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Guest Post: Warren Buffett Priced In Gold

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Submitted by Azizonomics

Warren Buffett Priced In Gold

Can you say bubble? Or, more to the point, can you say bursting?

Warren Buffett loves to bash gold — claiming that stocks are inherently superior, because they produce a return, whereas gold just sits.  Trouble is, stocks (and all paper assets) are subject to counter-party risk, whereas physical gold isn’t. Gold doesn’t overcompensate its CEOs, it doesn’t leverage its productive capital in toxic derivatives, it doesn’t cause industrial disasters like Deepwater Horizon, its value isn’t dependent on central banking, or securitisation, or American imperialism, or the machinations of the military-industrial complex. It just sits, retaining its purchasing power.

Warren Buffett had a great ride: he grew his wealth and businesses in an era of unprecedented growth powered by OPEC oil, and later by Chinese industrialism. That era — the era of the American free lunch — is coming to an end.  His insights are applicable to that era. Today is a different world.

 


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Sat, 03/03/2012 - 22:31 | Link to Comment Jason T
Jason T's picture

Fondle that Warren

Sat, 03/03/2012 - 22:48 | Link to Comment Western
Western's picture

HA!

How endorphic would it be to just laugh in his face. It's too bad he'll one day die a beloved American son, rather than a crooked criminal sellout not worthy of American citizenship. At least that will be the his future media portrayal.. though, we all know what he really is.

Sat, 03/03/2012 - 22:49 | Link to Comment wretch
wretch's picture

Peaked on (!!

Sat, 03/03/2012 - 23:01 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

I think it's time for Ennio Morricone to weigh in:

http://www.youtube.com/watch?v=ZNGe7iK1O-4&feature=youtube_gdata_player

Sat, 03/03/2012 - 23:16 | Link to Comment palmereldritch
palmereldritch's picture

Ennio +1 (Not that that is possible)

http://www.youtube.com/watch?v=ubVNXD4f0y0

 

 

Sat, 03/03/2012 - 23:24 | Link to Comment Goldilocks
Goldilocks's picture

Popcorn (dance mix)
http://www.youtube.com/watch?v=vCEi2f-hr4M (3:39)

Popcorn Original Song (LP)
http://www.youtube.com/watch?v=NjxNnqTcHhg (3:47)

Sat, 03/03/2012 - 23:50 | Link to Comment TruthInSunshine
TruthInSunshine's picture

OT, and I will post it another thread, as well:

 

David Stockman has gone all in on calling the Federal Reserve 'out of options' and stating that the shit's going to hit the fan (if you don't know Stockman's resume, you should, and this is incredible stuff):

 David Stockman economy Q&A: Economic disaster in the works 

--USA TODAY

 

Stockman: "Here's the heart of the matter. The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding. If you had a (former Fed Chairman) Paul Volcker running the Fed today 7/8— utterly fearless and independent and willing to scare the hell out of the market any day of the week — you wouldn't have half, you wouldn't have 95 percent, of the speculative positions today.

Q: You sound as if we're facing a financial crisis like the one that followed the collapse of Lehman Brothers in 2008.

A: Oh, far worse than Lehman. When the real margin call in the great beyond arrives, the carnage will be unimaginable.

Q: How do investors protect themselves? What about the stock market?

A: I wouldn't touch the stock market with a 100-foot pole. It's a dangerous place. It's not safe for men, women or children.

Q: Do you own any shares?

A: No.

Q: But the stock market is trading cheap by some measures. It's valued at 12.5 times expected earnings this year. The typical multiple is 15 times.

A: The typical multiple is based on a historic period when the economy could grow at a standard rate. The idea that you can capitalize this market at a rate that was safe to capitalize it in 1990 or 1970 or 1955 is a large mistake. It's a Wall Street sales pitch.

Q: Are you in short-term Treasurys?

A: I'm just in short-term, yeah. Call it cash. I have some gold. I'm not going to take any risk.

Q: Municipal bonds?

A: No.

Q: No munis, no stocks. Wow. You're not making any money.

A: Capital preservation is what your first, second and third priority ought to be in a system that is so jerry-built, so fragile, so exposed to major breakdown that it's not worth what you think you might be able to earn over six months or two years or three years if they can keep the bailing wire and bubble gum holding the system together, OK? It's not worth it."

Sat, 03/03/2012 - 23:52 | Link to Comment strannick
strannick's picture

Gold doesnt make you listen to pompous pontificating from the Octagenarian of Omaha at 'Capitalist Woodstock' or hypocritical curmugening from Munger.

Sun, 03/04/2012 - 02:21 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Warren Buffett (twice) and Jamie Dimon are both featured in this weekend's Barron's.  I review it at my blog ("Review of Barron's, Dated 5 March").

"I'll be damned if we don't have record profits for the next year or two." -- Jamie Dimon

This is despicable on so many levels.  Want to read more?  Gmail me at my name and promise to behave and I will send you the link (or just use Google).

Sun, 03/04/2012 - 00:00 | Link to Comment gwar5
gwar5's picture

Thanks, good post. I read an excerpt of this Stockman piece a couple days ago, but they left out the juicy bits. 

Sun, 03/04/2012 - 00:18 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Is he right, wrong, lying, putting a warning out there....????

I don't know. I know he was as high ranking as it gets as an economic adviser to a sitting President of the United States.

I know that when someone like this comes forward in an intentional shout out in the loudest way possible, through the AP Wire Service (which makes its way onto every front page of every newspaper), something is probably afoot:

Sun, 03/04/2012 - 07:20 | Link to Comment Poor Grogman
Poor Grogman's picture

Stockman just tells it like it is, he sees and he tells.
I don't think there is much of an agenda really just a narrative.
I may be wrong but that's my take.

