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A Warren Buffet-like investor's view on globalization
Old 06-18-2007, 07:42 PM   #1
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A Warren Buffet-like investor's view on globalization

This guy, William Thomas, is very sharp & his track record speaks for itself. He runs a venture capital/investment co that is publicly traded - Capital Southwest. He is calling it quits after this year but left some parting thoughts about the future. He also manages to bash CEO compensation. Kind of strange comments coming from a capitalist:

Capital Southwest Corporation

Galloping Globalization
"Last year, my annual report offered several observations about free trade in a section entitled Protectionism May Be the Final Answer. These remarks drew angry comments from several shareholders, who in one case gave me an F in economics and in another case threatened to sell his stock.

Despite our escalating foreign trade imbalance and the accelerated rate at which we are outsourcing manufacturing capacity and related jobs, globalization is a religion widely accepted by both political parties and by corporate managers anxious to lower their labor costs. Inevitably, it will lessen our country’s ability to create jobs that will enable our grandchildren to match their grandparents’ standard of living. Inevitably, it will lead to a trade deficit even higher than the present untenable 7% of GDP, increasing our country’s debt to its trading partners. Reversing this trend may require tax incentives or other controversial measures to reward corporations for creating domestic jobs.

Obviously, I am not an economist, but I know that our country’s welfare is threatened by today’s galloping globalization, which erodes our industrial base, outsourcing more and more jobs – blue-collar and white-collar. I am not capable of predicting the ultimate consequences of our country’s shrinking industrial capacity and its swollen trade deficits, but I know it is taking us in a hazardous direction.

I may sound like a voice crying in the wilderness, but my apprehension is shared by a growing herd of alarmed Americans. If some of our shareholders are offended by my challenging the merits of sustained globalization, I am sorry. I will hate to lose you, but hope you make a bundle on our stock and leave some to your grandchildren, who will need all the help they can get."

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Old 06-18-2007, 07:54 PM   #2
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Interesting. Martin Whitman, another long term successful value investor has had an investment in Capital Southwest for many years. I don't know if he still holds this in any of his funds.


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Old 06-19-2007, 02:46 AM   #3
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I believe the general Marco-Economics Theory about "Comparative Advantage" and how each country can do what they do most efficiently (i.e., best) and all benefit and wind up better-off.

However, I also believe that the USA has been on TOP since since WW II and probably emerged as the power house after WW I. I believe we need to do whatever we can to maintain our dominance. What is happening today could easily turn on us if we do not watch it. One thing we need to be careful about is the reverse brain drain and innovation going to other countries. We need to make sure that when the cards are done being shuffled, that we still have a strong winning hand. Otherwise, we will wind up more like UK or France. Hanging in there, but a shadow of their former self.

Part of the problem is that there are wealthy US capitalist that want to exploit the short-term differential to extract a profit. There is nothing wrong with that as long as it is not done to the countries overall long-term detriment.

One advantage of other countries beginning to participate in Global capitalism is more political stability. If they have a stake in overall economic participation, they should be a little less likely to want to upset the apple cart (but that is not guarantee).

Another advantage for the US... It forces us to be agile and reinvent ourselves. Other countries are taking the traditional money producing trade from the last century (I am talking about non-natural resources... certain manufacturing). We must continue to innovate and create the next big thing. Otherwise, we are scr3wed. China and/or India will over take us just by sheer numbers of their tax base. There is a direct relationship between the number of tax payers and governmental economic wealth once a country begins to participate... if they become a developed nation.

One other benefit that we have is that we have the governmental discipline that many other nations lack (at least for now). Plus, believe it or not our government is "more stable and less corrupt". Leveraging these strengths will be important over the next 50 years.

A parting shot: Americans work hard and are productive. Probably the most productive on the planet. We have a good work ethic that hails back for our early days. Work hard to survive!
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