Warren Buffett Has No Regrets About the Past Year — Do You?
Published on - October 2nd, 2009 (by Adam Baker) This article is GRS staff writer Adam Baker. In addition to his work at Get Rich Slowly, Baker blogs over at Man Vs. Debt, where he maintains a list of every single item his family owns.
It’s no secret that J.D. loves him some Warren Buffett. Honestly, though, who doesn’t? Financial wisdom seems to ooze from his pores. Previously on Get Rich Slowly, J.D. has touched on Buffett’s philosophies, well-known frugality, and charitable efforts.
Buffett was born, raised, and still lives in Omaha, Nebraska. Even as a child, Buffett constantly tinkered with business concepts. He filed his first income tax return at age 13, including a $35 work expense deduction for his bike and watch. These days, at age 79, Buffett is one of America’s most respected business minds and constantly jockeys with Bill Gates and Carlos Slim Helu for the position of richest person in the world.
A couple of weeks ago, CNBC ran a special “One Year Later” interview with Buffett marking the one-year anniversary of the height of the financial crisis. The interview is relatively short (just under twelve minutes), but manages to touch on everything from specific phone conversations to the state of healthcare reform.
The video below is courtesy of CNBC, which has also provided a downloadable PDF of the full-transcript.
Lehman and AIG call on Buffett for help
For me, the most intriguing part of the interview is when Buffett discusses his call from Bob Diamond, the head of Barclays. The venerable investment bank Lehman Brothers was in a desperate state, and Barclays, a British financial services firm, was looking to step in and take over the operation. Because of the size of the deal, though, British authorities were requiring a vote of the shareholders, which would take several days to organize. Knowing Lehman’s time was extremely limited, Barclays wanted Buffett to insure the transaction, effectively providing a short life-line to Lehman Brothers while the Barclays shareholders could be organized for a vote.
Buffett admits that during the initial phone call, he couldn’t understand the details of what would be required in the transaction. He laughs at how he received the first call just before heading into a dinner party on Friday night. Ultimately, Buffett requested additional information, but the inevitable meltdown started only hours later. To this day, Buffett still isn’t completely clear on what they wanted him to do.
This was only one of a couple phone calls Buffett received that weekend last September. Buffett’s recollection of the events couldn’t have been more entertaining if Hollywood had written the script itself. Ultimately, though, none of the transactions that were discussed came to fruition.
When asked directly if he has any regrets about the decisions he made (or rather didn’t make) during that weekend, Buffett responds, “No.” He adds with a chuckle that “it was a movie to see, but not to participate in.”
Buffett’s endorsement of government intervention
Ultimately, though, Buffett praises the government intervention that occurred in the weeks and month after the events. He even used the word “heroes” to describe:
- Federal Reserve Chairman, Ben Bernanke
- Former Treasury Secretary, Henry Paulson
- Current Treasury Secretary, Timothy Geithner
Buffett says that without their actions, “it would have gone further than anybody would have wanted to see.”
The public has been quick to criticize much of the government response over the last year. The approval ratings of Bernanke, Paulson, and Geithner aren’t exactly at all-time highs, so I find it interesting that Buffett provides such a strong endorsement of the actions of both Presidential administrations.
The state of the recession and the future of the economy
When pegged for his opinion on whether the recession is over, Buffett opines that “it’s sort of plateaued…” and that, barring any single catastrophic event, things should start to improve. “We’re past the critical point,” he finishes.
Strong words of hope from one of America’s most trusted sources of investing wisdom. But, what do you think? Do you see evidence that we’ve “plateaued”? Is the worst behind us? Do you feel the government intervention over the past year has helped the recovery — or delayed it?
For a more complete picture on Buffett’s responses, be sure to watch the full video interview. It’s well worth twelve minutes of your time!
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I don’t think the recession is over. I think there’s plenty of time for other people to default on their mortgages. I’m hoping that once more jobs are created that things will drastically improve. I’m going to be positive.
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Buffett has no regrets because he is still a kajillionaire, even if he did lose a ton of $$ last year.
As for government intervention – I have no idea if it was a good thing or not – the fact is that nobody (including Buffett) knows. What I do know is that Buffett is heavily invested in the insurance industry so government intervention to keep the financial markets moving was very beneficial to him personally.
In other words – when he talks about how bad things might have gotten without intervention, he might be talking more about his own situation rather than the whole country.
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I see large structural challenges being faced by people who are hoping they will have moved to another company/the other party will be in power when the wheels come off.
