Warren Buffett Loses his Mind?

Warren Buffett croons for Chinese New Year ... Investment guru plays ukulele in video on China's state-run TV ... U.S. billionaire and philanthropist Warren Buffett sang and played the ukulele as he appeared in a video broadcast on China's state-run television Sunday to mark the Chinese Lunar New Year. – AP

Dominant Social Theme: An older fellow with a spritely tune and a "Midas touch."

Free-Market Analysis: Warren Buffett has appeared on China state-run TV playing "I've been working on the railroad." It's part of what we might call a larger "Buffett meme."

The meme – sub-dominant social theme if you will – of Warren Buffett as a cuddly old multi-billionaire has been going on a while. We figure it's part of a larger theme of Buffett-as-shrewd-investor. The idea is that if gruff, cuddly Warren can make so much money, well ... maybe you can, too.

Within this context, we find it understandable why Buffett turns up on Chinese TV singing his song. It may seem as if he's lost his (considerable) mind ... but probably not.

On the other hand, just what IS Buffett implying in this video? It's well known that by turning down the possibility of an Alaskan energy pipeline, US President Barack Obama has just further enriched supporter Warren Buffett who owns substantial railroad properties that haul oil and gas products.

Was his tune some kind of sly dig at his critics? Some kind of "gotcha" moment? And what about China itself?

China's ChiCom government has experienced considerable trouble when it comes to building railroads, especially high-speed ones. There have been numerous accidents that have resulted not just in injuries but in many deaths as well.

Chinese high-speed railroads have become a kind of symbol for the Chinese people when it comes to ChiCom mismanagement of the economy. The railroads and their trains are seen as part of a larger, shoddy approach to craftsmanship. Their operation is indicative of a lack of governmental responsibility when it comes to providing citizens with adequate, safe travel opportunities.

Was Buffet in some sense endorsing the ChiCom approach to railroads and its commitment to high-speed rail travel? Buffet is also known for his general optimism when it comes to the Chinese economy. But it seems to us that there is no reason to believe in Chinese statistics.

The UK Telegraph's Ambrose Evans-Pritchard recently posted an article questioning these same statistics. He pointed out that Chinese utilization of energy and its imports have fallen recently. In the article entitled "China's Very Mysterious Data" he wondered how Chinese productivity could keep rising while other indices were falling.

The short answer is that they can't. Another short answer is that ChiCom bureaucrats are releasing "cooked" statistics. In fact, Chinese communist leaders have done everything they can to keep the Chinese "boom" going. They've overheated the economy to the point where entire empty cities are being built to accommodate China's building craze. Cities!

It's a classic monetary bubble as defined by those Austrian, free-market economists in which Warren Buffett apparently doesn't believe. But what DOES Buffett believe in?

We don't know what the "young" or at least younger Buffett believed in, but the current version certainly doesn't seem to have a lot of faith in the free market. From his many Wall Street and insurance investments to his booster-ism of modern China, Buffet seems mercantilist to the core.

That is, his investment profile at this point celebrates "bets" that involve a considerable amount of government involvement. Goldman Sachs and Chinese leaders practice this sort of "state capitalism" in which the government itself and its monopoly power are brought to bear to make sure the investments remain profitable.

Buffett's song selection seems in a sense like a sly dig at his critics and at the same time a kind of endorsement of the ChiComs' mercantilist approach to economic development.

In a way, he seems to have chosen the tune to mock not only his critics but also those who continue to believe that the establishment and cultivation of free-markets are preferable to China's increasingly distorted and failing state capitalism.

Ah, Warren, where have you gone? Once you were a supporter and proponent of free markets. Now your support seems merely rhetorical and your actions speak of a different belief system entirely.

Are we reading too much into this video? See for yourself ...

(Video from RT's YouTube user channel.)