Ask Warren Buffett

[Parsad]

CNBC will be doing their annual 3-hour interview with Buffett on March 1st.  Also the annual report comes out this Saturday morning.  If you want to ask a question and have it possibly answered, you can submit it here:

 

http://www.cnbc.com/id/35483921/

 

Cheers!

[Guest ValueCarl]

Your Question for Warren Buffett:

Dear Mr. Buffett, I have come to respect you as being a MASTER of NUMBERS always unafraid to address hocus-pocus accounting head on. I bring to your attention the REAL UNEMPLOYMENT RATE or the euphemistic JOBLESS RATE being somewhere in the range of 30M or 20 percent of the US workforce whilst counting "involuntary part time" and "discouraged workers" in our nation. What should these people do, and how does this jive with you being optimistic about America while you are aggressively capitalizing BYD Company, sometimes called, Build Your Dream, a Chinese auto manufacturer whose vehicles are scheduled to be sold in the US very soon? I would prefer to see your capital stay with us, not agin us, while we confront dirt cheap labor pools abroad. Thank you in advance. ValueCarl

[Rabbitisrich]

Your Question for Warren Buffett:

Dear Mr. Buffett, I have come to respect you as being a MASTER of NUMBERS always unafraid to address hocus-pocus accounting head on. I bring to your attention the REAL UNEMPLOYMENT RATE or the euphemistic JOBLESS RATE being somewhere in the range of 30M or 20 percent of the US workforce whilst counting "involuntary part time" and "discouraged workers" in our nation. What should these people do, and how does this jive with you being optimistic about America while you are aggressively capitalizing BYD Company, sometimes called, Build Your Dream, a Chinese auto manufacturer whose vehicles are scheduled to be sold in the US very soon? I would prefer to see your capital stay with us, not agin us, while we confront dirt cheap labor pools abroad. Thank you in advance. ValueCarl

 

 

How did you calculate the 30 million figure. Per the Employment Situation Summary for January '10, there were 25.6 million unemployed, under-employed, and marginal workers. Those are not seasonally adjusted figures.

[Guest ValueCarl]

Only "The Shadow" fully knows, comprehends and grasps the real gap beyond U6. As a beginning, U6 should be cited more often. Indeed, my numbers are estimates while I continue to witness ominous trends from Silicon Valley and the rest of the nation on a weekly basis. Let's hope that Mr. Buffett can remove some of the obstacles blocking the LIGHT creating, "The Shadow." They don't call him "The Oracle" without cause, and nobody I have ever witnessed has a mastery of numbers and stats in his head the way this man does. imo     

 

The “Real” unemployment rate in the US is now 22%

The media and government officials often tout the unemployment rate using the official, or U3 rate, which stands at 10.2% for October. While 10.2% unemployment is certainly bad enough – it’s the highest rate nationally excluding 1983s 10.8% - it pales when compared to the U6 unemployment rate. First let’s discuss the differences between U3 and U6 measures.

 

According to the Bureau of Labor Statistics (BLS) the U3 measure is described as “total unemployed, as a percent of the civilian labor force (official unemployment rate).” Now let’s take a look at the BLS U6 measure: Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

When including marginally attached workers and those forced to work part-time instead of full-time we have a national unemployment rate of 17.5%, which is nearly 70% higher than the U3 rate of 10.2%. That’s a dramatic increase from the normally quoted U3 unemployment rate, but even U6 fails to provide the actual percentage of people who are, or may be considered unemployed.

 

John Williams discusses alternative unemployment data sets at his Shadow Government Statistics site. Their service, in part, “exposes and analyzes flaws in current U.S. government economic data and reporting.” Once those flaws are included in the unemployment calculation – called the SGS Alternate - the unemployment rate reaches 22%. Shadow Government Statistics gives the following reason for SGS Alternate measure: “The SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated “discouraged workers” defined away during the Clinton Administration added to the existing BLS estimates of level U-6 unemployment.”

 

To clarify why the discrepancy between U6 and the SGS Alternate rate of 22%, I contacted the BLS and received the following answer to my question about the change in discouraged worker designation during the Clinton Administration:

“(P)rior to 1994 persons were not asked whether they had searched for work recently. If they gave one of the five “discouraged worker” reasons for not looking for work in the past 4 weeks, they were assumed to have “given up” the search for work, although they weren’t asked when they had last looked. As a result of the greater specificity introduced in 1994, the number of discouraged workers was cut approximately in half, from about 1.1 million in 1993 to 500,000 in 1994.”

About 600,000 people were removed from the unemployment calculations in 1994, so if you merely add those 600,000 to the current U6 number, the rate of unemployment would be much higher than 17.5% and would more accurately be reflected in the SGS Alternate unemployment rate of 22%.

 

http://www.layofflist.org/2009/11/16/the-real-unemployment-rate-is-now-22/

 

 

[value-is-what-you-get]

Here's the link to part 1 of the interview - first thing WEB says is a smack down for dumbass Kernan.  I particularly enjoyed that part!

 

http://www.cnbc.com/id/35641059

 

[CassiusKing1]

Hopefully they'll be replaying this.  Anybody know the schedule?

[dcollon]

I think I have the whole transcript (quickly reformated) here.

 

 

[vinod1]

I think I have the whole transcript (quickly reformated) here.

 

 

 

Thanks for the transcript. Saved me a couple of hours.

 

Vinod

[CassiusKing1]

I think I have the whole transcript (quickly reformated) here.

 

 

 

Thanks for the transcript. Saved me a couple of hours.

 

Vinod

Agreed.  Thanks for the transcript.  Much easier to get through.

[shalab]

Thank you for the transcript! It saved me a bunch of time. Joe Kernan comes across as totally boorish and unprepared - may be people like to watch this guy on TV. Good that he got the brick  ;D

[Myth465]

Do you guys read these sorts of things vs watching them?

