Forbes on Buffett.....this stuff is just too good.

[netnet]

 

 

As for the person who doesn't like Charlie's upholding of traditional Chinese values and calling him "racist," I think you're seeing what you want to see. Charlie hired a Chinese guy (who by all accounts loves him) to manage half his fortune and the guy goes on and on about what an amazing job China has done coming up from poverty, and how much he admires Chinese ethos and how much he admires that Chinese folks are outperforming Americans, and particularly young Mungers...and he's racist? What are you talking about?

 

Give this a read and tell me why this 1950's racist man is so beloved by a Chinese man. http://www.distressed-debt-investing.com/2010/06/li-lus-foreword-to-poor-charlies.html

 

Dude, not to pick a fight and it's the internet and one tends to read quickly, but to quote you, coc: What are you talking about?

 

No I absolutely did not call Munger a racist. nor do I think he is racist. (I will modify my comment to reflect that absolute distinction.)  I said that the language he uses smacks of 1950's (racist) way of talking. If him saying things like, well "I like those old Jews," is honey to your ears, then more power to you. if you like stereotyping people, well whatever.

 

It makes me cringe, and to me it is from a time when in "polite" company you could talk about how hard those Polish janitors work and my those Jewish women in their fur coats seem to talk about how much money their husband make. Frankly, I don't like that kind of thing one bit. My point was my idol is human and has feet of clay.  This clearly not an issue for him. (I should also add that the Chinese exclusion acts were justified by the fear of the 'yellow' races taking over, so you see historically the language could be problematic.  So....

 

Let me add though, in a Mungerist twist, that in Hawaii it is perfectly acceptable to talk about how the Japanese (Americans) run the firefighters union and you can say to someone you just met, "You're happa (half or mixed) you're half white but what else are you." 

[Mephistopheles]

The IRS cuts deals all the time. I just watched the documentary on Scientology. The scientologists pretty much bullied the IRS into cutting a deal with them. And that was the 90s. Imagine decades earlier.

I would be surprised if Buffett didn't cut a deal with the IRS at some point in his life. He's been in business over 60 years and we all know he is desperate to avoid taxation, did he not try to write off his bicycle as a business expense when he submitted his first tax return!?

 

I would be shock it at some point in his career he didn't cross the line at some point. To cross swords with the IRS doesn't make him a crook, however at the same time you can't help but think his attitude to taxation is more of a "do as I say" rather than a "do as I do".

 

This so called Buffett hypocrisy on taxes is laughable. Fact is that he made his early fortune when tax rates were much higher than now--he actually had a tougher playing field.

 

But that's not a question of playing field. His tax hypocrisy (at least in my opinion) has to do with his stance on income tax when he says his secretary pays a higher rate then him if you include payroll tax. He's done a great job at fooling America with this idiotic argument. His secretary even made it to Obama's State of the Union Address!

 

This argument is intellectually dishonest because a) he isn't compensating for the benefits after retirement and b) he includes the employer's portion of the tax under in his secretary's tax burden.

 

Meanwhile he makes 99.9% of his personal income through capital gains and dividends. So even if they were to raise payroll taxes to an infinite income ceiling, or even if they were to raise the income tax rates on high incomes to compensate, it would make no difference to his tax liability!

 

Funny how he rarely talks about raising the dividend, capital gain, or corporate tax. I wonder why that could be ...

[Jurgis]

But that's not a question of playing field. His tax hypocrisy (at least in my opinion) has to do with his stance on income tax when he says his secretary pays a higher rate then him if you include payroll tax. He's done a great job at fooling America with this idiotic argument. His secretary even made it to Obama's State of the Union Address!

 

This argument is intellectually dishonest because a) he isn't compensating for the benefits after retirement and b) he includes the employer's portion of the tax under in his secretary's tax burden.

 

Meanwhile he makes 99.9% of his personal income through capital gains and dividends. So even if they were to raise payroll taxes to an infinite income ceiling, or even if they were to raise the income tax rates on high incomes to compensate, it would make no difference to his tax liability!

 

Funny how he rarely talks about raising the dividend, capital gain, or corporate tax. I wonder why that could be ...

