The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [449]
Like Marc Hamburg, Berkshire’s chief financial officer, and others before him, Ian’s ability to interpret and work off directions like this with virtually no further instructions or supervision would be crucial to his career at Berkshire Hathaway. For the right kind of person it was the learning opportunity of a lifetime. Ian flew off to scuttlebutt.
By the end of the month shareholders jammed every flight into Omaha’s airport and filled every hotel room in town for the 2003 shareholders’ meeting, to see the man whom popular magazines had been proclaiming the “Comeback Crusader” and “The Oracle of Everything.” And there was some surprising news too. The Hong Kong Stock Exchange had disclosed that Berkshire had bought a stake in PetroChina, the giant, mostly state-owned Chinese oil company. It was Buffett’s first publicly acknowledged foreign investment in many years.18 He was notoriously cautious about investing outside the U.S. and had not owned a significant position in a foreign stock since Guinness PLC in 1993.19
Reached by reporters hungry for an explanation of this radical departure from the past, Buffett said he knew nothing much about China and had bought it for the oil that was denominated in yuan, the Chinese currency. He was pessimistic about the dollar and optimistic about oil. Buffett had written an article for Fortune, “Why I’m Down On the Dollar,”20 in which he explained that he had made significant investments in foreign currencies out of a belief that the dollar would decline in value. The reason was something called the trade deficit: Americans were buying more from other countries than they were selling, and at a fast-accelerating rate. They were paying for the difference through borrowing; foreigners were buying Treasury bonds, an I.O.U. from the U.S. government. In short order, the country’s “net worth,” he said, “is being transferred abroad at an alarming rate.” He posited a hypothetical example of two countries called Thriftville and the deficit-spending Squanderville: Sooner or later, the Thriftville citizens who were buying Squanderville Treasury bonds started wondering if Squanderville was good for the money. When that happened, they still traded with Squanderville—but instead of bonds, they took less risky hard assets: land, businesses, office buildings. “And eventually,” wrote Buffett, “the Thrifts own all of Squanderville.”
To ward off the United States becoming a version of Squanderville that was selling off pieces of itself to other countries, Buffett proposed a system in which United States companies that exported would be issued “Import Certificates”—in total about $80 billion a month. They could trade these (like the old warehouse certificates issued by Rockwood Chocolates could be traded). Anybody wanting to import into the United States would need an Import Certificate, and would have to buy from an exporter. Presto, companies would get paid a higher price to export than to sell domestically, automatically increasing exports. That, of course, would increase the importers’ (foreign companies’) costs. While this system could be viewed as unfriendly—a tariff, or tax on imports, which in the past had led to trade wars that depressed economies—Buffett felt that importers were going to suffer anyway as their goods became more expensive with the falling dollar. The Import Certificate idea at least used the market to allocate who was willing to suffer. Over time, demand for Import Certificates would gradually increase exports to rebalance trade and restore parity between Thriftville and Squanderville.
The plan had many nuances, but its bottom line was hallmark