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The recession may or may not be over, but I believe the stock market has hit its low and housing in most places has hit its low. The Fed hasn’t been trying to prevent a recession or keep people/corporations/banks from losing money. They’ve attempted to shore up banks enough that the economy doesn’t go into utter meltdown due to panic and frozen credit, which would wipe out thousands of good viable businesses along with the bad and marginal. This economy may be crummy, but it isn’t the great depression. Would the economy have recovered okay without the Fed’s massive intervention? Maybe. Maybe not.
Now that the rapid plummet has stopped though, it’s time to take our lumps and just deal with the fact that the stock market, housing market, job market, and credit market all got way overheated. Recessions can actually help the country in the long run by forcing people and companies to make more efficient use of their available money. The government needs to stop interfering now that the credit free fall has stopped. If they don’t we’ll end up with more problems down the road. Stagflation anyone?
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Not enough people are talking about how well the bailouts were handled. Just having an inkling of how connected these firms were to the foundation pillars of the economy is enough to know that “too big to fail” was right.
Doesn’t mean we shouldn’t fix that – we definitely should, since we did end up rewarding bad actors and that’s not a good idea – but the calculus was right. Better to reward bad actors than punish everyone needlessly and majorly.
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Just yesterday my husband was discussing Warren Buffet’s stock portfolio, comparing it to his own (of course the difference is in the billions!). Buffet has lost more than half of his net worth on stocks (something like $55 billion). My husband, himself, was complaining about his measly loses and saying how it’s an indicator that the public still isn’t very sure what the economy is going to do.
I agreed with this view of the economy and added my 2-cents, with my point being that so many people haven’t gotten that raise they expected this year that they were expecting and had to tighten their belt. Some people completely lost their job and had to take a lower paying job, if they were lucky to even get a job. So consumer spending is down, WAY down and that in itself affects the stock market and the entire economy. So, we may have plateaued like Buffet said, and I think we are have maybe another year or two before we see a more prosperous economy.
-Little House
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I think the economy has probably bottomed out, but employers are still cutting a few more jobs to jump-start cash flow while waiting for consumer spending to improve.
DH was laid off last week due to cost-cutting and it will probably be 3-6 months until he finds another job.
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The recession is DEFINITELY over, and the job market in the financial industry at least is back to their crazy ways. Compensation is also back as firms now OVER hire after they over fired.
Regrets? I definitely regret not scooping up more rental properties this summer, as prices have rebounded about 15% in my area, while stocks are up 50%.
So many people are know are getting raises and new job offers it’s unbelievable. It’s as if the downturn never happened.
Warren could have waited 20% more to buy into GS, but it was close enough.
Bull market is back, but I ain’t buying stock!
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I believe the question was not “is the recession over” but was “do you see evidence that we have plateaued?” To this I would point to the March 9th low of the stock market. I think we are on the steps to economic recovery; however, I have a feeling that there will still be some stumbling blocks.
I do not feel Wall Street has (or ever will) learn their lesson of responsible and ethical business practices. This is an industry perpetuated by the notion that exploiting loopholes is the key to profit. Moreover, those responsible for this whole debacle were never held fully accountable.
As far as myself, since 2004 I have been extremely financially responsible. The breaking point for me was in the Fall of 2004 when my credit card balance reached $10K, and I was only earning $35K/yr. This forced me to re-evaluate what I wanted for the future and was willing to post-pone in the present. I cut my expenses to the bone, took on a roommate, and set realistic financial goals for myself. Five years later, and I can say that I am: completely free of credit card debt; contributing the maximum to my Roth IRA (which I have been doing since graduating college); and for 2008 and 2009, contributing the maximum amount to my 401(k).
Hopefully, this will serve as a “wake-up call” to the rest of the nation to stop over-indulging via credit and start saving/budgeting for the future. Our society has shifted from the culture of “walking the long, steady path” to “right here, right now.” It seems we have gone from a nation that was willing to pull together to face insurmountable odds (i.e. the Great Depression, World War II, etc.) into what I can only describe as “financial piracy” (take whatever you can for yourself i.e. welfare, bailouts, etc.).
Whatever happened to an honest wage for honest work? Now, it’s all about what people can get for free.
I think the late Dr. Adrian Rogers said it best:
”You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.”
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Whether or not the recession is over is immaterial at this point. The “heroic” rescue efforts have seriously weakened the value of the dollar in the eyes of global investors and they are actively seeking to replace it as the world’s reserve currency. When — not if — that happens, we will be hit with a tidal wave of hyperinflation that will finish wiping out those of us who have managed to survive the recession pretty much intact. The recession and the credit crunch were just the fourth inning of this ball game.
