Buffett wants to cut cash pile, mulls $15 bln deal Reuters Sat May 6, 2006 OMAHA, Nebraska - Warren Buffett said on Saturday he wanted to reduce Berkshire Hathaway Inc.'s cash pile and that there was a small chance he would make an acquisition that could take up to $15 billion of cash. Buffet said he would ideally like to reduce Berkshire Hathaway Inc.'s cash pile to about $10 billion. Buffett, speaking at Berkshire's annual meeting, said the company did not need anything like the about $40 billion it has in cash. He said it was "likely but far from certain" that the company would have significantly less cash in about three years' time. He wants to translate the cash into earning power. Buffett added that he expected to get more opportunities for acquisitions in the utilities field. In March, Berkshire's MidAmerican Energy Holdings Co. unit acquired the western U.S. utility PacifiCorp from Scottish Power Plc (SPW.L) for $5.1 billion in cash, Buffett's biggest purchase in eight years. Berkshire's earnings released on Friday showed the company's cash position fell to $42.86 billion from a revised $45.02 billion at year end. On Friday, Berkshire moved to boost its international presence, announcing it would buy 80 percent of Israel's Iscar Metalworking Cos. in a transaction valuing the closely held tool firm at $5 billion. The Iscar deal helps fulfill Buffett's long-stated desire to make "major" acquisitions, which he said in March were needed to produce "truly satisfactory gains" in operating earnings at Berkshire, his insurance and investment company. Buffett described Iscar on Saturday as an "an important acquisition." He said it was a "large, extremely well-managed profitable" company which he had been introduced to in October. Berkshire also said on Friday that its first-quarter profit rose 70 percent to $2.31 billion, or $1,501 per share, helped by increasing auto insurance premiums and a successful bet the U.S. dollar would fall. Buffet said on Saturday that Berkshire's auto insurer Geico had a "very good quarter," and its reinsurance operations had a good quarter. But he said the quarterly figures were not terribly important in the long run. "Things have been working very well in all four sectors -- that's nice but not terribly important five years from now," he said. Comment: Buffett has bet on the decline of the dollar, and now Berkshire is trying to get rid of its cash. The main didn't become a multi-billionaire by being oblivious to what's really going on with the economy. The following articles provide some more recent rumblings on the dollar from Buffett/Berkshire.

Flashback: Buffett loses faith in US The Truth Will Set You Free March 04, 2006 Warren Buffett, sometimes thought of as America's greatest capitalist, said he was buying stocks of companies that do business elsewhere . . . I wonder how much Buffett knows that we don't. Buffett [bought] stocks in companies that earn a "large part" of their profits outside the United States, and denominated in currencies other than dollars. Buffett did not identify the companies, but the investments might be considerable. In his letter, Buffett did not itemize $7.15 billion of the $46.72 billion of stock investments that Berkshire had at year end. That's Billion, with a "B." That's a lot of investment to leave unitemized. Buffett began trading in currencies in March 2002, amid concern that U.S. policies were causing trade and budget deficits to soar, and would cause non-U.S. investors to pull money out of the country. He said his view has not changed. Keep in mind that "non-U.S. investors" here means foreigners. But, the statement is very misleading because the investors who will "pull money out of the country" are just as likely to be domestic as they are to be foreign. The statement is just a red-herring designed to feed into growing nationalistic fervor. Last year, the U.S. trade deficit rose 17.5 percent to a record $725.8 billion. Buffett said it might rise more, and that as investments shift, non-U.S. investors "will begin earning more on their holdings than we do on ours." Two observations. First, the comparison between "non-U.S. investors" and "we" further emphasizes the 'us against them' dichotomy. Second, the trade deficit is largely caused by multinational companies, many of which are owned by great American "capitalists," that manufacture abroad and import to the US. "As U.S. (interest) rates have risen relative to those of the rest of the world, holding most foreign currencies now involves a significant negative 'carry,'" Buffett wrote, referring to financing costs. "In contrast, the ownership of foreign equities is likely, over time, to create a positive carry--perhaps a substantial one." What he's really saying is that there is NOTHING left in the US to own. REALLY. They (the really big players) already own everything worth owning. But, the US remains an outstanding source of INTEREST payments. The best-known non-U.S. investment at Berkshire may be Asian oil producer PetroChina Co. . . . Berkshire owns about $1.92 billion of the company's shares, nearly four times what it paid for them. Berkshire, however, also owns large stakes in U.S. companies with large non-U.S. sales, including Anheuser-Busch Cos., Coca-Cola Co., Procter & Gamble Co. and Wal-Mart Stores Inc. So, now that we know that "investors" have lost faith in the United States, my question is, how long will it take for the United States to lose faith in investors?

Flashback: Buffett warns of turmoil with U.S. trade deficit Last Updated Wed, 18 Jan 2006 16:47:46 EST CBC News The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to "political turmoil," billionaire investor Warren Buffett has warned. "Right now, the rest of the world owns $3 trillion US more of us than we own of them," Buffett told business students and faculty at the University of Nevada in Reno. "In my view, it will create political turmoil at some point. Pretty soon, I think there will be a big adjustment," he said without elaborating. Buffett, head of Omaha, Neb.-based Berkshire Hathaway Inc., also disclosed his purchase of Business Wire, a privately held distributor of press releases, for an undisclosed amount. San Francisco-based Business Wire will operate as a wholly-owned subsidiary of Berkshire Hathaway, whose other holdings include the insurer Geico Corp. as well as stakes in American Express, Anheuser-Busch and Coca-Cola. Business Wire competes with PR Newswire to distribute company regulatory filings and press releases to investors and the news media. The U.S. trade deficit for the first 11 months of 2005 totalled $661.8 billion US, surpassing the previous annual record of $617.6 billion US set in 2004. Economists say when December figures are included, the final deficit for 2005 will top $710 billion US. Buffett said he expects it to top $700 billion US this year. "That's $2 billion US a day. We are like a super rich family that owns a farm the size of Texas. You sell off a little bit of the farm and you don't see it," he said. Fifteen years ago, the U.S. had no trade deficit with China, he said. "Now it's $200 billion. If we don't change the course, the rest of the world could own $15 trillion of us. That's pretty substantial. That's equal to the value of all American stock," Buffett said. "That's the big danger. Our national debt does not bother me. Our public debt is not at a crazy level," he said.

Poll: High Gas Prices Hurt Many Americans By WILL LESTER Associated Press May 6, 2006 WASHINGTON - High pump prices are pinching the pocketbooks of seven in 10 Americans, a financial hardship that more middle- and higher-income drivers say they are beginning to feel, an AP-Ipsos poll found. With gasoline prices topping $3 a gallon for regular unleaded in many areas, people say they are driving less, cutting short vacations and curtailing their use of heating and air conditioning. "Now, I'm just going to work and coming home - not doing anything else," said Kathleen Roberts, who makes a daily, 100-mile round trip from York, Pa., to her teaching job in Baltimore. The number of people who expect rising gas prices to cause financial problems in the months ahead has jumped from 51 percent a year ago to 70 percent now, according to AP polling. This increase has been dramatic among people who earn more than $50,000. These concerns are reflected in consumer confidence polling this past week by Ipsos, an international polling firm. Confidence dropped sharply and was the lowest since October, when the country was recovering from the devastation of Hurricane Katrina. The average price nationally of a gallon of regular unleaded gasoline was $2.92 on Friday, according to AAA, the motorists' club. The record high of $3.05 was set on Labor Day, according to AAA. When asked what would be a fair price for gasoline, many of those surveyed said $2-a-gallon on average. That price has not been seen consistently for more than a year, AAA said. "The U.S. economy is growing quickly, China is growing quickly and other countries are doing better - demand has gone up," said Phillip Swagel, an energy analyst at the American Enterprise Institute. Analysts blame the higher prices on a tight worldwide supply, unstable politics in oil-producing countries, an inadequate number of U.S. refineries and delays in the U.S. in switching over to summer blends of fuel. Whatever the reasons, soaring gas prices are affecting people's behavior. Two-thirds of those surveyed said they have cut back on driving and have reduced the use of heating and air conditioning. One-half say they have trimmed vacation plans. Hearing talk about short vacations upsets Susan Morang, a psychiatric counselor from Washington, Maine. She helps clients deliver antiques for sale during the summer tourism season. "Each summer, you have to make the majority of your money to live on the whole rest of the year," said Morang, who has cut her driving to the minimum. Morang's GMC truck guzzles gas, but she said she needs it to help clients haul their belongings. "A lady paid me $40 yesterday," she said. "I used it to fill my gas tank halfway." According to the poll, just over six in 10 of those who make between $50,000 and $75,000 a year say gas prices are a hardship, compared with four in 10 a year ago. Yet the price spikes have not influenced people's views about fuel-efficient cars. A year ago, four in 10 said they were considering getting a car with better mileage - the same number who say that now, according to the AP-Ipsos poll of 1,000 adults taken Monday through Wednesday. The poll has a margin of sampling error of plus or minus 3 percentage points. Auto industry watcher Erich Merkle said gas prices would have to top $4 a gallon in the next six months to nine months to have a significant effect on the sales of SUVs and light trucks. Jerry Taylor, an energy analyst at the Cato Institute, which favors limited government and free markets, said the price of gasoline as a share of a worker's earnings is not that high when compared with the share of earnings 50 years ago. But reports about "skyrocketing gas prices" do have an influence because "there's a big market for fist-shaking and red-faced conniption in the media." Don't try to tell Donald Denson of Gallatin, Tenn., that $3-a-gallon gas isn't causing problems. "The big experience now is with my job," said Denson, who works in the shipping business. "A lot of people are being laid off because business is going down."