Sun, 03/04/2012 - 11:45 | Link to Comment Jay Gould Esq.
Jay Gould Esq.'s picture

Why do you think Reagan cut Stockman loose, back in The Day ? I remember Stockman well. Establishmentarians from both spectra, such as Bob Dole in the Senate and Tip O'Neill in the House, vied to see who would be first to hang Stockman's scalp from his saddle. He walked it like he talked then, as now: declaiming the profligacy of Washington, whilst sortieing through the whithering barrage of political and ( obeisant ) media ack-ack fire.

+1, Stockman.

Sun, 03/04/2012 - 00:01 | Link to Comment palmereldritch
palmereldritch's picture

Is that the same Paul Volker who as the Chairman of the Group of 30 published the G-30 report that "...played a key role in convincing Congress to allow the OTC derivatives markets to remain largely unregulated." ?

http://www.riskglossary.com/link/group_of_30_report.htm

Sun, 03/04/2012 - 00:40 | Link to Comment Conrad Murray
Conrad Murray's picture

The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding.

Almost. The Fed is a private institution whose shareholders happen to be the "big Wall Street banks, traders and hedge funds". It is not a patsy. It is a parasite. It is doing exactly what one would expect when viewed in this light. Create a depression and buy up all the real assets with confetti.

End the Fed. End the State.

Sun, 03/04/2012 - 04:03 | Link to Comment Pitchman
Pitchman's picture

Right on with Stockman.

 
Warren Buffett: The Paradigm Puppet - Who Is Worse; The Criminals Or The Men Who Enable The Criminals?

 

Sat, 03/03/2012 - 23:32 | Link to Comment Unprepared
Unprepared's picture

And probably time for Immortal Technique as well:

http://www.youtube.com/watch?v=v6MfVELJYDg

Sun, 03/04/2012 - 11:34 | Link to Comment Silver Shield
Silver Shield's picture

SBSS 17. Warren Buffett Paradigm Puppet He is a irrelevant hack.

Sat, 03/03/2012 - 23:20 | Link to Comment CompassionateFascist
CompassionateFascist's picture

Buffet grew his paper wealth via politically-connected inside trading...beginning with knowing exactly when to bail (via Democ pty contacts) during the Hunt Bros. corner on silver. He's a rich crook. And, since the good die young, he will - like soulmate Soros - be around and rich for some time yet.

Sun, 03/04/2012 - 00:09 | Link to Comment palmereldritch
palmereldritch's picture

I believe the technical term is front running cut-out.

Sun, 03/04/2012 - 00:17 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Uncle Warren, strumming his guitar, leads the children all down to the mall.

There, the drooling wide-eyed Uncle, strumming his guitar, lets the cash and credit cards be tendered for all the aspirational Chinese crap that the venal can afford on credit. 

And when the music stops the goat-footed Uncle, belly all full,  heards the fleeced skinny sheep bleeting out the door.

Sun, 03/04/2012 - 00:22 | Link to Comment living on the edge
living on the edge's picture

Fuck Warren Buffet. It's because of people like him that I have to buy gold to protect myself and my family.

Sun, 03/04/2012 - 08:50 | Link to Comment bania
bania's picture

Regression to the dad.

Sun, 03/04/2012 - 11:30 | Link to Comment Jay Gould Esq.
Jay Gould Esq.'s picture

What is Rebecca Quick priced in Buffett Units ?

Seriously: How many of you believe that Quickie, or her neonate issue, "Junior" Quick, will receive a Howard Hughes-type "gratuity" in Uncle Warren's last will and testament: Cash ? Warren's soiled bloomers, for some Auld Lang Syne ? The Oracle's sacred Philosophic Tub ?

Sat, 03/03/2012 - 22:34 | Link to Comment lewy14
lewy14's picture

Them: You can't eat gold!

Me: You can't repo a pizza!

Sat, 03/03/2012 - 22:34 | Link to Comment Conrad Murray
Conrad Murray's picture

How many ounces for Becky Quicky? Or is she priced in grains?

Sat, 03/03/2012 - 22:49 | Link to Comment PrinceDraxx
PrinceDraxx's picture

Certainly no less than grams for a truly efficient Administrative Assistant. No telling how much a Sexytary costs these days though.

Sat, 03/03/2012 - 22:36 | Link to Comment BeetleBailey
BeetleBailey's picture

He's too busy mentally fondling one Rebecca Quick...as he wistfully sips his cherry Coke

Sat, 03/03/2012 - 22:47 | Link to Comment Goldilocks
Goldilocks's picture

Cherry Cola - Savage Garden
http://www.youtube.com/watch?v=Lz1f_aef8yM (3:53)

Sat, 03/03/2012 - 23:35 | Link to Comment kekekekekekeke
kekekekekekeke's picture

sweet like a chica cherry cola

Sat, 03/03/2012 - 22:46 | Link to Comment eddiebe
eddiebe's picture

Warren's got a point. Stocks, gold, commodities, currencies and bonds all have their functions. The graph above speaks for itself. Warren is talking his book and is a bit of a bore, besides being disingenuous. You would think once a person reaches his age he would make an effort to come clean and tell the truth, but even at his age life is pretty dear, and I have no doubt, that if he told what he knows, his days would be even more numberec than they are. All your wealth won't keep you from your reward, Warren.

Sat, 03/03/2012 - 22:48 | Link to Comment chairsatan
chairsatan's picture

I hate the old man as much as anyone, but isn't this graph showing you'd have been way better off betting on Berkshire from the beginning instead of gold, by factor of about 70x??

