corporations which is how Buffet did business, are not by law allowed to horde cash==instead they must pay taxes on these earnings or distribute them as dividends.
So–every rich guy in control of a corporation ILLEGALLY avoids paying taxes by hoarding cash. Its what rich people do while telling us to work hard.
I wasn’t objecting to hoarding cash, or using tax deductions, just pointing out that he didn’t earn money quite as easily as the article suggests. Nothing wrong with hoarding cash, and companies do it all the time. I really object to an estate tax that Buffett and other companies buy up property from people who were forced to sell to pay the tax. Buffett didn’t just take tax deductions, he found companies he could buy that would let him lower the tax bill for his other companies. So instead of A paying 7 million tax and B paying 0 we have A+B paying 3 million.
I think the IRS cleared up this loophole.
i’d believe it more if Jimmy Buffet said it
#10, bobbo,
Not quite. Every entity must pay taxes on their earned income. When a Corporation earns money, it is taxed. Usually not a high amount, but they must still pay a tax. When an employee or investor is paid, they are taxed as well on their earned income. When that person goes and spends their money (in a sales tax State) it is taxed. When the store pays off everyone, it pays taxes on what is left. Now, repeat.
Because Corporate Taxes are usually much lower than personal taxes, it might make sense to leave all earned money in the Corporation. That works fine but only if there is only one owner. However, that money may not be used for personal use by the owner. If the money is given or lent at very low rates to certain officers or owners then THAT may become taxable income. More than one CEO has gone to jail because they used Corporate property for personal use without paying the taxes.
So, do you take the money and pay taxes or do you leave the money and not get any return? Although there isn’t a limit on how much money a Corporation or person may have, there are practical limits. Since most Corporations are better at producing items, retailing items, or what ever than they are at sticking the money in the bank for next to no interest, it is in their interest to use that money to earn more money.
Also, Buffet is WORTH a certain amount. That doesn’t mean he has that much cash laying around. If the Stock Market increases, his net worth increases. If the Stock Market tumbles, so does Buffet’s net worth.
MikeN,
From post #4,
He had plenty of tax shenanigans mixed in. He also liked buying companies with huge losses so could which he could balance against other companies and pay less taxes.
then later, in post #11,
Buffett didn’t just take tax deductions, he found companies he could buy that would let him lower the tax bill for his other companies.
What is wrong with that? Was or is there now something illegal or sinister about it? If anyone can use a tax deduction then it is prudent to do so. If I am an investor in Berkshire-Hathaway and Management doesn’t take a deduction then they are short changing me, the investor. By law, they must maximize the value for me.
Buffet, as most good money managers, analyses value versus price in order to determine if something is worth investing in or buying. Unlike many other Investment Companies, B-H doesn’t buy companies, strip them of their valuable parts and throw the rest away. They buy companies who’s stock is worth much less than the company is. (sometimes this is called a “bargain”) If B-H can make minor changes and bring the stock value back to normal, they may sell the company and realize a profit or they may just keep the company to continue earning a profit.
I think the IRS cleared up this loophole.
What loophole? If you buy a company that has certain deductions then you just bought those deductions. Also, the purchase may entail specific other deductions. The same as with physical assets, obligations and investments, both negative or positive, are counted too. Only Congress gets to define which “deductions” are legal. The IRS gets to implement and enforce that definition.