Warren Buffett

• Hilsenrath: Fed Ushering in New Era of Uncertainty on Rates (WSJ)
• Is Supreme Court's chief justice ready to take down ObamaCare? (The Hill)
• Netanyahu arrives in U.S., signs of easing of tensions over Iran speech (Reuters)
• Nemtsov Murder Fuels Suspicion, Fails to Spur Russia Selloff (BBG)
• ECB uncomfortable with leading role in Greek funding drama (Reuters)
• Video shows Los Angeles police shooting homeless man dead (Reuters)
• Iraq Military Begins Campaign to Reclaim Tikrit (WSJ)
• How Billionaires in London Use Secret Luxury Homes to Hide Assets (BBG)

The day the Buffet "value-investing" fanatics have been looking forward to all year, almost as much as the annual pilgrimage to Omaha, has finally arrived - hours ago Warren Buffett released his historic, 50th annual letter to shareholders, which is extra special because as the Oracle notes in the foreword, "Fifty years ago, today’s management took charge at Berkshire. For this Golden Anniversary, Warren Buffett and Charlie Munger each wrote his views of what has happened at Berkshire during the past 50 years and what each expects during the next 50."

Warren Buffett once famously chided that all the gold in the world would form a cube of 67 feet (20 meters) on each side. In doing so, he was attempting to argue that there was no point in owning gold since all the gold in the world would be an unproductive, useless hunk of metal. What’s ironic (and completely lost on the venerable Mr. Buffett) is that you could make the same argument about the paper-based financial system.

The fact that there is a debate about a quarter-point rate hike tells us that extraordinarily low interest rates have mostly failed to deliver a robust recovery. That people opposed to even the tiniest increase in rates are resorting to hyperbole tells us that they too know this. The thinking seems to be that six years into near-zero policy, the only reason it hasn’t worked is because it hasn’t been tried long enough. Meanwhile, the dangerous side effects of year after year of artificially low rates continue to grow.

The world has begun to devolve into two distinct factions. The imperialist actions of the American Empire in the Middle East and Ukraine have pushed Russia, China, India, Brazil, and Iran closer together regarding trade deals; transacting commerce without using the USD; oil and gas pipelines; and military cooperation. Totalitarian regimes are known for using foreign threats to distract the populace from domestic suffering. As a matter of fact, all regimes use this tactic. When the global economy rips apart at the seams due to the debt saturation, world leaders will attempt to blame other countries for their dire circumstances. Foreign enemies are good for business. Ask our Nobel Peace Prize winning President. War is inevitable.

• Greek Risk Draws Global Concern on Lehman Echo Warnings (BBG)
• Merkel to urge caution in U.S. as pressure builds to arm Ukraine forces (Reuters)
• West Races to Defuse Ukraine Crisis (WSJ)
• German-French Push Yields Ukraine Summit Plan With Putin (BBG)
• Swiss Leaks lifts the veil on a secretive banking system (ICIJ)
• Italy Lenders Seen Cleansing Books Amid Bad-Bank Plans (BBG)
• G-20 Finance Chiefs Face Tough Test in Istanbul (WSJ)
• Demand for OPEC Crude Will Rise This Year, Says Group (WSJ)... or rather prays
• U.S. Banks Say Soaring Dollar Puts Them at Disadvantage (WSJ)

ECB's Jazbec: QE Could End Sooner Than Sept. 2016

The Fed has been supporting the market since the late 1980s. But there is an important difference between the actions of the Fed under Yellen versus Greenspan and Bernanke. In 2008, the Fed allowed Bear Stearns and Lehman Brothers to fail. Given the massive wipeout that followed, this decision is now viewed as a dangerous mistake. Having learned their lesson, the Fed is now rushing in to support the market in response to even routine 20% drops. In this way, the Fed is acting like a value investor who demands a small margin of safety before investing.... Since 2010, however, the Fed has changed tactics. The Fed is now reacting far more quickly. Small market selloffs are followed by immediate responses. By quickly riding to the rescue, the Fed is effectively front-running value investors.

"Eighty people hold the same amount of wealth as the world’s 3.6 billion poorest people, according to an analysis just released from Oxfam. The report from the global anti-poverty organization finds that since 2009, the wealth of those 80 richest has doubled in nominal terms — while the wealth of the poorest 50 percent of the world’s population has fallen." There you have it. The reason the wealth of the richest has doubled since 2009, is because “it’s not a recession, it’s a robbery.” Central bank and government policy has done this, it is no accident.

Adjusting Warren Buffett's favorite indicator for 'the giant con that America is still enjoying growing economic prosperity - predicated on debt being the bridge between rising GDP and a declining economy' suggests today’s true market valuation is more than twice the previous all time high in 2000.

• Average 10-year yield of U.S., Japan and Germany dropped below 1% for the first time ever: Free Money in Bond Markets Shows Global Economy Still Struggling (BBG)
• Brent falls below $52 as oil hits new five and a half year lows (Reuters)
• China Fast-Tracks $1 Trillion in Projects to Spur Growth (BBG)
• Saudi Arabia Raises Price of Main Oil Grade for Asian Buyers (BBG)
• Oilfield Writedowns Loom as Crude Slump Guts Drilling Values (BBG)
• Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead (BBG)
• CIA says its inspector general is resigning at end of month (Reuters)
• Pipeline IPOs Climb on Demand for Returns Immune to Oil (BBG)
• Natural Gas No Savior for Investors Seeking Oil Refuge (BBG)
• Euro zone economy ended 2014 in poor shape (Reuters)

Wealth inequality isn't just a political issue - it's a survival issue. When a society hits a certain level of economic disparity, it is set on a path towards destruction. It happened to the Roman Empire, and it will happen to the United States.

Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."

"I’m tired of being outraged!"

Say what you want about the gold price languishing below $1200 (or not, as the case may be, after this week), and say what you want about the technical picture or the “6,000-year bubble,” as Citi’s Willem Buiter recently termed it; but know this: gold is an insurance policy — not a trading vehicle — and the time to assess gold is when people have a sudden need for insurance. When that day comes - and believe me, it’s coming - the price will be the very last thing that matters. It will be purely and simply a matter of securing possession - bubble or not - and at any price. That price will NOT be $1200. A “run” on the gold “bank”  would undoubtedly lead to one of those Warren Buffett moments when a bunch of people are left standing naked on the shore. It is also a phenomenon which will begin quietly before suddenly exploding into life. If you listen very carefully, you can hear something happening...

Yes, it is that magical week leading up to Christmas and the subsequent low volume push into the new year. It is "magic time" as hopes are high that "Santa Claus" will come to WallStreet. "Ignoring valuation – ignoring risk – is a recipe for disappointment and is the thing that is most likely to lead investors to ruin"