Sat, 03/03/2012 - 22:50 | Link to Comment spiral_eyes
spiral_eyes's picture

The graph shows he grew his wealth in a different era, and now his insights are becoming less and less profitable.

Sun, 03/04/2012 - 00:49 | Link to Comment Sandoz
Sandoz's picture

And if starting tomorrow his insights become more and more profitable what will you say then?

Sun, 03/04/2012 - 07:05 | Link to Comment spiral_eyes
spiral_eyes's picture

Priced in gold, they won't. The reflation bubble is too big to deflate gold prices, and Berkshire Hathaway has a load of dynamite on its books.

Sun, 03/04/2012 - 12:33 | Link to Comment sun tzu
sun tzu's picture

Sure his company could get more taxpayer funded bailouts

Sat, 03/03/2012 - 22:59 | Link to Comment Burr's 2nd Shot
Burr's 2nd Shot's picture

On a long enough timeline, the value of everyone (when weighed in ounces of gold) drops to zero.

Sat, 03/03/2012 - 23:08 | Link to Comment Nassim
Nassim's picture

I doubt if Warren would keep in employment any of his analysts if they had been losing money for the past 12 years. The trouble is that he thinks that gold is not money. I hope he lives long enough to learn - and for his investors to despise him. :)

Sat, 03/03/2012 - 22:55 | Link to Comment Yen Cross
Yen Cross's picture

Monopoly Money . Reading Rail<>Road money. Pink/Yellow/blue/red?

Sat, 03/03/2012 - 23:05 | Link to Comment toadold
toadold's picture

If you look at graphs over the last ten years gold beats Berkshire.  Bullfat has been playing Soros Jr. with crony deals in realestate, derivatives, and rail roads.  He's been getting burned on some of them also. He just thought he knew how derivative risk worked.  He's now talking about a successor.  My tin foil hat tells me it is because some major stock holders have had hostile thoughts about him that have been expressed quietly. 

Sat, 03/03/2012 - 23:14 | Link to Comment bob_dabolina
bob_dabolina's picture

Ya know what pisses me off about Warren Buffet?

He runs around saying rich people need to pay more in tax to help balance the budget. Meanwhile he's donating most of his fortune to the Gates foundation to help people in Africa.

Keep your two cents to yourself Warren.

Sat, 03/03/2012 - 23:20 | Link to Comment Yen Cross
Yen Cross's picture

His natural Children, can't stand the Narcissistic ass hole! He will probably put a bullet in his head before he let's his children let him die with dignity!

Sat, 03/03/2012 - 23:49 | Link to Comment bob_dabolina
bob_dabolina's picture

He disowned one of his grand daughters (Nicole Buffet) because she said that his life revolved around money.

Apparently money IS more important than family in the Buffet household.

Sun, 03/04/2012 - 04:25 | Link to Comment tahoebumsmith
tahoebumsmith's picture

I say start in Detroit and let it morph from there... This Country is actually waiting to happen and would embrace however the only problem is, the powers that be have decided to take us down one at a time...

Sat, 03/03/2012 - 23:54 | Link to Comment palmereldritch
palmereldritch's picture

Ha!...Warren and Gates...yeah, it's all about Serving Mankind

http://www.youtube.com/watch?v=NIufLRpJYnI

 

Sat, 03/03/2012 - 23:18 | Link to Comment tahoebumsmith
tahoebumsmith's picture

Well Mr. Bathtub let me ask you one simple question...When you cash in your stocks how much of that gain do you get to keep in your pocket? Gold doesn't have to sit, It can be sold on the street, traded for a car, Wood, food,  bartered or used for just about anything else you want to use it for these days. And guess what O'l Orifice of Omaha, when I whip the shiny stuff out and get everybody's attention, I get to put the entire $1750 per ounce right in the old pocket of my overalls where it belongs. So go ahead and try a simple test... Next time you want something whip out a handful of stocks and see what type of reaction you get..LOL... Meanwhile I'll keep hyponotizing people with something real, something they can touch and something I don't have to divi up to figure out my take on the deal...

Sun, 03/04/2012 - 02:22 | Link to Comment Barmaher
Barmaher's picture

I whip the shiny stuff out and get everybody's attention,

 

Then things have changed since Mark Dice tried to get $50 for an ounce of gold in socal.   This aint Europe!

Sun, 03/04/2012 - 02:51 | Link to Comment tahoebumsmith
tahoebumsmith's picture

Barmaher, When you want to hang with the real boyz, give me a shout. If you come knocking after it's too late, good luck.. You will be one of them, my most feared enemies. One who thought he had everything and then realizes he has nothing and is totally naked. I don't want to see you naked, buy a few extra pair of briefs before the price of cotton makes it a luxury...

Sun, 03/04/2012 - 11:56 | Link to Comment VelvetHog
VelvetHog's picture

BUT!, if the S has already HTF and you come to me to bulld you a new house (shack) or to put a new engine in your 1978 F150 and you offer to pay me in gold.  You ain't gettin' no house or no new engine.

Sat, 03/03/2012 - 23:23 | Link to Comment Hugo Chavez
Hugo Chavez's picture

Gold retains its purchasing power huh?

Tell that to people who bought gold in the in the last gold bull market.

Virtually every asset class beat gold the next twenty years from 1981 to 2001.

I still prefer third world stocks as an asset class in general. Nobody trusts the third world, so assets are priced fairly. There is too much misolaced trust in developed market assets, hence they are overpriced.

