Guest Post: Warren Buffett Priced In Gold

Tyler Durden's picture

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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Jason T's picture

Fondle that Warren

Western's picture


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.

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 



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."

strannick's picture

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

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).

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. 

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:

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.

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.

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." ?

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.

Pitchman's picture

Right on with Stockman.

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


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.

palmereldritch's picture

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

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.

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.

bania's picture

Regression to the dad.

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 ?

lewy14's picture

Them: You can't eat gold!

Me: You can't repo a pizza!

Conrad Murray's picture

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

PrinceDraxx's picture

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

BeetleBailey's picture

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

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.

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??

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.

Sandoz's picture

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

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 tzu's picture

Sure his company could get more taxpayer funded bailouts

Burr's 2nd Shot's picture

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

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. :)

Yen Cross's picture

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

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. 

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.

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!

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.

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...

palmereldritch's picture

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


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...

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!

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...

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.