On governments mimicking Buffett, funding pension shortcomings with part-nationalisations

Long life to capitalism! So first Warren Buffett and now Wells and Fargo gets the upper hand.
That’s a bit of hope for those who still believe in human nature, not shooting in the dark with no ideas or control.

Amongst all this turmoil, I  don’t get yet why in free markets like UK or US they don’t do a Moscow (suspending temporarily trading). I know that a few weeks ago I supported the opposite view, but human nature and the trumpeted “wisdom of crowds” (or lack of any wisdom at all) requires of exceptional measures like those applied to that lady passenger on 1980’s Airplane!

When sheep panic, wolves feast. Just have a look to the magnificent sardine run, no hungry sharks, hungry seagulls, hungry dolphins, nor sardines left for that matter.

Pull the hand brake, go sleep, play some bridge, walk the dog, stay away from news and journalists, fake a stroke if you may! But step back, suspend the markets, let the dust settle a bit and make objective long term decisions. Burning the midnight oil to come up with an ill-conceived short term solution (to call it something) based on the daily roller-coaster stock markets is nothing but useless, pointless, and eventually painful for everyone involved (namely, E V E R Y O N E).

As far as I see it, long term is what counts. Specially for governments. Let’s not get into the discussion on government being actually needed, some kind of market supervision is definitely so. To the communal, local, regional or national level is a matter for a different post.

So we have got this master of long term (governments) playing the short term. It doesn’t work. It was proven. It has been proven. It is proven everyday. It will be proven tomorrow. Stick to the long term!!

Here we have got a successful long term investor: Warren Buffett and his Berkshire Hathaway Inc. A-tier stock (BRK.A) evolution since 1990:

1,290.94% up. No wonder individual and institutional investors follow Mr Buffett’s long term investments. And now we have got a new follower: Sovereign governments.

See I can’t but marvel at how humble this man must be. Not only followers are willing to invest where he does, but individual companies must be happy to have him as an investor, since he brings long term commitment to the firm (his and his followers), and in these daring times, having him as a significant investor is like having a stamp of approval in the company’s future fortune.

But of course, all this comes at a price. For years Mr Buffett has been warning that the markets where overpriced and over thought, always stressing that he doesn’t invest in companies or products he doesn’t understand (all right, to be fair he doesn’t have the average investment knowledge of a hamburger flipper either).

So he has been comfortably sitting on cash until about 12 months ago, when he started his last shopping spree. He helped Mars take over Wrigley chewing gum at a discount and preferred conditions, and while being kicked out of any deal with the bond insurers, after the speeding up of the financial tsunami, Buffett got a steal on his investment in Goldman Sachs (ironically, a senior debt partner on the Wrigley deal).
But again, the GS deal reflects the conditions only a deep pocketed investor of Buffett’s calibre could get.

Only? The GS deal hapened back in Sept 24, and other deep pocket investors like national governments took over 3 weeks to realise that a part-nationalisation with preferred conditions might be a solution. They just realised! for god’s sake! Who are these politicians getting advise from? Lehman Bros’ fallen angels or what? The plan is easy, be honest, acknowledge that you have absolutely no clue of what’s going on, but since no one else does, the Bushes, Browns, Merkels and Sarkozys are safe in the long term. Ask Warren the oracle and move on. Age does matters! You cannot buy experience or calculate human reactions! Like a home (you cannot buy it, just make it), wisdom comes with time.

Even Paulson and his personal playground, the US treasury, are thinking of “part-nationalising” banks in the US.

But here it comes my humble idea: Go ahead, part-nationalise the banks with preferred stock à la Berkshire and then, fund your future pension shortcomings by handing over ownership of the stock to every single national tax-payer. Your citizens we’ll understand it better. It makes sense, and gets the market going again. Anybody who gets stock like that, will be able to keep it or sell it whenever they want. Talk about the wisdom of crowds buy putting their free investment money in their pockets and see how they react… I bet you are done with market panic. After all, tax-payers money is money from the tax-payers.

Of course, I am working on the details of my global rescue plan, but I have to take the garbage out, hang the laundry, do the washing, and go work… I wish I were a politician with time in my hands.

.calvin

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