I do think gold is fairly priced right now, for a one percent real return these next twenty years. Who knows what the nominal return will be

Sat, 03/03/2012 - 23:29 | Link to Comment spiral_eyes
spiral_eyes's picture

Actually in terms of oil, or real estate, or anything other than pumped up paper bullshit (stocks, bonds, fiat, etc) buyers of gold even during bull markets mostly retain the purchasing power they put in. They lose when nominally priced in dollars or other fiat instruments. The smart thing to do is to hold gold when the markets and society are bleeding and equities when they're growing. The trouble is, I have no idea when the next time there will be real, productive, organic growth in America.

Sat, 03/03/2012 - 23:35 | Link to Comment Hugo Chavez
Hugo Chavez's picture

Makes sense.

I am dubious we will have any vigorous real growth until after international labor rates are more equalized, another twenty years?

Sat, 03/03/2012 - 23:58 | Link to Comment tahoebumsmith
tahoebumsmith's picture

1981-2001? Hello Hugo we are living in the land of 2012, ya know Mad Maxx times. Nobody will give one rat's ass about your portfolio when the dollar crumbles and your dollar based stocks become worthless. People need to wake the fuck up and realize there are dimensions out there they just can't see. If you don't have something tangible to trade you're done...If you don't have a gun to protect yourself you're even more done. Wall St. should have had its day a few years back however those who run the world decided they would go to the sucker's buffet for one more gorge fest. Honestly, look at what you got in stocks? A mere promisary note at best that maybe someone will pay...LOL..I say you better have something in your pocket. Reminds me of my youth when we use to play marbles and every now and then some fat kid would pull the sock out of his pocket with that bad ass ball bearing...Remember your reaction? Yup me too, I gave him a few worthless federal reserve notes for his steel filled sock and I was king of the hill until somebody just had to have it more then me...

Sat, 03/03/2012 - 23:37 | Link to Comment CompassionateFascist
CompassionateFascist's picture

The real Hugo Chavez thinks otherwise.

Sat, 03/03/2012 - 23:24 | Link to Comment zebrasquid
zebrasquid's picture

Gold doesn't require smart, honest executives; doesn't ever become obsolete or out of fashion, doesn't have labor unions and govt interfering with it's very existence, doesn't have to make or exceed Wall St expectations, doesn't have to compete with cheap 3rd world labor..... businesses that Buffett likes have all these issues despite the relative "moat" he believes some have. Gold is fully realized wealth.

Buffett's assets always have to keep proving their worth.

Sun, 03/04/2012 - 16:10 | Link to Comment Offtheradar
Offtheradar's picture

Gold never cooks the books.  Gold never uses questionable accounting methods. Gold never took my wallet. Gold is a good ole friend.

Sat, 03/03/2012 - 23:32 | Link to Comment Hugo Chavez
Hugo Chavez's picture

And I am going to miss the free lunch only svailable to usa citizens.

I look around me now and see a lot of naive, uneducated people who have no value added skill over a chinaman who makes a buck an hour.

Sun, 03/04/2012 - 03:40 | Link to Comment Vic Vinegar
Vic Vinegar's picture

Funny, I don't see that.  I see the state of mankind getting better, albeit very, very slowly.

BTW, here's another word you could perhaps explain: svailable

LOL

Sun, 03/04/2012 - 15:48 | Link to Comment debtandtaxes
debtandtaxes's picture

Clearly you value your IPhone more than you do your civil rights....

 

Sat, 03/03/2012 - 23:34 | Link to Comment Quaderratic Probing
Quaderratic Probing's picture

He knows paper gold is more worthless than paper dollars. He will know the date they pull the plug on gold leases

Sat, 03/03/2012 - 23:36 | Link to Comment spiral_eyes
spiral_eyes's picture

But does John Paulson?

Sat, 03/03/2012 - 23:41 | Link to Comment suckerfishzilla
suckerfishzilla's picture

Berkshire Hathaway could be priced in hamburger meat and the chart would look roughly the same.

Sat, 03/03/2012 - 23:43 | Link to Comment Yen Cross
Yen Cross's picture

That was a great post+1

Sun, 03/04/2012 - 00:00 | Link to Comment Augustus
Augustus's picture

Quite a bit of storage costs with the hamburger.

Sun, 03/04/2012 - 00:10 | Link to Comment Yen Cross
Yen Cross's picture

 Compared to what? Ice? Junk you to! Idiot!

Sat, 03/03/2012 - 23:52 | Link to Comment Rogier
Rogier's picture

'Warren Buffett had a great ride' implies he's just been some beta chasing monkey for all these years. I think the guy deserves a little more credit...

Sun, 03/04/2012 - 00:49 | Link to Comment tahoebumsmith
tahoebumsmith's picture

Warren Buffett has been more then just a Beta chasing monkey over the years, he has been the shiny spinners placed strategically above the lure to attract the fish so every sucker he throws the line out to bites on his bait. Once he has reeled you into the boat only he decides if you become dinner or if he might release you for future fishing entertainment. Wake up and look at the market, a few market makers with all the money joined by some robots that only do what the market makers have programmed.

 

Sun, 03/04/2012 - 00:09 | Link to Comment DavosSherman
DavosSherman's picture

 

 

 

 

"You know why Warren Buffett doesn't like gold, doesn't understand gold, because gold has out performed his stock in the last ten years by three and a half times." Link.

Sun, 03/04/2012 - 12:20 | Link to Comment Nage42
Nage42's picture

I clicked on the link and was listening for about 10 seconds before realizing that I was looking around the room to try to find a gun so that I could go find the speaker and shoot him in the face.

 

There are some smarmy, nasally, grating voices that just really shouldn't survive past childhood without someone punching their throat in for "tonal adjustment."

