Last Wednesday, I met the “Oracle of Omaha” in Sing Sing penitentiary – the notorious maximum-security prison “up the river” from Manhattan.
The occasion was the graduation ceremony for prisoners who had completed their college degrees at the correctional facility. Buffett’s sister, Doris, is a donor of the college program and invited Buffett to the event.
~ The European Crisis & Wall Street Selloff: Despite these two major events, Buffett told me he was quite bullish about the markets and expressed optimism about employment and the recovery: “It’s bound to go up,” he said.
~ The Debt Crisis: In response to his bullishness, I asked Buffett whether the growing budget deficits concern him. His sister, Doris, expressed deep concern about the debt crisis, but Buffett was less worried. With regard to the massive unfunded Social Security and Medicare liabilities (which Alexander Green mentioned in yesterday’s column), he told me he favors means testing as a way to reduce the costs of these entitlements: “I get Social Security and Medicare, but I don’t need it.”
~ Gold: I asked Buffett about the “ultimate salvation investment” – gold. Does he believe it’s a good long-term investment?”
“No – I’ve never invested in gold.” Buffett’s father, Howard, a conservative Republican congressman from Nebraska, believed in the gold standard and gave Buffett some gold coins. He told me he still has them, but “only as a keepsake, not as an investment.” He told me he’s no gold bug and instead prefers to invest in well-run businesses, on the belief that investing in free enterprise does more social good than investing in gold. He’s not interested in gold even as a speculation, although he did take a position in silver several years ago (not as a monetary metal, but as an industrial metal).
“So are you a collector of anything?” I asked Buffett. “Stamps, cars, art work?”
His response: “I collect businesses and friends.” (And with his Berkshire Hathaway stock is worth at least $50 billion, I’ll bet he has plenty of the latter!)
f you want to buy a value stock that Buffett currently favors, buy Goldman Sachs (NYSE: GS). It’s selling for only six times earnings and has profit margins exceeding 30%.
Good trading – AEIOU,
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