Buffett’s bet on peak oil

Warren Buffett is lauded as one of the greatest investors of all time, if not the greatest. He's the second-richest person in the world, and known as the "Oracle of Omaha" for his seemingly prescient investments. For example, in the wake of the collapse of Bear Stearns and during the height of the market panic that followed it, Buffett stepped in and negotiated a deal with Goldman Sachs. He acquired $5 billion worth of preferred shares, which would pay him a 10% dividend, as well as warrants with the rights to sell those shares at any time within 5 years from the time of the transaction. As of September this year, those warrants were "in the money" to the tune of $3.1 billion, and that doesn't include the $500 million in premium payments that Goldman pays every year. Those lucrative terms (punitive for Goldman Sachs) left others wondering why the Treasury Department could only negotiate a 5% dividend, but that only added to the mystique and legend of Warren Buffett. At the time, Buffett was quoted as saying "If I didn't think the government was going to act, I would not be doing anything this week," referring to the massive bailout bill which was indeed enacted by the government. It's deals like that that enable one to become one of the richest people in the world. But it's also that background that has some on Wall Street scratching their heads at the news that he was purchasing Burlington Northern railroad. The Wall Street Journal discussed how the acquisition seemingly broke two of Buffett's cardinal rules on investments: 1) buy undervalued stocks or companies, for obvious reasons and 2) don't split your own stocks, as it dilutes the equity of the existing shareholders. Bloomberg quoted a hedge fund principal as saying, "It could be five years before the logic of [Buffett's purchase of] Burlington Northern becomes clear." Even Buffett admits that the purchase was "not cheap" and that it represents an "all-in wager"on the future of the American economy. And there can be no doubt that it is a significant investment-- he's liquidating other rail investments totaling $691.3 million while the Burlington Northern purchase will cost some $26 billion-- an increase in his railroad holdings of some 3,600%. And this bears repeating, he's splitting stock to get it done. This is the first time ever that Berkshire Hathaway (Buffett's investment company) has split shares. He's so reluctant to split shares, the class A shares regularly trade over $100,000 per share, an unheard-of valuation.

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“Going Muslim” as the new “going postal”

The shootings at Fort Hood last week have provoked a media feeding frenzy. Questions abound, and there is no dearth of speculation as to the shooter's motives. Most articles I have seen waste no time pointing out that the shooter was a Muslim, that he exclaimed "Allahu akbar" before shooting, and that he is linked with radical imams and possibly Al Qaeda. That's from the ostensibly "impartial" media, but there are also a few extremely distasteful editorial perspectives that are unfortunately quite mainstream that I wanted to comment on today. I'm afraid my ability to edit sarcasm out of my posts declines in direct proportion to the insanity and hypocrisy with which I'm confronted, so bear with me. First, Forbes featured an article by Tunku Varadarajan entitled "Going Muslim", a play on the old phrase "going postal". He describes it thusly:

As the enormity of the actions of Maj. Nidal Malik Hasan sinks in, we must ask whether we are confronting a new phenomenon of violent rage, one we might dub--disconcertingly--"Going Muslim." This phrase would describe the turn of events where a seemingly integrated Muslim-American--a friendly donut vendor in New York, say, or an officer in the U.S. Army at Fort Hood--discards his apparent integration into American society and elects to vindicate his religion in an act of messianic violence against his fellow Americans. This would appear to be what happened in the case of Maj. Hasan.

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Church To State: “Do What We Want Or Else.”

The divide between church and state seems on the one hand to be growing but on the other narrowing, especially when you consider how intrusive established religions have been. Representatives of the Catholic Church sat in Nanci Pelosi's office of late while negotiations for the health care bill were ongoing, overseeing what she would do about abortion. Now this. Any way one reads this, it comes out as a threat. The quid pro quo is explicit. "If you don't bend to our will on this, we will stop services your city relies on." I have in the past believed that the tax exempt status of religions was a necessary work-around to preserve the fiction of separation. In the past, there have been instances of state intrusion directly into religions in, for one example, state funding for programs in parochial schools. There was always a quid pro quo in such offers and practices. But never has a representative of the state sat in the office of a minister while he drafted a sermon to be sure certain details got left out or included. Never, despite massive abuses by religious institutions in real estate and related financial areas, has the state moved to revoke 501(c)(3) status. It may be that any state official who tried it would be booted out of office summarily, but nevertheless that has been the unspoken law of the land. Seems the courtesy doesn't go both ways. If that's the case, I think it is time to revisit the whole issue. If the Catholic Church sees itself as providing services as an arm of the civil service sector and allows itself the conceit that it may use that service as a lever to influence political decisions, then they have implicitly given up due consideration as an inviolate institution, free from state requirements of taxation and regulation. Seems fairly clear cut to me. Obviously, there will be those who disagree. But it's time, I think, to seriously reconsider the state relationship to so-called "nonprofit" "apolitical" tax exempt institutions.

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Sepuku, Republican Style.

It's been absurd for a long while, but the apparent self-destruction of the Republican Party is reaching new depths. Senator Lindsay Graham of South Carolina is being censured by the state G.O.P. organization for working with Democrats on a climate bill. Here is the Fox News report. For contrast, here is the Huffington Report. All one can do is stare and ask "What is wrong with those people?" Despite party leader calls for bipartisanship, we see repeated motions by the grassroots elements of the embattled party to circle the wagons and harden their resolve to do nothing to aid and abet what they perceive as The Enemy. Which is what, exactly? Anything, it seems, which suggests that people cannot manage their own affairs, no matter how much they might affect other people, is disallowed. If legislation is proposed to control behavior of individuals, it is anathema to the Republicans. Unless we're discussing abortion. Then the full weight of the state must be brought to bear to prevent individual choice. If the Democrats are smart, all they need do is continue to discuss issues in rational, thoughtful ways, and let the Republican Rabid Dog Wing continue to vociferate mindlessly, and in 2010 there will be another bloodletting of Republican presence in Congress. All the Republicans seem able to do anymore is bang their shoes on the desk and repeat "No! No! No!" At some point, surely, there will be a schism (much like the one we saw in upstate New York) and the sane and rational Republicans will split away from the hydrophobic microcephalics that have been destroying them for so long. That cannot but be a good thing in the long run.

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Kelo vs. New London revisited

Remember the case of Kelo vs. New London? Briefly, it was a case in which homeowners including Susette Kelo sued their municipality to stop it from taking their homes using the power of eminent domain. The city wanted to raze the homes and redevelop the area, making it shiny and new to complement the anticipated Pfizer pharmaceutical research facility. After all, one musn't allow the shabby dwellings of the peasantry to mar the image of success and corporate uniformity that one is trying to project:

So, the politicians picked a 24-acre lot and sold it Pfizer for $10, adding on special tax breaks. Also, state and local governments promised $26 million to clean up contamination on the lot and a nearby junkyard. But Pfizer executive David Burnett thought New London needed to do some more cleaning. "Pfizer wants a nice place to operate," the Hartford Courant quoted Burnett in 2001. "We don't want to be surrounded by tenements." The old Victorian houses in the Fort Trumbull neighborhood next door did not match Pfizer's vision - a high-rise hotel or luxury condominiums would be more fitting.

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