 

I'm not saying I'd do it... but if someone was smarming at me in that tone, it'd be a real act of will to _not_ punch them in the throat -- as a service to the peace and quiet of everyone around them.

 

 

 

Sun, 03/04/2012 - 15:51 | Link to Comment debtandtaxes
debtandtaxes's picture

you felt the need to take time just to post an ad hominum attack? clearly you have  no response to the content -  extra time on your hands.

Sun, 03/04/2012 - 00:22 | Link to Comment Caviar Emptor
Caviar Emptor's picture

The Uncle always, always talks his book. Some things never change

Sun, 03/04/2012 - 00:30 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Whenever you don't buy stocks that Warren has recommended (and owns) it's an insult to his ego. 

He built his "What's Buffet Buying" rumor show into a 1990s-style cult that's as helpful now as yesterday's winning lottery numbers. 

Sun, 03/04/2012 - 00:34 | Link to Comment zebrasquid
zebrasquid's picture

Buffett was in his prime when he was a value bottom fisher in the '70s.
Once he veered away from Graham's value investing and started to just buy big stalwart steady growth he was no different, really, than a mutual fund. He did well during the 20 year bull market because he bought and held. He may have outperformed others during that run but not by all that much. Now, his method is all but obsolete and he does rely on inside info and connections and the halo effect that he enjoys(similar to the halo effect that Jay Leno enjoys because he was moderately funny years ago)

Anyone who sings the praises of Wells Fargo is either suspect for talking his book or living in some kind of senile denial.

Time to retire, Warren, before you hurt yourself and your widow and orphan acolytes.

Sun, 03/04/2012 - 00:54 | Link to Comment palmereldritch
palmereldritch's picture

FYI

Jay Leno was NEVER moderately funny

http://www.youtube.com/watch?v=ti73SgrLadU

Sun, 03/04/2012 - 00:32 | Link to Comment Sandoz
Sandoz's picture

I know this will be a tough concept for most of the people on this forum to grasp, but what this chart is saying is that you should sell your gold and buy Berkshire Hathaway. 

Yes, I know that most of you would like to pay the highest possible price for any asset, but let me recommend a unique approach to investing. It's what I call "buying at a good price." It's a simple technique really, you buy when the price is low and sell when it's high. While the people on this forum are talking up gold, Mr. Buffett (a billionaire I might add) is purchasing businesses at a good price. 

Sun, 03/04/2012 - 03:36 | Link to Comment LowProfile
LowProfile's picture

Yes, because the macro conditions that produced that cliff dive have clearly reversed.

/sarc

Sun, 03/04/2012 - 04:12 | Link to Comment Sandoz
Sandoz's picture

And at precisely what point will conditions have "clearly" reversed? When you get a margin call on your gold? Please share your criteria for determining a reversal of macro conditions so that we can all be enlightened by your economic prowess. 

Let me ask you, if gold falls 20% will that represent a reversal? Or will it have to fall another 20% after that? Or another 20% after that? Or are those just opportunities to "buy the dip." LOL. 

Sun, 03/04/2012 - 07:20 | Link to Comment o2sd
o2sd's picture

>> And at precisely what point will conditions have "clearly" reversed?

 

When the 1Y zero coupon rate is AT LEAST 4.5%.

Because until the 1Y reaches AT LEAST 4.5%, gold will continue to rise, as the risk weighted return will outperform any and all sovereign debt.

BUT, the 1Y CANNOT go to 4.5%, because that would either bankrupt every bank in the developed world, or 85% of the population, and barring another global conflict, that would be literally impossible for the current power structure to handle.

If gold drops 40%, it simply means that the volatility is 40%, not that it is in reversal.

By all means though, chase those equity returns. The last 2 years has seen the index gain 0.8% while inflation has run officially at 2.5%. So equities have gone backwards in real terms. Meanwhile gold has climbed 20% in the same period.


Sun, 03/04/2012 - 10:38 | Link to Comment Sandoz
Sandoz's picture

So you're firmly in the buy high sell low camp. 

Sun, 03/04/2012 - 11:19 | Link to Comment Gold Dog
Gold Dog's picture

I am firmly in the "we are all fucked in the ass camp" and will continue to add to my stack, ammo, and land.

Thanks for your time,

Dog

Mon, 03/05/2012 - 03:22 | Link to Comment o2sd
o2sd's picture

And here I was thinking you were going to present your counter-argument. Turns out you are just an idiot.

I offer you a chance at reversal of my opinion that you are an idiot. Point out in my post where I said I would buy high and sell low.

 

Sun, 03/04/2012 - 00:33 | Link to Comment Don Keot
Don Keot's picture

As a long time holder of Berkshire Hathaway, I must say that owning BRK is no different than owning gold.  I have never ever had a return on my stock.  Buffet has never paid one dividend, to show how smart he is, the only way you get a return is to sell your stock.  How does that make BRK any different than owning gold?  The rest of my few holdings are dividend paying stocks.  

Sun, 03/04/2012 - 04:06 | Link to Comment Vic Vinegar
Vic Vinegar's picture

How does that make BRK any different than owning gold? 

Owning physical gold will get your arrested one day, owning BRK will not.

Sun, 03/04/2012 - 15:54 | Link to Comment debtandtaxes
debtandtaxes's picture

owning brk will ensure your children starve. when they get hungry send them to my house.

Sun, 03/04/2012 - 11:02 | Link to Comment TwelfthVulture
TwelfthVulture's picture

Not too long of a holder, I guess.  BRK used to pay a handsome dividend.