My only regret is that I didn’t cash in on this dead cat bounce even though I had cash reserves to so.
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I do not believe that the worst of the economic crisis is behind us. I don’t think government action did much to help or to hurt. I see the stimulus bill as having been a distraction from the real problems.
I think we need to come to terms with the flaws of the conventional investing advice. This will restore middle-class confidence in the markets, in our economic system and in our political system. It’s a hard step to take because it is scary to acknowledge that we got so much important stuff so wrong. But the potential payoff is huge (I believe that once we take serious steps we will be on our way to The Golden Age of Middle-Class Investing).
Bogle has described the conventional investing wisdom of recent decades as “nutty.” Bogle rocks!
Rob
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How do I know when the economy is in a bad state? When my pizza delivery guy or the lady working the counter at 7-11 is older than me, when I see empty houses in my neighborhood that are going through foreclosure, and I don’t see any “Help Wanted” signs in store windows.
Lately, the age of retail workers has been trending downward, there are no empty houses in my neighborhood (as opposed to 4 a year ago), and I’m seeing Help Wanted signs everywhere I go. When retail stores are having problems filling open positions, I feel alright about the economy.
People watch the news too much. This kind of information is all around us, you just have to open your eyes.
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On ground level, I have known a number of people with families who have lost jobs. They aren’t out much crowing about it, don’t want to talk about it and are just keeping to themselves. My father lost his savings, business (and his job). Although he doesn’t make enough money on social security to live on, due to his age he is not going to be hired by anyone. My brother and sister who worked at the business also lost their jobs. My brother got a new job, but my sister took a big pay cut and goes from 1 retail job to the next, as one store after another closes, putting more and more people out of work. As she sees the trend of the stores, and the emptiness of the stores she worked in she tells me she wishes she took the job as a grocery store cashier, as that is looking pretty sweet about now.
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Buffet will back any administration. He cannot say that they are not doing things right because it will have a drastic ripple effect throughout the economy.
Greenspan, Bernanke, and the Federal Reserve have been the worst influences on our individual wealth. Why do you think a dollar in 1950 is now worth 11 cents. That’s a 89% decrease in value! It’s because of the monetary policy of the federal reserve. It is a way to pay back government debt and tax the people of America deceptively. I agree with the fundamentals of this blog. It is important to save and try to make your money work for you. But it is not looking at the obvious data that is readily available. Research different investments and then include a calculation for inflation and you’ll find what is the best investment. I know what is.
Here’s a government inflation calculator if you need one…
http://data.bls.gov/cgi-bin/cpicalc.pl
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I don’t see how things could get worse at all. I don’t believe what analysts say, but have to believe in the next few months thing should hopefully get better.
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i’m not sure what you hope to accomplish by asking people without economics/finance/business backgrounds, whether they agree with a man that has devoted a lifetime to studying these fields.
i may not know the answers, and buffet may not either, but he sure does know a lot more than me. he’s got the bank account to prove it.
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The fundamentals that brought on the recession have not been corrected. Forclosures and unemployment are still increasing every month. The cost for health care, education, and food are increasing, while every retail store in America has to cut prices to sell merchandise to unemployed workers who have to buy stuff with credit. The only reasons why people feel better about the economy today than they did 6 months ago is because the stock market went up, and Obama said that there were green shoots. They forget to mention that the 9.8% unemployment they announce is the U3 number and is actually distorted because it doesn’t count several significant categories of people. The more accurate unemployment number is U6 which is at 17%.
For everyone’s info, it took three years for the Great Depression to hit its worst point. By then everyone had used up their savings, and their family’s savings. We are in month 21 of the Great Recession, how long will it take before it becomes the second Great Depression.
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Buffet endorses the actions of the Fed and the Treasury because they shifted huge losses from Buffet’s portfolio to the taxpayers.
We lost hundreds of billions of dollars so that he wouldn’t have to.
And we will lose trillions of dollars paying on the loans our government took out, and loss of value of the dollar due to inflation from this vast increase in the money supply, to keep those companies afloat.
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Macroeconomics really doesn’t affect any individual person in any predictable way, so I really don’t worry about it too much. The world continues on its course, whatever that may be, and I try to do the best in whatever situation it gives me.
A car accident could easily have a more profound effect on my life than anything done by the federal reserve, but I don’t keep up to date on accident statistics and drunk driving rates hoping that it will help me avoid a crash. I simply try to drive safely and consider each other car as it passes me on the road.
