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Berkshire Hathaway CEO Warren Buffett attends the Fortune Most Powerful Women summit at Mandarin Oriental Hotel on October 5, 2010 in Washington, DC.
Thanks to Henry Blodget at Business Insider for directing to this Fortune except from Warren Buffett's annual letter to Berkshire Hathaway shareholders. In it, Warren Buffett lays out the commonsense case for avoiding investments in currency (for example, government debt like U.S. Treasuries) and gold (driven by fear) and sticking with stocks. Here's a taste:
My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See's Candy meet that double-barreled test. Certain other companies -- think of our regulated utilities, for example -- fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.
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Warren Buffett, chairman of Berkshire Hathaway, attends the Allen & Company Sun Valley Conference.
Last year, Warren Buffett wrote a much-cited and blogged-about op-ed for the New York Times arguing that rich people don't pay enough taxes. Fine, responded the anti-tax Republican crowd, suggesting that if Buffett was so hot to part with his money, he could always write the government a check.
A change to tax forms was proposed, allowing wealthy taxpayers to pay more, to reduce the national debt. And now Buffett is saying that he'll match, from his vast fortune, dollar-for-dollar whatever Republcian members of Congress voluntarily contribute.
The U.S. national debt currently stands at $15.2 trillion, about a trillion more than the entire yearly GDP of $14.5 trillion. Warren Buffett is worth about $50 billion. The average net worth in Congress was about $750,000. Rep. Michael McCaul of Texas, a Republican, is worth $294 million.
Want a little billionaire backlash with your daily dose of economic turmoil? Maybe you do, if the billionaire backlash you're talking about involves Warren Buffett as something of a class warrior. The Oracle of Omaha recently took to the opinion page of the New York Times to argue that it's high time we stopped protecting the "mega-rich," as if they were "spotted owls or some other endangered species."
Endangered species! Don't put too fine a point on it, Warren! In fact, the mega-rich – whom Buffett effectively defines as "making more than $1 million" a year – are anything but endangered, under the current tax code. Their long-term capital gains taxes have been a modest 15 percent since 2003 (before that, they were taxed at about 28 percent, and in the 1970s, nearly 40 percent). And that's stayed the same through the financial crisis and a change in administration at the White House.