Sun, 03/04/2012 - 00:48 | Link to Comment palmereldritch
palmereldritch's picture

I'm waaaay from an informed opinion but to me if you believe that true gold value/price has been suppressed by Central Banks insane/cryptic selling of the precious in the 90's/00 which drove prices down, versus latter day (2008) buying which has naturally driven up the price, then Warren's peak can only be a product of that unnatural/historical trend, no?

http://goldratefortoday.org/explaining-gold-rate/

http://www.gold.org/investment/statistics/gold_price_chart/

http://blogs.wsj.com/overheard/2011/11/03/honey-i-sold-the-gold/

Sun, 03/04/2012 - 00:52 | Link to Comment zebrasquid
zebrasquid's picture

Gold price, in real terms, is still the only asset class I know of that is cheaper today than it was 30 years ago. So how is that a bubble? It has just been playing a little catch-up on its way to outperforming in real terms. Long, long ways to go. Buying stocks now, to "buy low"' after a 30 year bull run, is the real fool's gold.

Everybody and their brother has owned stocks for decades.
If 1 out of 20 people you know actually owns any gold I'd be surprised. How is that a bubble?

Most everyone I talk to that doesn't own gold tells me it's because it's a bubble. The people who told you to buy it ten years ago (Faber, Turk) they think it has only just begun.

Buffett told you not to buy any tech stocks over the last 30 years - too risky!
That was even stupider than his bad gold call over the past few years.

Buffett is the bubble.

Sun, 03/04/2012 - 01:57 | Link to Comment Sandoz
Sandoz's picture

It's about observation, not theory. The price of gold is high, that's an observation. Sure, it may not be high relative to your theory of where it should be, but, for better or for worse, your theory is entirely irrelevant. You'll eventually realize that, but probably not before losing a boatload of money. 

Furthermore, think about what you've said about the price of gold in real terms. What you're telling me is that gold, contrary to what virtually every gold bug on this forum claims, is actually a really poor hedge against inflation.

Sun, 03/04/2012 - 05:03 | Link to Comment zebrasquid
zebrasquid's picture

Gold lagged for two decades because there was relatively low inflation during that period, and it was correcting from the massive, quick runup it had in the '70s. And the world was relatively stable during those decades, as compared to the decade that gold has gone up 6x.

One other point that argues against it being a bubble....Only 1% of investable assets in the world are in gold. Bonds are the bubble, where 40% of investable money sits ...with zero upside/frightful downside at these manipulated, reality-disconnected iow rates.

You chase your "cheap" stocks in a world that is on the verge of systemic collapse.... I still like my gold, and don't care that it's up. It's up for a reason, and that reason only gets more compelling with each day that the printing presses roll to reflect the greater disfunction.

Sun, 03/04/2012 - 00:47 | Link to Comment JohnKozac
JohnKozac's picture

After MF Global I don't know how anyone can trust ANY fund.

Sun, 03/04/2012 - 04:18 | Link to Comment Vic Vinegar
Vic Vinegar's picture

Try and love again, spacemonkey.  

Even Gerald Celente agrees we should lose it for this tune

http://www.youtube.com/watch?v=u2eOVG7FcSk

Sun, 03/04/2012 - 00:53 | Link to Comment sasebo
sasebo's picture

Nobody gives a shit about Warren buttoff except Warren buttoff.

Sun, 03/04/2012 - 04:03 | Link to Comment Vic Vinegar
Vic Vinegar's picture

You are probably better off never speaking again, both on this site and in "real life".  You define the concept/term of useless eater and have done nothing to advance mankind.  

OK?

Sun, 03/04/2012 - 10:02 | Link to Comment prole
prole's picture

I don't remember seeing comments like this on blogs in teh past.

This kind of out-of-the-blue Satanicly Cruel comment which God only knows what it could possibly do to someone of delicate constitution.

What kind of a world do I live in?

Sun, 03/04/2012 - 13:50 | Link to Comment sasebo
sasebo's picture

.

Sun, 03/04/2012 - 16:00 | Link to Comment debtandtaxes
debtandtaxes's picture

we must simply identify cruel ad hominum attacks for what they are. 

cruel

personal

without any constructive criticism or logical reasoning

thus proving who the useless eater in the room really is.

Sun, 03/04/2012 - 13:46 | Link to Comment sasebo
sasebo's picture

We might need to elect you to congress so you can censure to your hearts content. Until then you just have your opinion & I have mine.

OK?

Sun, 03/04/2012 - 01:23 | Link to Comment q99x2
q99x2's picture

"That era — the era of the American free lunch — is coming to an end. His insights are applicable to that era."

Agreed. And, what is the banking cartel's expertise? Gutting profitable companies like the ones that he's amassed.

No wonder he is parroting the Fed's agenda. Wealth is not what it used to be. It has become a liability.

Rupert Murdock.

Lots of people with great wealth are probably wondering who is next at this point.

Sun, 03/04/2012 - 03:58 | Link to Comment Vic Vinegar
Vic Vinegar's picture

Nice post, Tyler.  Simple enough for dummies like me to understand.  

If there's a hell, then surely Buffett will be there.  And if reincarnation is it, then hopefully WB will come back as a retarded Kennedy offspring, looking so ugly even this current crop of Kennedys wants to lock him in the basement.  And that's saying a lot!

Anyhow, I've made peace with having my 401k confiscated by the feds.  It's worth it just to see these Buffett-worshipers suffer the same fate.  

