Generation Y Investor » Warren Buffett

Buffett’s Thoughts On Wall Street Pay

Stephen Kline — Wed, 21 Oct 2009 00:57:24 +0000

A year has past since the credit crisis wreaked havoc on the world’s financial system. During that year of reckoning, firms on Wall Street that were lucky enough to survive (or should I say get bailed out) reduced annual bonuses by nearly 45% from the prior year.

Fast forward one year and my have things changed. Now, a mere 13 months since facing death, these same firms are set to payout a near record $26 billion in year end bonuses. Many feel this is outrageous…some argue it’s not. I however am going to defer to my man Warren Buffett who says: Wall Street Pay Must Have “Downside”

“You have to put in something where there is downside to people who really mess up large institutions.”

“Too many people have walked away from the troubles they have created for society, not just for their own institution, and they have walked away rich.”

“What you have to change in Wall Street, is you have to make sure that in addition to carrots, there are sticks.”

“And it can’t be a one-way street where they are making ungodly amounts of money when things are good and then they move on to someplace else for a while when things are bad.”

I believe that Buffett has a reasonable take on Wall Street pay. As a capitalist, I have no problems with large salaries and multi-million dollar bonuses. However, I do have a problem when such pay packages are doled out by companies who took a taxpayer funded bailout. There has to be a better way of insuring that failure goes unrewarded and that those who act unethically get punished.

The Greenback Effect

Stephen Kline — Thu, 20 Aug 2009 00:49:03 +0000

Warren Buffett wrote a great Op-Ed in the New York Times today. In the piece, Buffett argues that the current economic stimulus is necessary to get our economy running smoothly. However, Buffett also states that our current rate of spending is unsustainable and that once the economy begins to recover congress must stop the printing presses. Here are some of the more important highlights…

“The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

“An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money.”

“Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.”

“Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.”

I’m really happy to see that Mr. Buffett is taking the time to write about possible inflation problem. Usually the only people I see openly defending the dollar are Ron Paul and Larry Kudlow. Hopefully, Buffett’s warning will carry a little more weight than the other dollar defenders.

Warren Buffett Cartoon Series

Stephen Kline — Sat, 25 Jul 2009 21:40:23 +0000

Here’s a clip of Warren Buffett talking about his new online cartoon series called, “The Secret Millionaires Club”. Let me just say I’m a huge Buffett fan and I’m all for educating children about finance and investing but this is a little weird.

After the initial talk about the cartoon, Buffett begins to talk about the economy and stocks. He makes these main points…

- His businesses are essentially flat

- You can’t wait until the economy improves to invest in stocks… you’ll miss the rally

- A dollar is going to buy a lot less 10 years from now

- Stocks will outperform treasuries and short-term cash investments over time

- He likes cherry coke

Three Finance Rules From Warren Buffett

Stephen Kline — Sat, 11 Jul 2009 02:16:02 +0000

In a recent interview Warren Buffett was asked for his “top three pieces of advice for average Americans who want to grow their savings and keep their money safe.” Here’s what he said…

If it seems too good to be true… it probably is
Always look at how much the other guy is making when he is trying to sell you something.
Stay away from leverage…. Nobody ever goes broke that doesn’t owe money.

You can view the whole interview here…

Quote Of The Week 12/14/08

Stephen Kline — Sun, 14 Dec 2008 20:15:16 +0000

“There are all kinds of businesses that I don’t understand, but that doesn’t cause me to stay up at night. It just means I go on to the next one, and that’s what the individual investor should do.”

- Warren Buffett