Sunday, May 3, 2020

WARREN BUFFETT LOST $50 BILLION - HE CLAIMS 'AMERICAN MAGIC' WILL SAVE THE RICH - WHAT HE MEANS IS ANOTHER BAILOUT OF WALL STREET CRIMINALS

Warren Buffett: ‘American Magic’ Will Spur US Economic Recovery
Warren Buffett's company reports Q1 loss of $50 bln

Washington (AFP) – Billionaire investor Warren Buffet said Saturday he’s confident the US economy will bounce back from its pummeling by the coronavirus pandemic because “American magic has always prevailed.”
The 89-year-old made the sanguine prediction about the world’s largest economy as his holding company Berkshire Hathaway reported first-quarter net losses of nearly $50 billion.
Buffett also announced Saturday that his company had sold all its stakes in four major US airlines last month, as the pandemic clobbered the travel industry.
“It turns out I was wrong,” he said of his acquisitions of 10 percent stakes in American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
Berkshire Hathaway had paid $7 billion to $8 billion, and “we did not take out anything like that,” he said.
Between the purchases that took place over months, and the sale, “the airlines business I think changed in a very major way” and could no longer meet Berkshire criteria for profitability, he said.
Buffett’s announcement may further hurt airlines already pushed to the brink by coronavirus lockdown measures, now looking to the US government for $25 billion in relief funds.

‘American miracles, American magic’

Berkshire Hathaway, based in Omaha, Nebraska, called its first-quarter setback “temporary” but said it could not reliably predict when its many businesses would return to normal or when consumers would resume their former buying habits.
“We’ve faced great problems in the past, haven’t faced this exact problem — in fact we haven’t really faced anything that quite resembles this problem,” Buffett said in a lengthy speech on the country’s economic history.
“But we faced tougher problems, and the American miracles, American magic has always prevailed and it will do so again.”
“We are now a better country, as well as an incredibly more wealthy country, than we were in 1789… We got a long ways to go but we moved in the right direction,” he said, referencing the abolition of slavery and women’s suffrage.
“Never bet against America.”
Buffett is considered one of the savviest investors anywhere. His fortune of $72 billion is the fourth-largest in the world, according to Forbes, and in normal years, the company’s annual gathering in Omaha is a high-point of the calendar for investors, a “Woodstock for capitalists.”
But the devastating economic impact of the pandemic has hit hard at Berkshire Hathaway’s wide range of investments, and the need for social distancing forced it to hold the annual meeting online.
Buffett addressed his shareholders in a livestream flanked only by Gregory Abel, who is in charge of Berkshire’s non-insurance operations.
His business partner for six decades, 96-year-old Charlie Munger, did not appear.

Growth by one measure

Buffett, in a statement, played down his company’s bleak-looking net figure. He said a better measure of the company’s performance was its operating earnings, which exclude investments and are less subject to sharp fluctuations.
By that measure, Berkshire Hathaway saw growth to $5.9 billion from $5.55 billion a year earlier.
The brutal drop in the net — to a loss of $49.75 billion from a profit last year of $21.7 billion — resulted primarily from the virus-related decline in value of its broad investment portfolio, which ranges from energy to transport to insurance and technology.
The annual meeting often has an almost carnival atmosphere, as thousands of fans and investors flock to Nebraska to hear from the celebrated “Oracle of Omaha.” Buffett, famous for his relatively modest lifestyle, turns 90 on August 30.
In documents filed Saturday, Berkshire noted that until mid-March many of its companies were posting “comparative revenue and earnings increases” over the same 2019 period.
Many of its companies — including in rail transport, energy production and some manufacturing and service businesses — are deemed essential and are able to continue working amid the far-reaching confinement orders.
But their turnover slowed considerably in April, the company statement said.
Moves taken by those companies such as employee furloughs, salary cuts and reductions, and capital spending reductions are “necessary actions” and “temporary,” it said.



