Skip to main content

Rogers and Buffett disagree on bailouts

On the bailouts of Fannie Mae and Freddie Mac, investors Jim Rogers and Warren Buffett cannot agree.

Rogers feels the US government takeover of Fannie and Freddie is a disaster that signals the US' shift to socialism, while Buffett has called it a "sensible deal" and the best option available at the time.

Excerpts from the Money Morning piece, "Jim Rogers and Warren Buffett at odds on Fannie/Freddie bailout":

" Few analysts have abstained from voicing an opinion about the U.S. government’s plan to seize control of Fannie Mae (FNM) and Freddie Mac (FRE), the nation’s embattled mortgage behemoths, and that include such eminent investors as Jim Rogers and Warren Buffett. Of course, two of the world’s greatest financial analysts have very two very different perspectives.

"It is socialism for the rich," Rogers said yesterday (Monday) during an interview with CNBC Europe, "It’s just bailing out financial institutions."...

...Of course, the Oracle of Omaha sees things differently. He praised the plan as a wise move for Treasury Secretary Paulson, who Buffett said "did exactly the right thing."

"I wouldn’t change anything in the plan myself," Buffett said in his own interview with CNBC. "It’s the best deal and the most sensible deal available now." "

Warren Buffett told CNBC that Secretary Paulson did "exactly the right thing" in structuring this bailout deal, and that he basically agreed with the deal terms which gave the Treasury an 80 percent warrant on Fannie and Freddie's common shares.

At the same time, he noted that the Treasury was on the hook for losses that would arise from the preferred and common shares being wiped out. Still, he stressed that the Treasury's takeover was the best option to avoid "greater losses down the road".

Jim Rogers told CNBC Europe that the bailout was an outrage that showed America to be "more communist than China is right now". Unfortunately, this seems to be the way the US is leaning now, and the politicians we have voted in generally support these kind of policies.

Rogers responded to the CNBC anchor's ridiculous assertion that bank failures and crises have always ended in nationalization or state takeover by reminding him that this was not the case historically, as most financial panics and bank failures were solved through bankruptcy in the private markets, rather than taxpayer-funded bailouts and nationalization schemes.

He also noted that the nationalization is likely to fail, and that Hank Paulson knows this to be true, as they have merely "papered over" the problem until the next administration inherits it.

Bottom line: While I have great respect for Jim Rogers and Warren Buffett as investors, on this matter I am in full agreement with Jim Rogers.

In fact, I've come to realize that Rogers usually trumps most commentators and famous investors when it comes to spelling out reality and understanding the ethical questions that arise from these situations.

I believe this is due to his blunt personality, his critical thinking skills, and his knowledge of history and sound economic principles.

Popular posts from this blog

The Dot-Com Bubble in 1 Chart: InfoSpace

With all the recent talk of a new bubble in the making, thanks in part to the Yellen Fed's continued easy money stance, I thought it'd be instructive to revisit our previous stock market bubble - in one quick chart.

So here's what a real stock market bubble looks like. 

Here's what a bubble *really* looks like. InfoSpace in 1999-2001. $QQQ$BCORpic.twitter.com/xjsMk433H7
— David Shvartsman (@FinanceTrends) February 24, 2015
For those of you who are a little too young to recall it, this is a chart of InfoSpace at the height of the Nasdaq dot-com bubble in 1999-2001. This fallen angel soared to fantastic heights only to plummet back down to earth as the bubble, and InfoSpace's shady business plan, turned to rubble.

As detailed in our post, "Round trip stocks: Momentum booms and busts", InfoSpace rocketed from under $100 a share to over $1,300 a share in less than six months. 

In a pattern common to many parabolic shooting stars, the stock soon peaked and began a…

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL! 

Please bookmark our new web address at Financetrendsletter.com

Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner.  



Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead!

As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter. You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter). 

Stay up to date with our real-time insights and updates on Twitter.

William O'Neil Interview: How to Buy Winning Stocks

Investor's Business Daily founder and veteran stock trader, William O'Neil shared his trading methods and insights on buying winning stocks in an in-depth IBD radio interview.

Here are some highlights from William O'Neil's interview withIBD:

William O'Neil's interest in the stock market began when he started working as a young adult. 

"I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."
He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.

"I'd get in the c…