Suze Orman vs. Warren Buffett Revisited

March 8, 2007
Outing Suze Orman's portfolio

Orman estimated her liquid net worth at about $25 million, with another $7 million worth of houses. With just $1 million of that in stocks, it means that just 4% of her liquid net worth is in the stock market.

What does Orman do with the rest of her money? Solomon asked, and was told: "Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound."

As for playing the stock market, Orman said "I have a million dollars in the stock market, because if I lose a million dollars, I don't personally care."

She wanted 100% safe and sound from a risk standpoint, but also wanted superior rewards. Nice trick, huh? Wasn't she clever. How's that working out so far? The investments are looking pretty good as long as you don't factor in muni bond defaults surging, the questionable credit quality of the muni bond insurers, and the questionable assumption that inflation will remain tame long-term.

May 30, 2008
Subprime Finds New Victim as Muni Defaults Triple: Joe Mysak

But wait a minute: Municipal bonds never default, do they? Or at least this is how they are perceived by individual investors, right?

We're probably going to see a lot more munis default this year and in the years to come, because of the subprime crisis and maybe, just maybe, because of the high price of a barrel of oil.

May 4, 2008
Buffett Says Bond Insurers Don't Deserve AAA Rating (Update3)

Credit-rating firms shouldn't be giving top grades to bond insurers that borrow money at 14 percent or whose stock has dropped 95 percent, Buffett said at a press conference today in Omaha, Nebraska, a day after Berkshire's annual meeting.

June 1, 2008
Bank set to keep base rate at 5% as inflation continues to rise

The chief executive of HSBC bank, Michael Geoghegan, last week called on the Bank of England to raise interest rates, saying: "Inflation is a long-term problem because there is no long-term will to solve it."

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Suze Orman vs. Warren Buffett