Focus On Value Investing

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T. Boone Pickens who heads BP Capital Management was profiled this week on 60 Minutes. This is an interesting segment which goes beyond his normal message of eliminating the U.S. from dependence of foreign oil. His portfolio can be viewed here.

Warren Buffett and Arnold Schwarzenegger gathered at the 2008 Women's Conference to dicuss the economy.

A transcript of the event can be found here.

Things are really bad here in the Detroit area, in case you haven't heard. The housing market is one of the worst in the country, Detroit's political landscape has been riddled with scandal, and of course the auto industry is in a dismal state to say the least.

Today, billionaire investor Kirk Kerkorian sold 7.3 million shares of Ford (F)and may sell his remaining 133,500,000 shares "depending on market conditions". Kekorian had originally been buying shares in the $7-$8 range. Shares closed at $2.17.

Apparently the $25 billion federal loan package the government handed the Big 3 didn't entice Kerkorian to stick around. Even with government aid, the word seems to be that the Big Three may become the Big Two. Whether the new Big Two is a result of a merger or a failure is still speculation which we will likely have a clear answer soon.

If the auto makers cannot compete, they must be allowed to fail in order for the free market to self correct. As much as I would hate to see one of these great symbols of capitalism fail, in the long run it is the right economic decision for Detroit and America.

I believe economist Fred Foldvary's conclusion on the auto industry from progress.org should be the policy we take with the auto industry:

"There was a bad precedent 25 years ago, when the federal government bailed out the Chrysler Corporation. Now that the whole US automobile industry has failed, declarations of bankruptcy would not be a catastrophe. Other firms would buy the factories, and could start clean with no legacy costs. A bailout would lead to further demands from other industries. It would be best for the American economy to avoid any more bailouts, but also to restructure government policy to stop both the taxes and the subsidies that have distorted the economy."

"Government is not allowing prices and profits to do their economic jobs, and further interventions will just make the problem that much worse in the long run."

Alice Schroeder wrote the recently released book The Snowball: Warren Buffett and the Business of Life. She will be posting eight "webisodes" relating to the life of Buffett. The first video is posted above and more can be found here.

CNBC discusses Warren Buffett's NY Times article Buy American.I Am.

From the article: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now."

Jim Rogers states the Federal Reserve is "unleashing an inflationary holocaust". Money being pumped into the economy ultimately creates inflation which weakens the dollar.

Here is an interesting long term chart of the US dollar against other major currencies. Speaking in recent terms, the dollar has seen major declines since 2006 and even bigger declines since 2002.

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder was recently released and the above review from Barron's of the biography isn't favorable. I haven't read the book but I will sometime in the future when I can find a cheap used copy. I will be curious to see what additional Buffett knowledge can be gain which isn't in Buffett: The Making of An American Capitalist. If anyone reads Snowball, let me know what you think.

Warren Buffett appeared on Charlie Rose this week to mainly discuss the financial crisis.

Warren Buffett talks to his CNBC gal pal Becky Quick on the GE investment. Also, Whitney Tilson discusses Berkshire.