Warren Buffett, a rock star in the world of investing, has noticed the pattern of panic in the stock market recently and is using this volatility to his advantage. I am still buying into the market; the only change I’ve made is to buy more stocks, even if I don’t get the price at the lowest point on the curve.

Buffett is filling up his personal portfolio with American stocks with the goal of having an asset allocation 100% in equities in a short time. He sees fear in the market now, and he is sticking to a mantra that has worked well for him throughout his life: “Be fearful when others are greedy, and be greedy when others are fearful.”

You might think it would have been impossible for an investor to lose money during a century marked by [a gain of 17,320% in the Dow]. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

This is an opportunity that comes around only once every few decades. If you want to have the long-term gains that financial advisers claim stocks can provide, you have to buy low and sell high rather than buy happy and sell afraid.

Photo credit: TEDizen
Buy American. I Am., Warren E. Buffett, New York Times, October 16, 2008 via ramit.

If you are lucky enough to inherit (for example) $10 million in property or investments from deceased relatives, you are also lucky enough to pass a good portion of that to the government in the form of estate taxes. It is kind of a strange concept. Why should that money be taxed? It is simply a gift from one person to another, not a gift to the government. The basic argument in favor of the estate tax is that it helps to prevent massively wealthy families from avoiding tax on their main source of income, generation after generation. The existence of the estate tax also encourages charitable giving, as that is a way to avoid this particular tax.

Opponents of the estate tax often call it a “death tax” to stir emotions and create a political issue. Warren Buffet has is critical of the “death tax” term and is a strong supporter of the estate tax.

The billionaire investor has been an outspoken critic of efforts to repeal the estate tax and in testimony at a Senate Finance Committee estate tax hearing on Wednesday, he told lawmakers that you’d have to attend 200 funerals to be at one where the family of the deceased would owe estate tax.

So it sounds like the families that were intended to be taxes on their estates end up avoiding the tax while still passing along their wealth. Those who want to repeal the tax argue that it hurts farmers and family business owners whose property or business is passed down from one generation to the next, and need to sell part of their business to pay the bill.

Buffett provided suggestions for improvements to the estate tax that will ensure that those passing on their wealth fairly contribute to the government while protecting family-owned businesses.

File this under the category of “problems I’d like to have one day.”

Update: On Advanced Personal Finance, KMC explains why the estate tax is the most misunderstood tax.

Do you think the estate tax should be repealed?

Buffett: Phrase “Death Tax” is “Dead Wrong” [CNN Money]

According to CNN, if you add up the net worth of the 400 wealthiest Americans, you come up with a combined net worth of $1,250,000,000,000. That’s $1.25 trillion.

That’s an increase of $120 billion from last year.

The article then goes on to describe who is in the list (only billionaires, no lowly millionaires). Warren Buffett and Bill Gates, pictured here, are at the top, But that’s not important to me today. This is what I really want to know: Read the rest of this article »

Here’s another caption contest. What do you imagine is going on between Warren Buffett and Kelli Swanson? Leave your photo caption in the comments below. The winner gets a cookie.

Stephen Dubner, the author of Freakonomics, noted that Warren Buffett (who I’ve been writing much about lately, it seems) made a comment on a talk show recently describing one particular failing of market systems, particularly the free market system enjoyed in this country.

Buffett’s comment: “A market system has not worked in terms of poor people.” This is why he feels the need to give away his fortune to the Bill and Melinda Gates Foundation, which works hard for those with no means to help themselves.

The comments following Dubner’s post have been somewhat insightful. Is philanthropy outside of the free market system, or does this form of economy rely on the “goodness” of a few with incredible means to help those without? Buffett believes that if a better economic system was in place—it looks like he’s thinking globally—there would be no need for this type of philanthropy. But does the economic system take philanthropy into account, thus relieving the government from potential responsibility to the poorest?