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alstry (36.08)

Buffett Moving From Planes To Trains.....

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November 05, 2009 – Comments (7)

NetJets Inc. said today it will lay off nearly 500 pilots, as its new management deals with a prolonged economic downturn that has hit the company hard.

The company employs more than 3,000 pilots worldwide, with most of them located in the U.S. About 50 of the pilots to be laid off live in the central Ohio area, the company said.

Sokol, who replaced Richard Santulli as leader of the Columbus-based Berkshire Hathaway unit in August, said it was a "difficult decision" in recognition that demand for private-jet service isn't expected to recover soon.

http://www.columbusdispatch.com/live/content/business/stories/2009/11/05/netjets_layoffs.html?sid=101

For those that don't know......Berkshire owns Netjets.  Having been on one of the planes...it is the only way to fly.

If we continue to lose over 500,000 per week for much longer.....pretty soon not many will be working.

Commercial and multifamily mortgage lending in the U.S. fell 12 percent from the second quarter to the third quarter and is down 54 percent from year ago levels, according to the Mortgage Bankers Association.

The drop includes a year over year decrease in lending for all types of commercial properties. Loans for retail properties are down 62 percent. Loans for office properties are down 56 percent, MBA says.

“Tight credit conditions coupled with scant demand for new loans meant that commercial and multifamily mortgage originations remained low for the third quarter,” said MBA vice president of commercial real estate research Jamie Woodwell.

http://washington.bizjournals.com/washington/stories/2009/11/02/daily85.html?surround=lfn

50% less loans....50% less people needed selling commerical and servicing mortgages for real estate ....

50% too much retail and office space......50% less people needed managing commercial real estate.

We already have over 50% of the architects unemployed........and over 50% of the residential construction workers.......and over 50% of the residential construction supply workers........

50% fewer auto manufacturing workers......50% fewer auto supply workers......soon to be 50% fewer auto sales people as more dealers shut down and others let go due to 50% fewer sales........

As many of you can probably tell, my blogs have been focusing more on employment and government's role in our economy.  We now have many industries that have reduced employment and/or wages by 50%.  In a large service economy like ours, in order to maintain GDP....we need lots of people servicing. 

When government is responsible for OVER 50% of GDP.....and government is the largest consumer by over a 50% margin.........when government's tax receipts drop 50%........we have a serious issue going forward regarding contraction in our economy.

It is not the end of the world.....simply the end of 50% of our GDP as we know it..........

 

7 Comments – Post Your Own

#1) On November 05, 2009 at 5:46 PM, chk999 (99.97) wrote:

What you didn't mention was Buffett's quote on buying BNSF:

'An all-in bet on the future of the United States.'

So who's right, you or Buffett?

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#2) On November 05, 2009 at 5:56 PM, MustBNuts (31.99) wrote:

HEY, why are you referring to yourself in the first person??!!

1 rec

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#3) On November 05, 2009 at 5:58 PM, alstry (36.08) wrote:

It is not Alstry or Buffett.....it is Buffet's CEO and Buffett....

Sokol, who replaced Richard Santulli as leader of the Columbus-based Berkshire Hathaway unit in August, said it was a "difficult decision" in recognition that demand for private-jet service isn't expected to recover soon.

And based on Orbitz's results today.....20% crash seems to be the magic number in the travel industry......

Orbitz Worldwide net revenue fell 22% to $187 million from $240 million. Analysts polled by FactSet Research were looking for sales of $200.7 million, on average.

"Average daily hotel rates fell more than expected in the quarter," said CEO Harford, accounting for the gap in results and the Wall Street consensus. "It's a pretty complex business we are operating, and it's particularly challenging market form a forecast perspective."

October and November Hotel Revenues are much lower this year vs. last year as well.  Travel and related expenses is responsible for a HUGE amount of tax receipts to government as well.

I am not sure who is right...Mr. Buffett or his CEO...but the numbers are favoring the latter right now.

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#4) On November 05, 2009 at 6:13 PM, alstry (36.08) wrote:

As far as this quote:

'An all-in bet on the future of the United States.'

