The Billionaire Pessimists Club

Pardon the delay:  I was planning on putting this up Tuesday, but I didn’t want to make this look like log rolling (after Tim was so complimentary).

Great post from Tim at the Mess that Greenspan Made:

heard many times from Warren Buffet about the difficult road ahead for
the U.S. economy – the dollar, the perils of living in Squanderville, and the ascendant Sharecropper Society are his most notable objections to the rosy picture painted by Wall Street economists and government officials.

Even Mr. Buffet’s much younger, slightly richer, sometimes side-kick, and occasional bridge buddy Bill Gates has been rather down on the dollar lately due to rapidly accumulating debt and the plethora of promises made by the U.S. government.

George Soros and Jim Rogers of Quantum Fund fame are bearish on Bush economic policies and bullish on commodities,
respectively. Both of these views bode ill for the American way of life
as it has been known for the last half century. That is, the American
way of life for most of the citizenry – for the upper few percent of
the populace, rising energy and raw material costs are more than offset
by a reduced tax burden.

Sir John Templeton has been predicting a U.S. real estate disaster for some time now, and Bill Gross at Pimco has likened the current state of affairs to Rome burning, and much worse.

What do all these gentlemen have in common?

are all billionaires, they all speak freely, and they all have very
serious concerns about the course that the nation’s economy has charted.

Is anyone listening to them?

Tim does great work; If you haven’t been reading his blog (The Mess that Greenspan Made), you are missing out on insightful commentary . . .

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What's been said:

Discussions found on the web:
  1. drucev commented on Jan 5

    It’s the Dick Clark economy, perpetually young, until one day it isn’t.

    Don’t know what performance enhancers Dick Clark used, or who he sold his soul to. But in the US economy it was debt and China.

    Time to start teaching your kids to say ‘shoeshine, sir?’ in Chinese.

  2. Kent commented on Jan 5

    Warren Buffet has a far from perfect track record picking the direction of the economy and stock market.

    Mr. Gates is extremely successful and rich, but he is a computer programmer by trade.

    George Soros will always be dour on a US led by a Republican President.

    Sir Templeton left a lot of money on the table if he bailed on real estate at the time of his prognostications.

    Investors flee to bonds when the future looks bleak, and there isn’t anyone who benefits more from that shift than Bill Gross.

    While I respect all of their opinions, and I am listening, I am not moved.

  3. Kent commented on Jan 5

    Warren Buffet has a far from perfect track record picking the direction of the economy and stock market.

    Mr. Gates is extremely successful and rich, but he is a computer programmer by trade.

    George Soros will always be dour on a US led by a Republican President.

    Sir Templeton left a lot of money on the table if he bailed on real estate at the time of his prognostications.

    Investors flee to bonds when the future looks bleak, and there isn’t anyone who benefits more from that shift than Bill Gross.

    While I respect all of their opinions, and I am listening, I am not moved.

  4. Colin commented on Jan 5

    Yeah, well, according to Larry Kudlow, Buffet’s bet against the U.S. dollar was at 1.22 euros.

    I don’t think that’s proven a great bet thus far. So Buffet may be a billionaire, and he may even put his money where that doesn’t seem to make him infallible. I also question Buffet and Soros’s ability to provide dispassionate analysis given their political leanings (moreso Soros than Buffet).

    The fact is, while the federal deficit is certainly not a positive, it’s still under 3% GDP. And the CA deficit is a reflection of the relative strength of the US economy to its trading partners. Neither one is a cause for much worry in my opinion.

    Not saying that the new year will be all roses, but this talk of the economy about to go to hell in a handbasket strikes me as ill-advised.

  5. David Silb commented on Jan 5

    Well, I don’t know about you guys but each month I receive a letter from my creditors i.e. Power, Satellite (hate cable), phone, cell phone, mortgage company, credit cards, bank loan on my car, car insurance, and one thing I have noticed: They are very content as long as I pay my bill. The moment I am not able they get real nasty.

