Warren Buffett

Ultra-loose monetary policies by the Federal Reserve and the European Central Bank are throwing the world into "chaos" rather than helping the global economic recovery, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday. Is he right?

Some rather scary predictions out of Paul Farrell today: "It’s inevitable: Wall Street banks control the Federal Reserve system,
it’s their personal piggy bank. They’ve already done so much damage, yet
have more control than ever.Warning: That’s a set-up. They will eventually destroy capitalism,
democracy, and the dollar’s global reserve-currency status. They will
self-destruct before 2035 … maybe as early as 2012 … most likely by
2020. Last week we cheered the Tea Party for starting the countdown to the
Second American Revolution. Our timeline is crucial to understanding the
historic implications of Taleb’s prediction that the Fed is dying, that
it’s only a matter of time before a revolution triggers class warfare
forcing America to dump capitalism, eliminate our corrupt system of
lobbying, come up with a new workable form of government, and create a
new economy without a banking system ruled by Wall Street." And just like in the Hangover, where the guy is funny because he's fat, Farrell is scary cause he is spot on correct.

"Sometimes the cheapest situations are the ones that everyone agrees are cheap, but there's no catalyst. We think cheapness is its own catalyst and if you can be patient, sometimes for a year or two, you'll be rewarded. Our patience and the investor base we built that allows us to be patient is a big advantage."

There was a time when Warren Buffett was actually a credible, respected investor, when his views were prescient, and when his every action was not predicated by some supreme hypocrisy merely seeking to perpetuate the ponzi market, and/or praise the status quo which forces his record bet on "endless" American growth to be aligned exclusively with what the Fed does each and every day, i.e., destroy the value of the dollar. Yet 7 short years ago, the very same Warren Buffett wrote a scathing op-ed in which he lamented the decline of the dollar, the surging US trade deficit, and pointed out that any profits he and Berkshire may make courtesy of his then brand new non-US FX longs, "would pale against the losses the company and our shareholders, in other aspects of their lives, would incur from a plunging dollar." Well, the dollar continues to plunge courtesy of QE, and the pain is about to be far more acute once Bernanke really gets involved in the next 3-6 months. And the irony is that on November 10, 2003 Buffett admonished: "A perpetuation of this [dollar decline] will lead to major trouble." So much for once held ideals. And ironically, the same Buffett who now preaches Keynesian ideals at every opportunity, concluded his letter as follows: "In evaluating business options at Berkshire, my partner, Charles Munger, suggests that we pay close attention to his jocular wish: “All I want to know is where I’m going to die, so I’ll never go there.” Framers of our trade policy should heed this caution—and steer clear of Squanderville." It is no wonder then that reading between the lines, people tend to forget the brilliant investor that Warren once was, and focus on the two-faced hypocrite that his "assets" have forcefully converted him into.

James Altucher’s work is supremely two things: bullish (permanently so) and flawed. It is on the latter that I wish to briefly comment.

It looks like an M&A boom is on the horizon and it might provide a much needed lift to sagging markets.

More insights from "smart money"....

Some days ago, Business Week pointed out that "Warren Buffett shortened the duration of bonds held by his Berkshire Hathaway Inc. after warning that deficit spending could force inflation higher." As the article further pointed out, twenty-one percent of holdings including Treasuries, municipal debt,
foreign-government securities and corporate bonds were due in one year
or less as of June 30, Omaha, Nebraska-based Berkshire said in a filing
Aug. 6. That compares with 18 percent on March 31, and 16 percent at the
end of last year’s second quarter. The conclusion: "It may be a sign that Buffett expects interest rates to start rising, maybe sooner than the conventional wisdom." Yet very curiously, as we pointed out, another capital markets titan, Bill Gross with his trillion+ in fixed income securities courtesy of Pimco's numerous asset managers, has done precisely the opposite. As the chart below demonstrates, Gross' flagship Total Return Fund has been doing the inverse of Buffett, and has been actively increasing the duration of his bonds over the past two years, with the current blended maturity profile being the most long-end weighted in years: in fact the percentage of bonds maturing in 3 years or less is now the lowest it has been since October 2008. Using the above logic, it would signify that, unlike Buffett, Gross is now more primed for deflation than ever. In the great inflation-deflation debate, this will be the primetime heavyweight cagematch to watch. Between Buffett's empire and Pimco's FI monopoly, one of the two will have to lose. Our question of the weekend is who will it be?

The Canada Pension Plan Investment Board (CPPIB) is hedging for choppy markets, snapping up Manhattan real estate and getting into the lending business.

It looks like a feud is brewing among the credit rating agencies. For now, it is just the verbal bashing between S&P and Dagong. With S&P's fresh downgrade on Moody's this Tue., Moody's may have a score to settle as well.

I’m sorry to be the bearer of bad news. There are no easy solutions. There are only painful, more painful, and really really painful solutions. Both mainstream corrupted political parties have had the chance to put the country back on a prudent fiscal path. They have both failed miserably. One party will spend the country into oblivion and the other country will try to democratize the world with their military machine. There are no fresh ideas from either party. There are the same old stale ideas and rhetoric. - Jim Quinn

Bill Miller says: "U.S. large capitalization stocks represent a once in a lifetime opportunity in my opinion to buy the best quality companies in the world at bargain prices. The last time they were this cheap relative to bonds was 1951." That's funny, because according to our regression analysis (recreated below), the fair value of stocks is 750. But who needs facts when you have propaganda and a massively underwater stock position to offload. Bill Miller's desperation letter to sucker mom and pops in buying his dangling tech holdings can be found below, but here is a quick refutation of his point, which we discussed as recently as three weeks ago. And just in case there is any confusion, the dividend yield on the S&P compared to that of 10 Year Bonds, implies a fair value for the S&P of... 655! Perhaps Bill was experiencing a "Warren Buffett" moment and actually meant stocks are a once in a lifetime opportunity to short?

For those that care about real freedom, genuine progressive reforms and this Republic in general there are all sorts of things you can do and they are being done all over the place. I actually think this group will fail miserably and ultimately be brought to justice. I simply think too many smart people have woken up to the scam and the entire system will implode on itself. So as I have written before the key is NOT to be consumed by fear but rather to take action. Get your finances in order with gold and silver and other real assets but also get mentally and emotionally prepared. This is because if you are not in a position to help your neighbors then you are no good to anyone. This will not be about hunkering down in a bunker and emerging rich once the dust settles. It is about staying intact financially and emotionally so that you can help rebuild a better nation when the current world paradigm comes to an end which should happen swiftly within the next 1-2 years. Most importantly do not look for leaders to save anything or anyone. It not about looking outside it’s about looking inside as Gandhi said. If we become the change we want to see in the world the world will change. Messianic leaders are a myth and meant to control you and stop you from personal action and independent thought. Thinking a new leader will change the world just gives you an excuse to be lazy.

- Mike Krieger

This could work. I think it is "fair". What do you think?