Stocking stuffers: Buffett's Oriental Trading Company

Omaha sage's purchase a harbinger of things to come? Photo: Oriental Trading ad

WASHINGTON, November 6, 2012 – The markets have a slightly positive tone this morning, indicating to at least some investing pundits that President Obama’s re-election bid is viewed as secure by Wall Street. Mind, although most of Wall Street supported The One in 2008, they’ve come to bitterly rue their poor choice over the past four years and have supported Mitt Romney to the max. That said, at the end of the day, Wall Street is still more comfortable with the devil they know than the one they don’t.

Ergo, any up move in the averages today will be viewed as a hopeful sign for the incumbent as the blow-dried TV punditocracy begins its collective bloviating after dinner this evening. Realistically, unless one side or the other is clearly perceived to have won in a landslide by mid-evening tonight, the electoral nonsense could go on for weeks, à la Bush-Gore 2000. Between delayed counting of absentee and provisional ballots in critical states like Ohio—which could continue through the middle of the month—phalanxes of lawyers on both sides could create sturm und drang for weeks indulging in frivolous attacks on thin state victory margins, slaughtering any remaining bulls that didn’t already drown in last week’s Hurricane Sandy debacle.

The enormous potential for delays works in the Democrats’ favor, giving them plenty of time to find enough votes to win in tight contests, just as they did in the relatively recent Minnesota travesty that brought the dreadful Al Franken—illegitimately and illegally—into the U.S. Senate. But we shall see, harboring as we do a faint but growing suspicion that today’s balloting action will bring a very unpleasant surprise to the institutional left.

Meanwhile, life goes on, whether it’s Wall Street or Main Street. As if to emphasize the point, let’s turn briefly to an interesting impending acquisition by the Sage of Omaha, Warren Buffett himself. As readers of this column know, Uncle Warren is not one of our favorite people. Investing acumen aside, he’s been too comfortably in the tank with the current administration, making most of his public pronouncements suspect at the very least, particularly when it comes to his support of “tax the rich.”

That said, Buffett’s very, very long term investing style can often reveal the secret workings of Adam Smith’s “invisible hand” of the market. For example, environmental “concerns” aside, it’s interesting that the Obama Administration’s slow roll on the Keystone Pipeline may not only be influenced by the machinations of Luddite-style environmental fascists. If the pipeline is delayed or simply not built, all that oil and gas will have to get transported out of the Bakken Shale and Canadian tar sands areas anyway, particularly if it’s getting shipped from the West Coast to China (since we obviously don’t need energy here). And who better to transport it than the main railroad conglomerate that runs these routes, Burlington Northern, acquired by Buffett in 2009? No pipeline? Just ship that product via Buffett-Rail’s incredibly prescient positioning.

But, with his original background in retailing, railroad and insurance magnate Buffett is never one to overlook the little stuff either if there’s money to be made. Hence, his seemingly surprising deal to purchase online seasonal junk purveyor Oriental Trading Company. And we mean that term “junk” with some respect, as Mrs. Maven frequently purchases stuff from that Omaha-based (!) catalog merchant to pass out at Halloween, to decorate Thanksgiving or Christmas tables, and for whatever else celebratory comes to mind.

Oriental Trading merchandise is generally manufactured overseas (read “China”) and is cheap, cheap, cheap. But this stuff is also surprisingly festive and attractive, and is a great way to enliven your house for the holidays without spending any money at all. And that’s the important point. If you’ve noted the success in recent years of all the various “dollar stores,” you can connect the dots and see that even relatively affluent Americans are now seeking out merchants offering ridiculous bargains on a variety of daily household goods, including foods.

Since salaries and purchasing powers seem to be in a protracted swoon, saving money is of the essence today and for the foreseeable future. That’s why even many shoppers, including the highly class conscious, are seeking out dollar stores, consignment shops, Salvation Army stores, and the like.

Which gets us back to Buffett and Oriental Trading. Since Buffett probably expects the fruition of his current investments to occur long after his death at this point, his acquisition of this trinket purveyor marks his long-range bet that our economy may not recover in sufficient time for even Boomers like this writer to see that happy day. For Buffett, Oriental Trading assures that Berkshire Hathaway will continue to hold significant corporate turf in the “cheapest of the cheap” retail environment indefinitely. And “indefinitely” is the period of time—if there is time—that will elapse before America can once again reduce indebtedness and return to prosperity.

Hence, Buffett’s big bet on Oriental Trading. As an Obama supporter, he thinks a return to prosperity anytime soon is simply not gonna happen. That’s a sobering thought to keep in mind as we head for the polls today, assuming we haven’t already done so. Buffett sees a whole lot of Oriental Trading years in front of us. So do we if “Forward!” is the verdict American voters render tonight.

As for today’s market: probably best to stay on the sidelines. With the latest Greek election tomorrow, and with ours very likely to drag out this week, the high degree of uncertainty significantly increases risk, so cash is everyone’s best investment for now.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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