    Just because everything is fine right now in the economy doesn’t mean it wll stay that way. We have some real structural issues looming that might spell disaster. Or in more economic terms: Contraction, inflation, stagflation etc.

    The Big question is: “Will our national creditors be as hard nosed as my personal creditors?”

  6. Keith commented on Jan 5

    It seems that these discussions get polarized: either you believe that everything is fine or you believe everything will crash. I don’t think either of the extremes is true. While the US economy is strong, we also have a trade deficit in the range of 7% of GDP. That doesn’t mean that the sky will fall tomorrow, but it does seem to be a little lower today than yesterday. I would feel better if there appeared to be some path to improvement, but the darn thing just keeps growing.

  7. centrist commented on Jan 5

    how dare these people…wait until rove and a “special prosecutor” have a go at them. Im not not going to stand here and listen to them bad mouth our heroic wartime president while i slave away at walmart w/o lunch break and while me son is on his 3rd tour in iraq avenging 911 er a for “iraqi freedom”. They are all liberal coastal elite.

  8. Jon commented on Jan 5

    Have you ever heard the saying “even a broken clock is right twice a day”? If you keep predicting how bad the world is, one day you’ll be right, but mostly you’ll be wrong. That is, if you don’t die first.

    I’ve observed that the older one gets, the more fiscally conservative you tend to get. I’m not suggesting that Buffet, et. al. aren’t amazing investors, but that their perspective is tilted to the pessimistic as a result of their age. They fail to see the incredible innovation that is driving the world economies and how fast we re-invent ourselves. Sure markets go up and down. But betting that the world is coming to an end before you die is a sucker bet.

  9. Justice Litle commented on Jan 5

    Two more deeply worried billionaires to add to that list are Tom Barrack and Richard Rainwater, both the subject of excellent profiles in Fortune this past year. Considering that Barrack made his pile in real estate and Rainwater made his in energy — precisely the areas that have them fretting — their opinions may actually be worth more than those of a generalist Buffett or a tech-centric Gates. Last but not least, Paul Volcker is not a billionaire, but he certainly deserves honorable mention as a pessimist worth paying attention to.

    As for the trade deficit, don’t worry — it will surely start to improve when consumer spending hits the skids. Of course, consumer slowdown will then lead to Asia slowdown, which in turn will lead to a rapidly diminished appetite for US treasuries. The central bank dollar-dump jamboree is thus primed to kick in at the precise time our man Bernanke dons his superhero getup to fight deflationary debt malaise on the home front. So on second thought, worry. Worry a Lot.

  10. B commented on Jan 5

    I have to agree with Kent on this. I saw an interview with Bill Gates about a year ago and he was asked about the dollar, trade deficit, etc because of his friendship with the dollar-shortin Buffet. I was surprised that he was even worse than a deer in the headlights. He stammered around and then said he supported whatever Buffett thought because he was a magical investor or some other rubbish. He was more than clueless. And when you are worth $50 billion, you have the right to be.

    Soros hates everything American it seems. I wonder why he lives here. Maybe he doesn’t any more. He definitely hates Bush. But, as I recall, he does like pot. Or supported legislation to legalize it. Seriously, he’s so damn dour that I can’t listen to anything he says. He’s outside of the bell curve. He’s Barbra Streisand’s bi*chy, haughty male equivalent.

    I have a quote from Buffett in March of 2003 where he said he saw no compelling values in the market. The NAS promptly had a nearly 80% run. And his dollar prognostications have left him wrong more than once. And hugely wrong in the wallet. He is an awful market timer, period. One can be bearish on the dollar but trying to time it when the Fed is raising rates is damn near idiotic in my estimation. I have alot of respect for Buffet’s ability to buy cheap companies and hire good management to run it, but that in no way translates into being any more right at predictions than the neighborhood card reader.

    Templeton is 300 years old but was a great value investor for a long time and still may be. That said, I’d put his commentary into the same as for Buffet. I’d be more willing to listen to him but since he’s basically crapped on his American citizenship since becoming “Sir” and moving out of the country, I have a few axes to grind with him. :) Seriously, I’d be most likely willing to listen to his view more than others.