I believe his time frame was 10-20 years....based on that time frame....we could still have a wicked depression where most corporations and individuals go bankrupt, the dollar crash....have half of America unemployed....go through a world war and/or suffer a major pandemic and still recover in time for him to be right.

Based on the fact that he is in the insurance business and understands high stakes very long term betting on catastophic issues.....my guess is he factored the above into his analysis.

I have actually heard him gloss over it in an interview.

In the near term we have a lot of potential black swan's flying:

WAR:  Israel seizing an Iranian ship in international waters carrying a cache of weapons while we are building up troops in Iraq and Afghanistan and Pakistan flaring up along with Venezuela and Columbia.

PANDEMIC:  Ukraine now practically under martial law due to the widespread infections from a virus

ECONOMIC SCANDEL:  A number of pension fund advisors are now under investigation for accepting imporper payments as an unprecedented number of pension funds are on the brink of insolvency as the Pension Guaranty Fund is now out of funds.

And now this little birdie:

Federal prosecutors filed new criminal charges against several Wall Street lawyers and traders for allegedly being part of an insider-trading network run by Zvi Goffer, a former proprietary trader at Schottenfeld Group LLC, a hedge-fund firm based in New York.

Goffer, who also worked at Galleon Group and started a trading firm called Incremental Capital last year, was known as "the Octopussy" within the insider-trading ring because of his reputation for having so many sources of inside information, according to the Securities and Exchange Commission.

The other defendants include Arthur Cutillo, an attorney at law firm Ropes & Gray LLP; New York attorney Jason Goldfarb; Craig Drimal, who worked in Galleon's offices but wasn't an employee; Emanuel Goffer, who worked at trading firm Spectrum Trading LLC and is associated with Incremental Capital; David Plate, a former Schottenfeld employee who's associated with Incremental; and Michael Kimelman, another Incremental associate.

Ali Hariri, a vice president of Atheros Communications Inc.  was also charged with giving inside information to an unidentified hedge-fund manager in California.

Goffer, Cutillo, Goldfarb, Drimal, Emanuel Goffer, Plate, Kimelman and Hariri were arrested. All except Hariri are expected to appear in Manhattan federal court on Thursday, according to a statement from the U.S. Attorney for the Southern District of New York.

Deep Shah, a former employee at Moody's Investors Service was also charged with insider trading. He remains at large, the U.S. Attorney for the Southern District of New York added.

COULD YOU IMAGINE IF THIS SPREADS TO ENCOMPASS MUCH OF WALL STREET ?????????

11.10.9.........When economic distress is felt.

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#5) On November 05, 2009 at 6:14 PM, davejh23 (< 20) wrote:

chk,

He did say that this was an all-in bet on the future of the US...however, what does this mean?  He didn't mention future growth...or a bright future.  It could be an all in bet on the bleak future of the US.  I took it as an all-in bet on higher energy prices in the future...a move away from trucking back to rail transport out of necessity.  It could also be an all-in bet on future inflation...one reason he would want to spend all of his idle cash.

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#6) On November 05, 2009 at 6:32 PM, alstry (36.08) wrote:

PANDEMIC UPDATE:

BRUSSELS, Nov. 4 (UPI) -- An explosive outbreak of influenza in Ukraine is worrying EU member nations that border it, observers say.

Kiev has issued a call for international help in obtaining anti-viral drugs, saying 71 people have died in the past week and another 240 people hospitalized in serious condition among more than 250,000 reported cases of flu-like infection, the EUobserver reported Wednesday.

The publication said blood tests have not confirmed the presence of the H1N1 variety known as "swine flu," but the rapid pace of the infections have prompted a high level of concern among Ukraine's neighbors.

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#7) On November 05, 2009 at 6:43 PM, docsteven (< 20) wrote:

Buffett also recently said very clearly that although things aren't any worse than 6 months ago.. they aren't any better.. and thats with a few trillion just thrown at the problem..i think Buffett wanted somewhere to park 44billion for the next 5 years..just a thought..

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