 

You might be totally right in what you wrote and I guess I never listened to the details of his secretary's example. But I always thought that the example was that he was not paying taxes because his income was cap gains (or untaxed unrealized cap gains) while the secretary's income was salary. That makes sense as an example and does raise the issue of cap gains taxes (which is another can of worms). You might be right though and maybe the example people have in mind is distorted from what he said.

 

Peace.

[Dalal.Holdings]

Meanwhile he makes 99.9% of his personal income through capital gains and dividends. So even if they were to raise payroll taxes to an infinite income ceiling, or even if they were to raise the income tax rates on high incomes to compensate, it would make no difference to his tax liability!

 

Funny how he rarely talks about raising the dividend, capital gain, or corporate tax. I wonder why that could be ...

 

You're absolutely wrong--he's been talking about raising capital gains taxes all along: http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=0

 

Straight from the horse's mouth:

 

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

 

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

 

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

[Mephistopheles]

 

 

You might be totally right in what you wrote and I guess I never listened to the details of his secretary's example. But I always thought that the example was that he was not paying taxes because his income was cap gains (or untaxed unrealized cap gains) while the secretary's income was salary. That makes sense as an example and does raise the issue of cap gains taxes (which is another can of worms). You might be right though and maybe the example people have in mind is distorted from what he said.

 

Peace.

 

 

You're absolutely wrong--he's been talking about raising capital gains taxes all along: http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=0

 

Straight from the horse's mouth:

 

 

Touche.

 

But I stand by my main point about the whole payroll tax argument being nonsense.

[Dalal.Holdings]

 

But I stand by my main point about the whole payroll tax argument being nonsense.

 

No idea where you're assuming Buffett ever said anything about raising payroll taxes. What matters (and what Buffett focuses on) is the percentage of total taxes paid by an individual relative to total income (why the secretary example makes sense: total taxes/total income). Emphasis added to WB's words:

 

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

 

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

[Mephistopheles]

 

But I stand by my main point about the whole payroll tax argument being nonsense.

 

No idea where you're assuming Buffett ever said anything about raising payroll taxes. What matters (and what Buffett focuses on) is the percentage of total taxes paid by an individual relative to total income (why the secretary example makes sense: total taxes/total income). Emphasis added to WB's words:

 

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

 

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

 

No, I said that he includes payroll taxes along with income/capital gains taxes when he goes out and says his secretary pays more. That's why she has like a 33% effective rate. I'm saying that's bs to include it in the calculation.

 

Edit: here's the link

 

There is also the double taxation issue with dividends and cap gains. Another reason why the numbers are dishonest.

 

Editx2: Re raising income/cap gains above $1 million/$10 million, I wonder what he thinks the cap gains rate should be? Since he doesn't mind the double taxation and all. Should it be taxed as ordinary income? Eliminate long term capital gains?

 

I remember on CNBC a few years ago they asked him about the double taxation. This was in 2012 when there was talk about Romney's 14% effective rate and Buffett's 17%. He dodged the question saying there is no double taxation for him when he invested in Korean securities, or when Romney invested in bankrupt companies that paid no taxes. I think he's wise enough to know this is the exception and not the rule.

[doughishere]

Dont think this was in the last one

 

 

http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm

[Guest longinvestor]

Dont think this was in the last one

 

 

http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm

That's a classic. Here's the final word from it about critters taking flight in 2016..

 

 

is talk of 17-year periods makes me think--incongruously, I admit--of 17-year locusts [pictured below]. What could a current brood of these critters, scheduled to take flight in 2016, expect to encounter? I see them entering a world in which the public is less euphoric about stocks than it is now. Naturally, investors will be feeling disappointment--but only because they started out expecting too much.

[stahleyp]

just something to note.

 

With inflation, a $1,000 in 1964 took $2,932.26 in 1981.

 

Buying power of $1,000 in 1999 only took $1,436.14 today.

 

Per Buffett in that article, GDP rose 370% during the period from 1964-1981.