    Rogers? He made boatloads working for Soros and hasn’t done anything productive since other. Although, I think he’s more concerned about the debt dilemma than anything else. And debt has not kept the markets from past bull markets. That said, now may be the time that happens.

  11. trendfellow commented on Jan 5

    WASHINGTON (AFX) — Treasury Secretary John Snow issued a wake-up call to the financial press. In a speech prepared for delivery to the Chamber of Commerce, Snow said the U.S. economy is on “solid footing.” Snow said he agreed with a suggestion in an op-ed by columnist Robert Samuelson that good economic news is bad news for the news business. “The press may find this economy of ours to be downright boring…but I don’t find it boring,” Snow said. “Rather it is a reason for optimism,” he said

  12. nate commented on Jan 5

    also consider sales of video games during nov-dec 05.

    even if the economy is weak, stocks might go up. might not.

  13. Tim commented on Jan 5

    Here’s a handy Wikipedia link:

    Cognitive Dissonance

    “Cognitive dissonance is a state of opposition between cognitions…In brief, the theory of cognitive dissonance holds that contradicting cognitions serve as a driving force that compels the human mind to acquire or invent new thoughts or beliefs, or to modify existing beliefs, so as to minimize the amount of dissonance (conflict) between cognitions.”

  14. trendfellow commented on Jan 5

    If all the people are making more money from the stock market and housing markets, why those Billionaires are concern about the state of the economy.. I see people driving new cars and buying home, those are good things.. perhaps those Billionaires are worrying too much about being catch up by other fellows..

    This stock market is the best for many years.. Google is $450 and Nikkei index is going up 200 points easily on any given day.. it is time to make more money, not to worry.. worrying is foolish..

  15. davidsilb commented on Jan 6

    OK Guys & Gals,

    The American economy will not crash into the ground. It will go along and continue to function. What I think is being missed is the fact that many things are pointing to eventual drags on the economy. As for two camps well I geuss one is denial and the other is worry. Did anyone say Crash? No, did anyone say anything to describe total meltdown? What I think you need to look at are potential problems. ALL MARKETS CORRECT. (Period) And these billionaires may see something we don’t. After all the Capital account is out of whack, meaning we now owe more to foreigners than to Americans in means of investments. That puts a drag on the dollar. The simple supply and demand for dollars could be cooling remember we have an 8 trillion dollar deficit. If foreign investors have all the dollars they want then to entice them interest rates must go up. And somebody got to pay that debt so taxes are a factor. Corporate investment is up but not in the US it is mostly in China. So future expansion of the economy is not going to be to its possible fullest, maybe.

    Come on, you folks don’t see some of this as trouble? OK let me pose another idea. These billionaires have billions of dollars, they are far closer to the trillion dollar mark than we are. They may know something about acuiring money and how it is invested. Lets just say that their success rate is better than most. If they are a little worried we should seriously review what they are saying and test its validity.

    I remember being told about Weapons of Mass destruction, told we would be “greeted as liberators,” and “Not a huge military presence was need to keep the peace.” And we followed those bad ideas. (And before you attack me on this point remember Saudi Arabia stopped us from going into Baghdad the first time because they couldn’t keep a lid on the Arab world if we did. I think because they feared a free and democratic Iraq next door. And we still haven’t caught Osama Bin Laden!!!!!)

    Billionaires are running a better track record than most no matter what you think of them. So pay attention, listen and like old saying goes, “buy on the rumor sell on the news.”

  16. D. commented on Jan 6


    Historically, life for 95% of people has never been easy. My grandparents are still around to tell me all about their ordeals. These last few decades in the Western World are an anomaly for sure.

    If you want to keep on thinking that life as we’ve known it is a given that’s your pejorative but history is clearly on the careful person’s side.

    And the more I see people living high off the hog and becoming more positive and complacent by the day, I worry.