Great Depression, the Sequel

|
Posted: Apr 26, 2020 12:01 AM
It took President Donald Trump three years to build the world’s best economy with an unemployment rate of only 3.5 percent, rising wages, strong consumer confidence and a robust stock market. Sadly, it only took three weeks for that healthy economy to be destroyed and the longer the economy is closed for business, the harder it will be for our nation to recover.
The economic statistics are truly staggering. The Congressional Budget Office (CBO) projects that the economy will shrink by 40 percent this quarter and that the unemployment rate will rise to 16 percent this year, before declining in the fourth quarter of this year and next year. For comparison, the nation’s all-time high unemployment rate reached 24.9 percent at the height of the Great Depression in 1933.
Since the shutdown began in mid-March, the nation has lost 26.5 million jobs. In Louisiana, there has been an astounding 5,677 percent increase in unemployment claims from last year. It has suffered the second highest percentage increase in unemployment, behind only Florida. These states and others that rely on retail sales, hospitality and tourism are suffering the worst. Other states like Vermont and Connecticut that have a greater number of high paying “white collar” jobs are doing much better.
Some health experts are arguing that the country cannot open the economy until there are almost no new COVID-19 cases. Such an argument is patently ridiculous. As noted by U.S. Senator John Kennedy (R-LA) such a strategy will lead to the collapse of the economy. According to Kennedy, “I wish we could do that, but we will have burned down the village to save it.”
Economic realities are why some states are moving forward with a limited opening, despite opposition from President Trump. The most aggressive action was taken in Georgia by Republican Governor Brian Kemp. He signed an executive order allowing a variety of businesses to open, including theaters, restaurants and gyms. These businesses must maintain social distancing guidelines and restrictions. The order did not extend to nightclubs or bars.
Other states such as Mississippi, Tennessee, Texas, Alaska, Montana and Colorado are relaxing restrictions and allowing some businesses to reopen. This trend will surely accelerate in the days and weeks ahead. Our country cannot afford to wait any longer, as we have no viable choice. Economic collapse is not an option that most Americans will tolerate.
This health driven economic experiment has already been too costly. It is undoubtedly one of the reasons why we have never closed our economy before, even during the flu pandemics of 1918, 1957, 1968 or 2009.
It is never a good strategy to throw people out of work, give them government checks and then try to restart the economy on a limited basis months later. There is no historical precedent showing that such a strategy has succeeded, certainly not on a short-term basis.
In response to the COVID-19 pandemic, there have been four stimulus packages already approved by Congress and signed into law by President Trump. These packages have cost over $2.8 trillion, boosting a federal debt that has already increased by $5 trillion during the Trump administration. The CBO report predicts the overall federal debt will approach $25 trillion this year with a budget deficit of $2.1 trillion next year. These debts are not sustainable as the federal government cannot print enough money to solve our self-imposed economic problems.  
In the view of U.S. Senator Rand Paul (R-KY), these actions bring the United States “closer and closer to a point of no return, a point at which the world loses confidence in the dollar. A point at which our debt becomes an existential threat to our security.” He said, “No amount of money, not all the money in China, will save us from ourselves. Our only hope of rescuing this great country is to reopen the economy.”
Of course, Senator Paul is correct. If we do not reopen the economy, we will face an economic Armageddon worse than the Great Depression. Even an establishment Republican like Senate Majority Leader Mitch McConnell understands this reality. He warned his fellow Americans that “unless we get our economy up and running again there is not any way, we can spend enough to continue to prop up the country.”
President Trump claimed that the new relief package he signed on Friday will be “great for small businesses.” The reality is that a government loan is not “great,” but it is necessary assistance to allow many of these small businesses to remain open. True relief will not come until the economy is fully reopened and Americans can return to some semblance of normalcy.
Jeff Crouere is a native New Orleanian and his award winning program, “Ringside Politics,” airs locally at 7:30 p.m. Fridays and at 10:00 p.m. Sundays on PBS affiliate WLAE-TV, Channel 32, and from 7-11 a.m. weekdays on WGSO 990-AM & www.Wgso.com. He is a political columnist, the author ofAmerica's Last Chanceand provides regular commentaries on the Jeff Crouere YouTube channel and on www.JeffCrouere.com. For more information, email him at jeff@jeffcrouere.com

We're facing 'the worst economic contraction' in modern history: Economist


Markets Reporter
The U.S. economy is facing the worst contraction in modern history — and a “confidence shock” will make the recovery slow, says one economist. 
Frances Donald, head of macro strategy at Manulife, predicts GDP this quarter could shrink by a whopping 20% amid the coronavirus pandemic
“We are going to see, without hyperbole, the worst economic contraction in modern economic history. It will be likely double digits,” Donald told Yahoo Finance. “We are not looking for growth to come back online really until the fourth quarter of this year.”
The latest jobless claims show more than 4.4 million Americans filed for first time unemployment last week. Since the spread of the outbreak, more than 26 million Americans have filed for unemployment insurance as companies big and small have laid off or furloughed employees and shuttered commerce.
“What worries me as an economist is that we can give people their jobs back when we turn the economy back on. Not all of them but some,” she says. “But there is a confidence shock at play here. Are we going to be able to make these workers who lost their job whole? Probably not.”

‘Sizable confidence shock’

Donald says individual behaviors will make it hard for the economy to bounce back quickly once states re-open. 
“We're dealing with a sizable confidence shock, a size-able financial hit that is not going to be easy to unwind,” said Donald. “I think this is going to have a permanent stain on the way that Americans think, the way they behave, the way they save in this future.”
Some sectors will take longer to come back than others. 
“It's a lot easier to press a button and put a manufacturing plant back online, so you might see a V-shaped recovery in manufacturing and construction” said Donald. “But for services, for confidence that flows through into the things that you and I buy on a day to day basis, that's going to take a lot longer.”
Aggressive moves from the Federal Reserve and stimulus aid from Congress have been aimed at mitigating the fallout of COVID-19. 
Still, Donald predicts 1%-2% growth for the next several years. She says federal, state and local governments may be able to provide boosts in the years ahead.
“If we do see large-scale infrastructure spending, if we do see productivity boosts, then we might actually be able to break out of this slow-growth environment come three, four years from now,” says Donald. 

“But the next couple of years are going to be marked by deflationary concern, slow spending, high savings rates,” she added.

No comments: