Warning!

‘CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.’ 

Taxes

Buffett stated that he only paid 19% of his income for 2006 ($48.1 million) in total federal taxes (due to their source as dividends and capital gains, although the figure excluded the taxes on that income paid by the corporations that provided it), while his employees paid 33% of theirs, despite making much less money. “How can this be fair?” Buffett asked, regarding how little he pays in taxes compared to his employees. “How can this be right?” He also added, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”After Donald Trump accused him of taking “massive deductions,” Buffet countered, “I have copies of all 72 of my returns and none uses a carryforward.”

Buffett favors the inheritance tax, saying that repealing it would be like “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics”. In 2007, Buffett testified before the Senate and urged them to preserve the estate tax so as to avoid a plutocracy. Some critics argued that Buffett (through Berkshire Hathaway) has a personal interest in the continuation of the estate tax, since Berkshire Hathaway benefited from the estate tax in past business dealings and had developed and marketed insurance policies to protect policy holders against future estate tax payments. Buffett believes government should not be in the business of gambling, or legalizing casinos, calling it a tax on ignorance.

Trade deficit

Buffett viewed the United States’ expanding trade deficit as a trend that will devalue the US dollar and US assets. He predicted that the US dollar will lose value in the long run, as a result of putting a larger portion of ownership of US assets in the hands of foreigners. In his letter to shareholders in March 2005, he predicted that in another ten years’ time the net ownership of the U.S. by outsiders would amount to $11 trillion.

Americans … would chafe at the idea of perpetually paying tribute to their creditors and owners abroad. A country that is now aspiring to an ‘ownership society’ will not find happiness in – and I’ll use hyperbole here for emphasis – a ‘sharecropping society’.

Dollar and gold

The trade deficit induced Buffett to enter the foreign currency market for the first time in 2002. He substantially reduced his stake in 2005 as changing interest rates increased the costs of holding currency contracts. Buffett remained bearish on the dollar, stating that he was looking to acquire companies with substantial foreign revenues. Buffett emphasized the non-productive aspect of a gold standard for the USD in 1998 at Harvard:

It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

In 1977, about stocks, gold, farmland and inflation, he stated:

Stocks are probably still the best of all the poor alternatives in an era of inflation – at least they are if you buy in at appropriate prices.

China

Buffett invested in PetroChina Company Limited and in a rare move, posted a commentary on Berkshire Hathaway’s website stating why he would not divest over its connection with the Sudanese civil war that caused Harvard to divest. He sold this stake soon afterwards, sparing him the billions of dollars he would have lost had he held on to the company in the midst of the steep drop in oil prices beginning in the summer of 2008.

In October 2008, Buffett invested $230 million for 10% of battery maker BYD Company (SEHK: 1211), which runs a subsidiary of electric automobile manufacturer BYD Auto. In less than one year, the investment reaped over 500% return.

Tobacco

During the RJR Nabisco, Inc. hostile takeover fight in 1987, Buffett was quoted as telling John Gutfreund:

I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.

— Buffett, quoted in Barbarians at the Gate: The Fall of RJR Nabisco

Speaking at Berkshire Hathaway Inc.’s 1994 annual meeting, Buffett said investments in tobacco are:

fraught with questions that relate to societal attitudes and those of the present administration. I would not like to have a significant percentage of my net worth invested in tobacco businesses. The economy of the business may be fine, but that doesn’t mean it has a bright future.

— Buffett, Berkshire Hathaway annual meeting

Coal

In 2007, Buffett’s PacifiCorp, a subsidiary of his MidAmerican Energy Company, canceled six proposed coal-fired power plants. These included Utah’s Intermountain Power Project Unit 3, Jim Bridger Unit 5, and four proposed plants previously included in PacifiCorp’s Integrated Resource Plan. The cancellations came in the wake of pressure from regulators and citizen groups.

Renewable energy

American Indian tribes and salmon fishermen sought to win support from Buffett for a proposal to remove four hydroelectric dams from the Klamath River. David Sokol responded on Buffett’s behalf, stating that the FERC would decide the question.

In December 2011, Buffett’s MidAmerican Energy Holdings agreed to buy a $2 billion solar energy project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona, his first investments in solar power. He already owned wind farms.

Expensing of stock options

He has been a strong proponent of stock option expensing on corporate Income Statements. At the 2004 annual meeting, he lambasted a bill before the United States Congress that would consider only some company-issued stock options compensation as an expense, likening the bill to one that was almost passed by the Indiana House of Representatives to change the value of Pi from 3.14159 to 3.2 through legislative fiat.

When a company gives something of value to its employees in return for their services, it is clearly a compensation expense. And if expenses don’t belong in the earnings statement, where in the world do they belong?

Google and Facebook

In May 2012, Buffett said he had avoided buying stock in new social media companies such as Facebook and Google because it is hard to estimate future value. He also stated that initial public offering (IPO) of stock are almost always bad investments. Investors should be looking to companies that will have good value in ten years.