Sun, 03/04/2012 - 04:26 | Link to Comment Ted Baker
Ted Baker's picture

THERE ARE TWO MAIN REASONS WHY BUFFET CONTINUE BUSHING GOLD:-

(1) FIRST, HE MISSED THE GOLD BULL RUN OVER THE LAST FEW YEARS FROM 850 USD TO CURRENTLY 1,700+ USD THE OUNCE. IF HE WOULD HAVE SOLD MOST OF ITS SHARES HOLDINGS  BACK THEN WHEN THE BULL PERIOD STARTED HIS WORTH TODAY WOULD HAVE BEEN MUCH LARGER BEATTING ANY RICH MAN OR CENTRAL BANK IN THE PLANET - REMEMBER HE IS NOT LONGER THE RICHEST MAN IN THE WORLD OR IN AMERICA...SHAME ON YOU BUFFET, CLEARLY THIS SHOWS THAT HE IS NOT THE SMARTER NOR SAVY GUY IN THE ROOM AND HIS WEALTH IS ENTIRELY ATTRIBUTED TO A MASSIVE CARTEL CONTROLED AND MANIPULATED BY HIMSELF AT EXPENSE OF THE POOR AND WORKING CLASS IN AMERICA.

(2) SECONDLY, IT IS EASIER TO CONTROL YOUR WEALTH, MANIPULATE PRICES AND DESTROY OTHER PEOPLE'S WEALTH BY OWNING YOUR OWN SHITTY SHARES AT A MASSIVE SCALE AND OTHER PEOPLE SHARES AS HE HAD OVER THE LAST 20-30 YEARS. WHEN OWNING GOLD UNLESS YOU ARE A SUPER VAULT GOLD HOLDER YOU MUST FACE CENTRAL BANKS AND OTHER RICHER GOLD HOLDER PEOPLE FROM WHO HE CAN NOT HIDE AWAY OR PLAY THE DIRTY TRICKS HE HAD WITH HIS WEALTH OVER THE LAST 20-30 YEARS....

 

Sun, 03/04/2012 - 04:43 | Link to Comment Vic Vinegar
Vic Vinegar's picture

HEY WHAT'S UP TWEETIE-PIES?  TED BAKER FAILED TO MAKE A COHERENT POINT ONCE AGAIN, AS ALWAYS.

http://www.youtube.com/watch?v=AEhsEQwfcgU

Sun, 03/04/2012 - 05:29 | Link to Comment reutersanalyst
Sun, 03/04/2012 - 05:36 | Link to Comment satan2liberals
satan2liberals's picture

 

I hate to agree with warren on this point.( i find his self serving politics and hypocrisy disgusting)

Diversified Index investing will outpace gold and compensate  for inflation on the long term but the long term can be a very long term: 20 yrs or so.

 

A more imortant point is GOLD IS FOR WEALTH PRESERVATION, investing in gold for accumulation is just speculating on your ability to time markets , and sentiments. Sadly the reality is most peole fail miseably at this and it's a mathmaical certainty that they do so.

The goldbugs buying at 200$ an ounce will profit handsomly, those investing to preserve their current wealth will achieve that.

Those thinking they will make a killing in gold "NOW" are gonna lose their ass .

I hope this clarifies things for someone getting to the party late.

 

I myself own no gold because I'm in the capital appreciation stage. 

I'd probably own up to 50% gold if I were in the wealth preservation stage of life.

 

Sun, 03/04/2012 - 06:40 | Link to Comment LookingWithAmazement
LookingWithAmazement's picture

Its [golds] value isn’t dependent on central banking.

Hmmm. There's a direct connection between the act of money printing and the rise of the gold price.

Sun, 03/04/2012 - 07:09 | Link to Comment spiral_eyes
spiral_eyes's picture

In nominal terms, yes.

In purchasing power terms, no. 

Sun, 03/04/2012 - 07:49 | Link to Comment LookingWithAmazement
LookingWithAmazement's picture

Do you have hard evidence?

Sun, 03/04/2012 - 08:10 | Link to Comment spiral_eyes
spiral_eyes's picture

Gold priced in crude oil, vs dollars priced in crude oil. No matter what central bankers do, crude oil and gold remain relatively stable.

http://azizonomics.com/2012/02/25/price-stability/

Sun, 03/04/2012 - 06:42 | Link to Comment godzila
godzila's picture

.dupe.

Sun, 03/04/2012 - 06:41 | Link to Comment godzila
godzila's picture

Trouble is, stocks (and all paper assets) are subject to counter-party risk, whereas physical gold isn’t

 

As long as you can legally own it... confscation has already happened in the US of A...

Sun, 03/04/2012 - 07:09 | Link to Comment spiral_eyes
spiral_eyes's picture

That's not counter-party risk. That's risk of theft.

Sun, 03/04/2012 - 07:34 | Link to Comment o2sd
o2sd's picture

>> As long as you can legally own it... confscation has already happened in the US of A...

 

When societies break down completely, the government will confiscate anything and everything, including land, property, car, whatever.

So, if it comes to that, and you are still in the country, then it becomes irrelevant what you invested in.

It's worth looking at the Communist Revolution in China, particularly the cultural revolution. Because Communism is such an idiotic system of government, the entire productivity of China collapsed within 10 years of it's implementation. Then the real confiscation began. Almost everybody lost everything. In THOSE situations, having gold would get you killed, unless you made a voluntary donation to the CCP.

So by all means buy Gold if you think your country will survive this crisis and democracy (of sorts) and property rights remain intact. Otherwise GET THE HELL OUT OF DODGE NOW.


Sun, 03/04/2012 - 09:41 | Link to Comment bugs_
bugs_'s picture

looks like mr value has a value problem.

but it makes sense - grow like crazy on insider trading profits and tapping into government power at the right moments.

like anything else there are diminishing returns.  now it would take a hella insider trade to push his curve up.  so large that the risk of discovery (Sokol) is too great.  now it would take a hella exertion of government power that the risk of discovery (keystone) is too great.

and over time true value will exert itself.  sell it.

