Buffett loses faith in US

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?