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I don’t know if the recession is over, has plateaued, peaked, valleyed or otherwise. And no one does, if they say they do they are lying. I’m pretty disgusted by the bailouts, considering they let one company fail, then saved the rest. I respect Buffett’s opinion, but what is he going to say? They all screwed up and should be fired? He’s not going to burn a bridge like that.
All I know is our family is living frugally and debt-free (except mortgage) and will continue to do so. I’ll worry about that stuff – things I can control – and do my best to limit risk in the stock market. I’ll hope for big gains, but won’t count on them.
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I agree with Buffett (and I’m happy to see that he sees things the way I’ve been seeing them the last few months!), The disaster is averted, but that doesn’t mean that we’re back on top of the bubble again.
There’s a lot of work to be done before we’ve recovered; I believe this is what he meant by “plateaued”. Obviously it will take time for companies to relax enough to begin hiring again, the US budget needs some serious re-balancing over the next few years to make up for the two stimulus packages (stimuli?), and citizens need to rebuild the damages to their personal finances.
It’s like an airplane running out of gas. We narrowly dodged crashing into the side of the mountain, now we just need to fly down to a safe landing.
Personally 12 months ago I thought we’d be lucky if the Dow was up to 8000 by Christmas; the fact that we’re getting close to 10,000 points out that the stimulus revitalized the market and got money moving again which was the pressing concern. Now that money is starting to move again, and companies and investors aren’t as fearful anymore the benefits of will start to trickle back into the lives of ordinary people like myself.
There’s obviously alot to be done but things are far better than anybody expected a year ago. And the 3000 point jump since spring has worked wonders on my portfolio (I invested heavily when I saw the bottom and got in at 7000).
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I still have friends out of work and friends in houses they can’t afford with interest only loans coming due in 2010 and maxed out credit cards. But my 401k is back up to even so I feel like I’ve personally passed the bottom. But my head tells me nothing has really changed except the stock market went up a little bit. I’m worried about a long period of upcoming inflation.
Where do people put their money during periods of high inflation? Can you do a article on inflation JD? And traditional methods to combat it. If I feel inflation is coming should I put my cash into stock? Bonds? Gold? Anywhere but cash right?
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Someone always has a “friend” who is suffering, and yet none of us are suffering. Guest what folks? We are that “friend” to someone else, and if we’re all doing great, then by default all our friends are doing great.
Seriously, I think we’re more fine than we think. The media just likes to post misery stories.
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Tyler K #19, that’s the best analogy I have ever seen. Thank you.
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@ #2, Four Pillars:
Government intervention IS making it worse. Worse for you and me, but better for them in power. Ludwig von Mises and his followers (eg. Congressman Ron Paul, Peter Schiff, etc) have been warning of this for YEARS (some cases many DECADES), but no one was really listening. Hopefully, their messages are not too late to save us.
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I’ve studied economics, for years, out of personal curiosity. My personal opinion is that Bernanke and the rest did what was necessary to stop a full-blown panic. This should have saved it a lot of people on the margins by lessening the economic impact but stretching it over a greater period of time. America as a country has carried too heavy a debt load for over a century. If we don’t make some major reforms over the next decade there is a very good chance we will be paying the same percentage in taxes as socialist countries without the benefits!
I can’t speak for the rest of the readers, but my personal income this year has dropped dramatically. My average annual income has been $28,000 a year, this year I will count myself fortunate if it reaches $22,000. Two years ago I broke down and bought a new car because I had never owned a vehicle that lasted for a full two years and I’m 49 this year. I rent a room because I cannot imagine paying apartment rent and utilities on my current income. My insurance coverage is through a union which pays for it with a small amount for each hour I work. This calendar year I only worked enough hours to pay for one quarter. My sister is a government employee ( she’s a 911 operator) her insurance costs are the same annually as mine fora single quarter. And she has better coverage and lower deductibles/copayments.
The poorest 20% of Americans are going to continue to see a reduction in our standard of living and a higher portion of our income going to healthcare. Try living on minimum wage for a year. Then tell me if you feel subsidized healthcare and food stamps are a waste of taxpayer money!
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@Financial Samurai has made some interesting points. I was also reading in yesterday’s WSJ about how some banks are remixing the remics –> the process of resecuritization of bad debts has started all over again.
Recall that that was one of the main technical probs going into this. Toxic debts getting rebundled with the good stuff and re-rated (with higher ratings), re-sold, and passed on to the next buyer. Proceed with caution. Most of the underlying problems which caused the local collapse still remain.