[alwaysinvert]

KERNEN: Hey, Warren, Warren, were you using the rule of 72 there? You were, weren't you?

 

BUFFETT: No, actually, I was calculating the distance of the moon and dividing by the speed of sound.

[DCG]

Thanks for posting the transcript. That was a great read. It sounds like the people doing the interview are morons who know verry little about Berkshire and were uninformed, but Buffett was candid and insightful as usual.

[nodnub]

The same three people have done this long-form interview with WEB in each of the past few years. Joe Kernen always comes across as a windbag.  The other two are not so bad when they aren't constantly interrupted by Kernen's dumb questions and comments. In past WEB interviews I swear Joe only spoke for the sake of hearing his own voice, instead of having anything useful to say.

[Guest ValueCarl]

Others are choosing to explore, rather than ignore, as did Mr. Buffett and his more dubious CNBC host on Monday, REAL UNEMPLOYMENT RATES in America!

 

It was interesting that Mr. Buffett's letter did not offer any meaningful predictions about "Mr. Market's" direction this time around. Without a doubt, that's the wiser course of action, even for an "Oracle." imo 

 

http://finance.yahoo.com/tech-ticker/%22real%22-unemployment-could-surge-to-25-portfolio-manager-says-435911.html;_ylt=At01iTBfZiAMFrIncJIlI4O7YWsA;_ylu=X3oDMTE2MXUxdjRtBHBvcwMxMARzZWMDdG9wU3RvcmllcwRzbGsDcmVhbHVuZW1wbG95?tickers=^dji,^gspc,dia,spy,man,LCCMX,KELYA&sec=topStories&pos=8&asset=&ccode=

[DCG]

Now I have an additional reason to route against France in the World Cup.  :P

[Guest ValueCarl]

Would our Oracle from Omaha agree with this, "The Market Oracle's" position? Considering my feeble memory recall during the past few years heading into and during the crisis, I can't remember Messrs Buffett or Munger criticizing turning the PRINTING PRESSES on FULL BLAST!

 

They've BLESSED every spending spree in CREATION to date.

 

Great article, citing outstanding financial history, while acting counter to more traditional conservative think tank groups in America, land of the free, home of the brave new world order. imo

 

 

http://www.marketoracle.co.uk/Article17685.html

 

BE CAREFUL WHAT YOU WISH FOR...

 

But there are pitfalls to budget surpluses as economist Randall Wray points out in his article "The Federal Budget is NOT like a Household Budget" on New Deal 2.0:

 

"The US federal government is 221 years old, if we date its birth to the adoption of the Constitution....With one brief exception, the federal government has been in debt every year since 1776. In January 1835, for the first and only time in U.S. history, the public debt was retired, and a budget surplus was maintained for the next two years in order to accumulate what Treasury Secretary Levi Woodbury called “a fund to meet future deficits.” In 1837 the economy collapsed into a deep depression that drove the budget into deficit, and the federal government has been in debt ever since. Since 1776 there have been exactly seven periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson’s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third. Of course, the last time we ran a budget surplus was during the Clinton years. I do not know any household that has been able to run budget deficits for approximately 190 out of the past 230-odd years, and to accumulate debt virtually nonstop since 1837.

 

The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. (Do you see any pattern? Take a look at the dates listed above.) With the exception of the Clinton surpluses, EVERY SIGNIFICANT REDUCTION OF THE OUTSTANDING DEBT HAS BEEN FOLLOWED BY A DEPRESSION, and every depression has been preceded by significant debt reduction....our less serious downturns have almost always been preceded by reductions of federal budget deficits. I don’t know of any case of a national depression caused by a household budget surplus." (Randall Wray, "The Federal Budget is NOT like a Household Budget: Here’s Why", New deal 2.0)

 

Repeat: The seven periods of budget surpluses in the US were followed by six Depressions. Will this be the seventh? It depends on whether sanity prevails and Obama pushes another stimulus package through congress. Otherwise, we're toast

 

 

 

 

[beerbaron]

Good article ValueCarl, I do have some comments about it tough.

 

He should have stated that the debt to GDP only decreased 10% of GDP in the Clinton era. Nothing compared to the other depressions which state 30% and more.

 

From reading it's stats it seems that the depressions follows right after, NOT 10 years after.

 

So yes, we are in a deleveraging process, and yes the government will have to borrow the extra money. But it has nothing to do with the Clinton's debt repayment. I believe debt should be in a specific range (depending on the amount of foreign debt) and that getting out of that range could do greater damage then 20% unemployment. You don't want the IMF to come down to the US!!!

 

BeerBaron

 

[Guest ValueCarl]

A most astute observation including "timing," Beerbaron. I concur with your analysis in that, NOT all debt is bad, nor is all debt unnecessary.

 

This being said, would you like to share your magical percentage formula which will keep the IMF from coming down hard on this land of the free, home of their NWO?  :)

[beerbaron]

A most astute observation including "timing," Beerbaron. I concur with your analysis in that, NOT all debt is bad, nor is all debt unnecessary.

 

This being said, would you like to share your magical percentage formula which will keep the IMF from coming down hard on this land of the free, home of their NWO?  :)

 

Lol, I have absolutely no idea if it's 100% of GDP or 1000% of GDP. Usually the more variables are included in an equation and the more range you need to give yourself to include errors. That is what most analyst fail to understand, we never deal with exact numbers when we make projections/predictions. There is hundreds of variables in there, and most of them are rather linked to perception then facts so why even bother... give yourself a range that you consider dangerous and be caution when we are in it.... Whatever the number, a country has no advantage to explore into unknown areas, all empires fail one day or another and it would suck to be part of one.

 

BeerBaron