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Warren Buffett: Washington just likes to bluff

Jeff Brown, Special to CNBC.com
Friday, 20 Sep 2013 | 4:52 PM ET
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Recapping the day's news and newsmakers through the lens of CNBC.

Buffett on political bluffing

Notes:

Forget the big taper countdown, the markets' new fixation is the fight over the federal budget. In the extreme, it could lead to a partial government shutdown, even a Treasury default. How likely is that? A well-known voice of reason, billionaire investor and Berkshire Hathaway CEO Warren Buffett, says the markets will weather all this: Washington will stop short of the brink because not even politicians are that stupid.

Quote:

"The market is not gonna fall apart, because [investors] expect Washington will only act irrationally for a certain length of time."—Warren Buffett

The herd mentality

Notes:

Though the S&P 500 has already gained 150 percent since the depths of the financial crisis, the appetite for stocks is still strong. In the days before Wednesday's Fed decision to keep its bond-buying program going, stock funds took in their largest weekly cash haul in history, $26 billion. Though investors like Warren Buffett and Carl Icahn say bargains are harder to find, and short covering accounted for many of those fund purchases, investors and traders are sticking with stocks because bonds and other alternatives look even riskier.

Quote:

"Where is your money better suited [than in stocks] if the Fed is going to start to taper? You're going to start to have rising rates and then dropping bond valuations. Even though that dynamic may have been put off in the short term, I think that's the eventual game."—Art Hogan, managing director at Lazard Capital Markets

Logical deduction

Notes:

Is nothing sacred? Dave Camp, a Republican congressman from Michigan and chairman of the House Ways and Means Committee, is said to be drawing up plans to eliminate the federal deduction for state and local taxes. Like proposals to get rid of the mortgage-interest deduction, this seems like a long shot. Then again, it's an idea that just won't go away—several commissions have recommended it. Camp wants to cut tax rates and needs offsetting revenue. Two-thirds of taxpayers don't get the state and local tax deduction because they don't itemize.

Quote:

"It is hard to go into [tax] reform and not go there."—A top Senate Republican tax aide

Son of Humvee

Notes:

What proves you're the coolest kid on the block? Owning the most expensive car, of course. But lots of guys have Porches, Mercedes, Teslas and Ferraris. So, for a mere $250,000—or $400,000 fully loaded—you could try to get your hands on the military's Humvee replacement, coming in a couple of years. That's the government's price estimate as it evaluates prototypes for a 55,000-vehicle purchase. Back in 1992, Arnold Schwarzenegger pushed hard for the government to sell a civilian version of its new Humvee, and he became one of the first to drive a Hummer down a city street. Could you be the next Arnold?

Quote:

"The legacy Humvee system is not capable of providing sufficient protection for its occupants in a world where improvised explosive devices have become commonplace."—Loren Thompson, defense analyst at the Lexington Institute

A piece of the 'systematically risky' Rock

Notes:

Prudential Financial, the giant insurer, has been added to the government's list of "systemically risky" firms that bear extra regulatory scrutiny and tougher capital requirements. The Dodd-Frank law, trying to avoid future bailouts for financial players deemed "too big to fail," allows the Financial Stability Oversight Council to put non-banking firms on the list. Prudential joins American International Group and GE Capital. Prudential had opposed the designation.

Quote:

"We are currently reviewing the rationale for the determination and our options."—Prudential statement

—By Jeff Brown, Special to CNBC.com

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