Gas Prices Force Locals onto Horses LocalNews8.com May 6, 2006 Idaho - Gas prices continue to stay high, and now a lot of people are turning to different options to get around. In Rexburg, a few cowboys explored the possibilities on Saturday. The signs suggest burning hay, not fuel, and these cowboys are all for it! Horsemen and women joined forces, hopped on their horses, and showed off their alternative modes of getting around. "A lot cheaper than gas, they burn hay they don't burn gas," responds Dean Jacobson. "Hopefully we can influence somebody that the price of gas is a little bit high around here," says Jeff Hawkes. In doing so, riders from all over met off the Archer-Lyman road, excited to hit the dusty trails. Horsemen put on their chinks, cowboy hats and saddled up ready to go. After being injured two years ago, Swede Wilson is back in the saddle. "It really feels good. It's still sore but it feels good to be back on a horse, really enjoyable," says Wilson. Though the "horse power" didn't get us to the speed limit, the horsemen did make it to their target destination, slowly but surely, and worth every minute of the ride. "Where a lot of people go to the beach, fishing, we go take our horses with us and just have fun. They don't burn no gas." Neither do mules. Dean Jacobson had his team pulling this buggy around town. The high price for him is only a little bit of this. "Mules are smarter, better and a lot of fun!" The riders there says they plan on doing this at least once a month, bringing more riders with them each time or at least until they say their point has been made.

US job creation hits the brakes AFP Fri May 5, 2006 WASHINGTON - US job creation weakened last month to its slowest pace since after Hurricane Katrina, but wages took off in a warning sign for the Federal Reserve, according to government data. The Labor Department's "non-farm payrolls" report showed that US employers added 138,000 new jobs in April, the worst level since October and much less than Wall Street's forecast of 200,000. The jobless rate was unchanged in April at 4.7 percent, the department said. Economists said the faster pace of wage growth could rattle the US central bank, but Wall Street took the weaker job creation numbers as a sign that the Fed could soon pause on its long-running campaign of rate hikes. The Dow Jones share average rocketed 138.88 points (1.21 percent) to a six-year high of 11,577.74. The blue-chip index is not far off its all-time closing high of 11,722.98 reached in January 2000. In an interview with the financial news network CNBC, President George W. Bush put an upbeat spin on the jobs report. "My view is the 138,000 job increase for the last month is an indication that this economy's still strong," he said. "So the 138,000 remind me that not only are people working, which is good, but that the tax cuts are working, and the economy's strong and vibrant, and we need to keep it that way," he added, demanding Congress renew his tax cuts. Economists say the US economy needs to create between 150,000 and 175,000 new jobs each month to keep pace with population growth in the workforce. Ethan Harris at Lehman Brothers said the April figures were in line with "trend-like job growth instead of booming job growth," after payroll increases of 200,000 in both February and March. "The rest of the report, however, did show signs of strength that will keep the Fed a little bit nervous," he said. "You're starting to see some pass-through from commodity costs. The labour market is now tight enough that workers can get cost-of-living raises that they weren't getting a year ago." While job creation was weak last month, wages surged. Average hourly earnings increased nine cents, or 0.5 percent, to 16.61 dollars in April. Earnings are now up 3.8 percent in the past year, the biggest year-on-year gain since August 2001. The acceleration could add to pressure on the Fed at a meeting next Wednesday to keep raising interest rates to stamp out inflationary pressures. But US workers are also producing more for every hour they work, which could offset the inflationary impact of higher wages. On Thursday, the government reported robust productivity gains of 3.2 percent in the first quarter. In its payroll report, the Labor Department said the average work week lengthened by 0.5 percent to 33.9 hours. Payroll growth was widespread throughout industries, if less than predicted by private economists. Of 278 industries, 64.4 percent were adding jobs. In services, 101,000 jobs were created. Goods-producing industries added 37,000 jobs. Construction posted 10,000 more jobs and manufacturing 19,000. Economists said that for now, there was no reason to expect a change in Fed thinking heading into next Wednesday's meeting of its policymaking committee. But there is much uncertainty about the outlook further out. Fed chairman Ben Bernanke last month hinted at a pause in the hikes "at some point in the future", but Friday's report could give him food for thought. "In-phase world growth, where just about every part of the world is now expanding, is putting pressure on commodity prices, not just oil," Joel Naroff at Naroff Economic Advisors said. "With labour costs rising, Mr. Bernanke has to be worried that this could lead to higher inflation," he said.