 

GDP was Dec 31, 1999 12.32 trillion and Mar 31, 2016 16.49 trillion

 

Now, unless we have low rates for an extended period of time or some crazy productivity gains, I don't see the next 17 years being what they were from 81-99.  In reality, this past 17 year period wasn't all that bad (well, unless there is a big market drop later this year) compared to the 64-81 period.  Returns weren't bad given gdp growth wasn't great and low inflation.

[Guest longinvestor]

just something to note.

 

With inflation, a $1,000 in 1964 took $2,932.26 in 1981.

 

Buying power of $1,000 in 1999 only took $1,436.14 today.

 

Per Buffett in that article, GDP rose 370% during the period from 1964-1981.

 

GDP was Dec 31, 1999 12.32 trillion and Mar 31, 2016 16.49 trillion

 

Now, unless we have low rates for an extended period of time or some crazy productivity gains, I don't see the next 17 years being what they were from 81-99.  In reality, this past 17 year period wasn't all that bad (well, unless there is a big market drop later this year) compared to the 64-81 period.  Returns weren't bad given gdp growth wasn't great and low inflation.

Buffett was spot on about 1999 and the mood/expectations of investors as a whole. That mood does not exist today. That's all that Buffett said. If he follows with another one for the next 17, we'll see. We can go with Munger's repeated comments about head scratching needed to try to understand today. And their next-50 commentary. The last 17 was aberrational. The clock is perhaps not a 17 year one, maybe 20, 25? Kinda like 1929 - 1950's

[Jurgis]

Today, if an investor is to achieve juicy profits in the market over ten years or 17 or 20, one or more of three things must happen. I'll delay talking about the last of them for a bit, but here are the first two:

 

(1) Interest rates must fall further. If government interest rates, now at a level of about 6%, were to fall to 3%, that factor alone would come close to doubling the value of common stocks. Incidentally, if you think interest rates are going to do that--or fall to the 1% that Japan has experienced--you should head for where you can really make a bundle: bond options.

 

(2) Corporate profitability in relation to GDP must rise. You know, someone once told me that New York has more lawyers than people. I think that's the same fellow who thinks profits will become larger than GDP. When you begin to expect the growth of a component factor to forever outpace that of the aggregate, you get into certain mathematical problems. In my opinion, you have to be wildly optimistic to believe that corporate profits as a percent of GDP can, for any sustained period, hold much above 6%. One thing keeping the percentage down will be competition, which is alive and well. In addition, there's a public-policy point: If corporate investors, in aggregate, are going to eat an ever-growing portion of the American economic pie, some other group will have to settle for a smaller portion. That would justifiably raise political problems--and in my view a major reslicing of the pie just isn't going to happen.

 

So where do some reasonable assumptions lead us? Let's say that GDP grows at an average 5% a year--3% real growth, which is pretty darn good, plus 2% inflation. If GDP grows at 5%, and you don't have some help from interest rates, the aggregate value of equities is not going to grow a whole lot more. Yes, you can add on a bit of return from dividends. But with stocks selling where they are today, the importance of dividends to total return is way down from what it used to be. Nor can investors expect to score because companies are busy boosting their per-share earnings by buying in their stock. The offset here is that the companies are just about as busy issuing new stock, both through primary offerings and those ever present stock options.

 

So I come back to my postulation of 5% growth in GDP and remind you that it is a limiting factor in the returns you're going to get: You cannot expect to forever realize a 12% annual increase--much less 22%--in the valuation of American business if its profitability is growing only at 5%. The inescapable fact is that the value of an asset, whatever its character, cannot over the long term grow faster than its earnings do.

 

So bad news is that Buffett was wrong in both points 1 and 2. Why bad news? Because that might have juiced the returns of last 17 years a bit, but looking forward we have to look at points 1 and 2 again and likely to come to Buffett's conclusion again: rates won't fall further from here and corporate profitability won't rise. Assuming we stay with Buffett's prediction on GDP growth, we are pretty much back to his 1999 prediction: pretty subpar general market growth. Yeah, I know, valuations are lower and we still can try to outperform the market. But general returns are unlikely to be great. (Some people will argue that this means we need to short, whatever, but unlike 1999 market may not have a predictable crash. It may just meander like it did for 2015 and so far this year).