Yoshikami: Buffett Bashers Unite!
After Warren Buffett wrote an op-ed piece in the New York Timesrestating his belief that the intervention of the government was a success, and in published reports reiterated his view that taxes should be raised on the affluent, critics howled. Many commentators labeled Buffett out of touch and conflicted in his perspective.
I suspect the criticism will continue.
It is my view that anti-Buffett rhetoric is really a smokescreen for critics protesting the interventionist activities of the Bush and Obama administrations when financial markets froze in 2008.
True, Buffett had much to lose if the United States economy had collapsed. But seriously, isn't this the the case for all of us?
Whether you own Wells Fargo stock or not, a frozen economy would have surely collapsed many other sectors and investment strategies. Labeling Buffett as nothing more than an interventionist apologist only seeking Berkshire Hathaway's best interests avoids the greater issue at hand; a real philosophical debate on the role of government in economic matters.
The bottom line for critics of Buffett is that he supports an interventionist strategy.
The pure free market proponents can't stand that position.
Let the banks collapse, they cry, because at least then we will have a financial system based on reality and not propped up by the government. While these are easy words to say, do we recognize that in all likelihood a collapsing economy would have led to 25% unemployment? A downturn that might have lasted 10 years? Massive cuts in services and standard of living reductions for Americans?
Frankly, our society is not set up for that level of economic stress, and I suspect the proponents of unbridled collapse would be quite silent then. I know; the retort is that current actions will lead to a slow disaster. But at least we have a chance to avoid financial Armageddon.
There is now a chance for an orderly deleverage process.
It's my view that intervention was necessary. It was flawed and clumsy, and it was disconcerting to see the lack of transparency as the blunt instrument of intervention was wielded. Despite reading Henry Paulson's book, "On the Brink: Inside the Race to Stop the Collapse of the Global Financial System,"I still have no idea whyBear Stearns was saved and Lehmanwasn't. I suspect if "do overs" were allowed, different decisions might have been made. But as inept as the intervention might have been, it did save the US economy from a second Depression. Doing nothing would have been as irresponsible as allowing continual abuses in mortgage lending. Regulation and intervention has it's place.
As for Buffett's stand on taxation, again it is a philosophical argument; tax versus non-tax. Buffett obviously does not believe in the trickle-down theory, and it is certainly his right as a taxpayer to make that statement. Of course, it is far too simplistic to state we should tax everyone making a significant income, particularly if we are referring to small company owners. In the United States, these are the employers that drive job growth. I believe it makes sense to provide business owners incentives to create jobs to attack the core economic problem faced today: high unemployment. Some might say this is a tax rebate for the rich. I disagree.
This approach is patently different than simply dropping extra cash in someone's pocket. I believe tax policy should be targeted and dramatic. Put dollars to work to get Americans working; stimulate hiring. A policy promoting hiring would not require any trickling; the money would be directly provided to hire workers and move the economy forward.
Back to the Buffett bashers; the critics are less upset about Buffett and more irritated about the perceived takeover by the Federal government (and Federal Reserve) of the United States economy. There is certainly reason to be concerned that the level of intervention will remain permanent.
We need an exit strategy stated and initiated.
As of today, we don't see one and that is alarming. We join the critics of current policy in pleading for a plan on how we will move towards a freer market economy once again. A free market with appropriate regulation is the key to a healthy economy.
Buffett is just one person and one investor. He's entitled to his opinion. But it's probably more productive to strip out the controversy from the man and have a discussion of the core issues at hand; the role of government in free enterprise. Using Warren Buffett as a punching bag gets us nowhere. Rationally highlighting the differences of opinion is what's necessary and more productive.
CNBC Asia Program Alert: Mr. Yoshikami will be a guest on CNBC's Squawk Box Asia Monday, November 22 between 5-7pm/et. Maria Bartiromo will be co-hosting with Martin Soong and Karen Tso live from CNBC HQ in Singapore.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top 100 investment advisors in the United States for 2009 and 2010 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at email@example.com.