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All kinds of regrets. Biggest being ploughing all my money into a house purchase for my family instead of pocketing the cash and investing some…
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In my opinion, the national economy, and the international economy for that matter, are cyclical entities. They are going to ebb and flow on their own timetable. I feel that things can be done to prod it in the right direction (or send it the opposite way) but for the most part, it is going to do what it is going to do.
I have disagreed with a lot of things that have been done in the recent past to try to jumpstart the economy, but I don’t think they have done any irreparable damage nor will they send it back into the stratosphere anytime soon
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I feel like the other shoe is hovering in the air- waiting to drop. I don’t think it is over- but people like Buffett want us to think it is. They make money if we put all our money back into their pockets….
@Financial Samurai – you must not know many people in the West. I have two brothers and a brother in law all out of jobs. They were all senior level in their companies.My sister just bought a house for 100,000 less than it was sold for two years ago. Another sister just canceled health insurance for her small business when the premiums went through the roof for their under 50 yr old employees.
I think you are lucky not to know people not being laid off or losing houses. The reality is that you turning a blind eye does not make it a reality that it is fiction instead of fact.
Things have to change. Health care is a good start.
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What’s with all the Ron Paul nuts? He’s a racist right wing hack. I’ll take my financial advice from Buffet, thank you.
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Of course, Warren has had a very good recession, despite his earlier pronounced hatred of derivatives.
It is so disappointing that a figure who really represented so much that is good about our system has come to this. I will be selling my Buffetology collection.
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I’m with Tyler on this one. Be rational and don’t take risks with your own finances, but don’t spend hours obsessing about things you have little control over.
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@23 – Financial Samurai
Speak for yourself!
Not everyone here is doing ‘great’ or ‘not suffering’.
@12 – Mark
where do you live!? I want to move there, LOL.
Here, the retail places are firing (my place of retail has been firing/laying off left and right), and hardly anyone is hiring yet, or if they are, it’s part-time only.
The economy here (FL) seems to still be in a bad recession, or at least in my part. I don’t see many upward trends of improvement at all yet or even a plateau, really. That may be partly due to the fact we’re among the few states who were hardest-hit.
I really hope things get better soon though. These last 3 years have been awful (I noticed the recession starting in early 2007. Graphic design jobs are usually the canary in the mine shaft. When those start going, the economy is going downhill, since companies start cutting jobs there first, and unless you’re a graphic designer, you won’t notice things are bad yet).
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Knowing that one of the most trusted financial gurus of our times says the critical period is over is a little reassuring. However, it is hard to know that the worst of the recession is over when unemployment is still so high and the banks are still being so tight fisted about lending. It is very telling though that someone at Buffet’s level of the game is confident that the economy will recover. This hopefully is the good news.
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The best part of this story was in another conversation between Becky and Joe. Allegedly Warren admitted off camera that he did receive one more call that Friday night from a contact at Lehman. It went to his voicemail on his blackberry. Only Warren is not technologically capable. His daughter retrieved the call 8 months later!
As for the state of the economy, Warren has the best perspective, it is what it is! This is the new normal, take a look around you and make the best decisions you can.
Regarding the government intervention, I believe they have only spread the pain over a longer period of time. The big concern when TARP was approved was the “toxic” assets. Where are they today? The banks still have them! PPIP is only now getting started and at 1/10th of what it was originally suppose to be.
Even the IMF has been public about how the banks still have yet to come clean with write downs.
Enjoy the ride, we may not be in for much more fall but the ride back up is likely to be long and painful.
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if there are people who live without regret, he is one of them. almost everybody would like to be like him. i like this guy very much and whatever book he endorses, you better read
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I think it interesting he wasn’t interested in using any of his own money but thinks it great in using taxpayer money to bail out the various industries.
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Regrets? Yes. I regret I was unable to secure ridiculously favorable terms for a guaranteed investment in Goldman Sachs, giving me priority over other stakeholders. I regret that, unlike Goldman Sachs, I was unable to trade on inside information and Fed leaks, risking none of my own money but turning obscene profits using taxpayer bailout money. I regret not being able to use those ill-gotten profits from taxpayer bailout money to pay myself a billion dollar bonus.
But Warren Buffet doesn’t have those worries, does he?
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The recession is definitely over with positive signs starting to emerge. It is now time if you have cash to buy stocks or property thats for sure.
As for Warren he was definitely not willing to put his cash up but the government was willing to put taxpayers money at stake.
In saying this if I was in Warren’s position I probably would of done the same thing!
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