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Why Is Warren Buffett So Upset?

Reuters Writes: Buffett calls threat to not raise U.S. debt limit a ‘political weapon of mass destruction

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NEW YORK (Reuters) – Warren Buffett, chairman and chief executive of Berkshire Hathaway (NYS:BRK-A – News), said Wednesday that the threat of not raising the U.S. debt ceiling is a political weapon.

The idea that Congress could fail to raise the $16.7 trillion U.S. borrowing limit is a “political weapon of mass destruction,” Buffett told cable television network CNBC.

Buffett said Berkshire Hathaway owns short-term Treasury bills and is “not worried” about the bills being paid, despite concerns about the U.S. debt ceiling.

Of course Mr. Buffett is correct. What happened in Washington over the last couple of weeks is nothing short of a disaster. An absolute disaster. What Mr. Buffett forgot to mention is that this “political weapon of mass destruction” has already gone off.

Surely, the US will not default on its debt. In my previous posts I have clearly stated that neither the market nor should you care about that. The damage has already been done and will be eventually felt on a different front.  This front has to do with our creditors.  I bet you my left leg that this situation was very closely watched and analyzed by both Japan and China (two of our biggest creditors). 

Their conclusion will be very simple. Washington is being run by idiots who have no problem putting the wealth and the future of our countries at risk. Therefore, we should diversify.  I bet you my right leg that these countries will start to lessen their US Debt exposure (if they haven’t started already) as soon as possible. Interest rates will go up and that will cause a significant slow down in the US Economy and a substantial DROP in the financial markets.

BOOM. Thank you Washington.  


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How China Lost Faith In The US Government

Bloomberg Writes: Foreigners Sold U.S. Assets as China Reduces Treasuries

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Foreign investors were net sellers of U.S. long-term portfolio assets in August as China reduced its holdings of Treasuries to a six-month low.

The net long-term portfolio investment outflow was $8.9 billion after a revised $31 billion inflow in July, the Treasury Department said in a statement today in Washington. Net sales of U.S. equities by official holders abroad were a record $3.1 billion, and China lowered its holdings of U.S. government debt for the second time in three months, the department said.

Today’s report showed China remained the biggest foreign owner of U.S. Treasuries in August even as its holdings dropped $11.2 billion to $1.27 trillion.

Read The Rest Of The Article Here

In my previous posts I have argued that the biggest impact of the US Government shutdown will not be any sort of a default, but a shaken confidence of foreign investors.

No one in their right mind, not the Chinese nor the Japanese, would trust the fiscal future of their nations to a government that acts like little children fighting over a toy.

As predicted, we are now beginning to see the consequences associated with shutting down the US Government with China cutting their US Treasuries buying.  While this outflow doesn’t make a trend, just yet, it is certainly something to watch over the next couple of years. I guarantee you that China and Japan both are discussing the issue at the highest levels. Their confidence has been shaken and they can no longer trust the US Government to the extent that they have in the past.  

The result? Very simple. Lower demand for the US Treasury, higher interest rates, slower growth,  a substantial decline in economic activity, much lower financial markets, a decline in real estate and auto sales. Not a good picture.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!  

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Buffett Agrees…..How US Politicians Just Destroyed America

Reuters Writes: Buffett calls threat to not raise U.S. debt limit a ‘political weapon of mass destruction

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NEW YORK (Reuters) – Warren Buffett, chairman and chief executive of Berkshire Hathaway (NYS:BRK-A – News), said Wednesday that the threat of not raising the U.S. debt ceiling is a political weapon.

The idea that Congress could fail to raise the $16.7 trillion U.S. borrowing limit is a “political weapon of mass destruction,” Buffett told cable television network CNBC.

Buffett said Berkshire Hathaway owns short-term Treasury bills and is “not worried” about the bills being paid, despite concerns about the U.S. debt ceiling.

Of course Mr. Buffett is correct. What happened in Washington over the last couple of weeks is nothing short of a disaster. An absolute disaster. What Mr. Buffett forgot to mention is that this “political weapon of mass destruction” has already gone off.

Surely, the US will not default on its debt. In my previous posts I have clearly stated that neither the market nor should you care about that. The damage has already been done and will be eventually felt on a different front.  This front has to do with our creditors.  I bet you my left leg that this situation was very closely watched and analyzed by both Japan and China (two of our biggest creditors). 

Their conclusion will be very simple. Washington is being run by idiots who have no problem putting the wealth and the future of our countries at risk. Therefore, we should diversify.  I bet you my right leg that these countries will start to lessen their US Debt exposure (if they haven’t started already) as soon as possible. Interest rates will go up and that will cause a significant slow down in the US Economy and a substantial DROP in the financial markets.

BOOM. Thank you Washington.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!