Sun, 03/04/2012 - 10:12 | Link to Comment Kasperfx
Kasperfx's picture

Worren , Ben don't you know, Even with your influences over the markets.

 

You can't fool nor stop Mother Nature !!!

Sun, 03/04/2012 - 12:26 | Link to Comment Spartaguy
Spartaguy's picture

WB is a hack!

 

http://www.aintmymedia.com/

Sun, 03/04/2012 - 12:46 | Link to Comment Milton William ...
Milton William Cooper's picture

Aziz rips off Peter Schiff so bad it hurts.....Schiff made this exact point on his radio show well before this article....no question this guy listened

Sun, 03/04/2012 - 13:52 | Link to Comment zebrasquid
zebrasquid's picture

Warren Buffett never liked tech stocks either, never made one dime off of the 30 year super bull market in tech stocks! THIS is the stock picking genius of his era??

Sun, 03/04/2012 - 14:50 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

He goes for slow undervalued steady returns. Not bubbles that spike than crash. I like to call them long term pump and dumps.  He has 60 billion dollars. Name one pump and dump techy that has 60 billion dollars.

 

He bailed out Goldman Sachs and BOfA with his own money.  Last time I checked those firm were full of high priced Ivy League educated people.  Buffett and Munger are superior.

 

Another example. Steve Jobs asked Warren Buffett what to do with all the cash he was accumulating.  Buffett suggested he buy back Apple stock. Steve Jobs declined and just decided to keep the cash.  I would have to say Steve Jobs has more of a brain then this Rosenberg nobody.

Sun, 03/04/2012 - 14:45 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Would rather have a share of BRK than a gold bar. Anyday.  The man owns an entire railroad among other things.  I am going to take the opposite stance and say gold is overvalued.  See the problem with your analysis is gold fluctuates in value just like currency, it doesn't always go straight up like it has the last decade.  From 1980 (when it crashed following prices like this 10 dollars a gram due to the manipulation of the silver market) to 2000 it averaged 3.69 dollars per gram in 1971 dollars. In 1971 dollars it was worth 1.25 dollars per gram when it was backed by currency.  Now it is worth around 10 dollars per gram IN 1971 dollars.

Sun, 03/04/2012 - 14:57 | Link to Comment Watson
Watson's picture

>>>
It just sits, retaining its purchasing power.
<<<

For long periods, it doesn't.
Sorry about that, but just a historical fact.

What gold *is* good for, historically, is as a hedge against a complete breakdown of the existing order (foreign invasion is the usual example).

But who is going to do the invading?
Russia is not the military power it once was, and Germany is practically pacifist.
Anyone suggest any realistic candidates?

Mon, 03/05/2012 - 03:42 | Link to Comment o2sd
o2sd's picture

Who invaded Zimbabwe?

 

Sun, 03/04/2012 - 15:06 | Link to Comment gsb2118
gsb2118's picture

Log scale would be more informative.

Sun, 03/04/2012 - 16:26 | Link to Comment loveyajimbo
loveyajimbo's picture

Buffet is a 'roid.  he is like Blankfein, only in a Teddy Bear suit... he disses gold while Ben the Gay Blade prints like mad... is he nuts or simply a mouthpiece for the elite status quo? 

He says residential houses are a great deal, even though there are a million+ bank owned homes that are waiting to be dumped on the market... only reason they are not is that they are held at ORIGINAL value on the books and dumping them would bloow the scam and sink the big bad boyz.

 

If not for the bailouts, Old man Buffet would be on the street selling his ass for $5/throw.

Sun, 03/04/2012 - 20:02 | Link to Comment dwilso39
dwilso39's picture

Now we know why he "hates" gold

Sun, 03/04/2012 - 22:00 | Link to Comment ejhickey
ejhickey's picture

Gold does not pay a dividend to its owners, but then BRK.a and BRK.b don't pay dividends to its owners either.   Warren keeps the dividends.

Sun, 03/04/2012 - 22:20 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

People buy gold as an inflation hedge. Inflation of the dollar has only been 11 percent the last 6 years while gold has increased 275 percent in price.  Looks exactly like the housing bubble.  People than to judge things by how much gold is worth but just because speculators jacked the price up doesn't mean other things are worth less including the dollar. It's insanity, its a scam and its worse than the housing bubble and tech bubble combined because its worth nothing and nothing will come from peoples loss from this. Its just another scam to cash in on more cash nobody who invests in gold really cares about gold they just care about money and the security of their money.

 

Its very obvious also considering most of the miners aren't increasing in stock price as well. Big time sign.

Mon, 03/05/2012 - 00:57 | Link to Comment zebrasquid
zebrasquid's picture

You are so wrong and you are the poster child of the 99% of people who own no gold and are so sure that it is somehow in a bubble in spite of that 99%. You might think about that before you talk about that which you obviously are clueless about.

I don't mean to insult you but, rather, too help you understand how silly your thesis is.

Mon, 03/05/2012 - 03:16 | Link to Comment Watson
Watson's picture

(From a US point of view) If you think someone is going to (successfully) invade, or civil war, or some other *total* breakdown of law and society, then gold in small physical units probably is a good idea, even at current prices.

Personally, I think a very slow (near-jobless) recovery, mostly in manufacturing and not including banking, housing or financial services, is much more likely.
And that scenario is not good for gold.

Watson

Sun, 03/04/2012 - 22:54 | Link to Comment alphastratus
alphastratus's picture

For all the talk about Buffett - it's his latest hires that are more interesting: http://blog.alphastratus.com/berkshire-hathaways-more-interesting-holdings

Do NOT follow this link or you will be banned from the site!