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Heeding the Oracle
Warren Buffett's annual letter points out the tax cut and dollar dangers ahead.
March 8, 2004: 1:28 PM EST

The Oracle of Omaha is becoming the Prophet of Financial Doom, but I'm not complaining because somebody has to get us all focused on the challenges ahead.

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Warren Buffett's annual letter to shareholders criticizes the Bush tax cuts as helping the wealthy too much. Okay, all you Republicans out there I know what you're saying: cut taxes on the wealth earners and wealth owners and you will see investment and the economy blossom.

What we need to go along with that is a plan to reduce the burgeoning budget deficit and even the most ardent Bush fan has to admit that this president has been on a major spending spree. And cynics would say it's to get re-elected.

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Buffett letter (on Berkshire site)

As for you Democrats, don't look so smug. Many Congressional Democrats have gone along with the current tide of spend now pay later. And that leads to one of Buffett's other big worries: the dollar.

The link to the budget deficit?

We spend beyond our means, borrow like crazy by selling bonds to the rest of the world, and that helps fuel the spending that leads to the trade deficit.

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So far the dollar decline has been healthy in many regards, especially for U.S. exporters who have gotten more competitive. But Warren is worried about a sharp, prolonged slide.

That would be the kind of thing that scares away the foreign investors holding U.S. bonds. Even the Oracle of Omaha can't tell us when that might happen, but he's clearly worried it could.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.