    The list of civilizations that have collapsed because of an inefficent use of their resources is long. When I see so many unproductive members of society instantly become rich because of rising real estate I worry.

    I worry even more when I see how many take that money and waste it on depreciating assets. In 10 years, that 50K kitchen is going to be worth as much as a 1960s kitchen!

    We, North Americans, suffer from the entitlement syndrome. We expect everyone else to make us rich while we kick off our shoes and sip our wine. And this attitude has only gotten worse in the last 10 years.

    It makes me sick to see how many people have been getting rich through no work of their own but just because of bubbles that keep on growing here and there and I’m not the only one who feels this way.

    Meritocracy is a farce and most of us feel it. It seems that all you can hope for is to be a the right place at the right time, forget about hard work! How can we expect a prosperous future and live harmoniously when the foundation that the New world was built on is being destroyed bit by bit?

    There are billions of people out there with a strong work ethic who will be kicking our butts in the next decade. With the help of technology and media, we’ve been showing them what living the life of leisure is all about and now they want it.

    The pie might be getting bigger but I have the feeling that our percentage of it will shrink.

  17. seamus commented on Jan 11

    B, Soros did not try to get pot legalized. His Open Society Foundation is at the forefront of the nigh-hopeless fight to reform the wasteful and immoral War on Drugs. To my knowledge, he’s never specifically spoken kindly about smoking pot.

  18. glenn commented on Jan 17

    I notice the pundits on CNBC are overwhelmingly bullish on the economy as is Larry Kudlow. I guess they can’t be pessimistic otherwise they would lose a lot of business. I’m a stock trader and I can’t see much reason to be bullish other than on gold and energy. Virtually everyone agrees the GDP will decline this year. How can stocks hold up when the economy is in decline? Moreover, I read that 9 of the last 10 times rates were tightened the market fell a year later. Buffet may have been wrong about the dollar last year but I doubt he will be this year due to the lack of support from Fed tightening. For some time there has been fear that central banks of other countries will dump our bonds for gold and other securities. China recently denied that allegation. Do you believe that? Gold is skyrocketing. US companies are sitting on tons of cash. The optimists say corporate spending will increase and help the economy turn up. I can’t see corporations expanding with the expected drop in consumer spending, particularly with the new credit card laws and the drop in housing prices. I thought corporations had a great earnings year last year only to read an article in the that said record stock buybacks by companies caused earnings to look better than they actually were. The article claimed it was only a mediocre year. Chief financial officers, who know most about the corporation, are pessimistic about 2006 while CEOs are positive. Skyrocketing energy prices somewhere along the line are a given and that is bad for both the economy and the markets. I don’t believe the government inflation figures as well. I think it is much higher given the way commodities are rising and that the figures don’t include housing (ownership). I think Americans are like ostriches with their heads in a hole. Suddenly gold no longer represents inflation. The inverted yield curve no longer is an ominous sign for the economy. So many of the pundits out there are positive, this is a contrarian sign for a downturn in the markets. I expect a big drop in the markets some time over the next few months and probably sooner rather than later. There are just too many negatives. For the first time in 5 years I’m 80% in cash. Bernanke will be forced to ease rates before the end of the year after the market goes into a steep decline. Then hopefully the market will move upward the last few months of the year. Inflation should continue unabated. I expect huge moves in gold.

  19. cem commented on Feb 28


    we are living in a period of “artificial heaven” as far as the economy is concerned. after the change of FED’s chairman, people still believe that the interest rates will not rise very fast but steadily. This may not be true: there is a high level of probability of an interest hike of high order that will inevitably turn into a money crunch ( to be precise, a contraction of the money supply M2). in the past, this has inevitably led to the recession. As the stock prices are overvalued as well as the real estate, there seems to be no more room left to maneuver except in secondary stocks or alike. The general outlook points out to the possibility of a seeing a new 70s pattern (stagflation, severe contraction ofthe stock market, rapid rise in commodity prices). The only question that will be left to answer would be as follows: if such a situation arises, what will happen in the world in the coming next 10 years?

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