Warren Buffet Buys into gold

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16th Aug '20 by chandreshpatel1

14 comments 830 reads

Warren Buffet Buy into gold

Has Warren Buffet seen the writting on the wall for the US dollar . He has always been so positive on the US and its economy.

His old man was Politician https://mises.org/wire/howard-... a gold bug to boot, perhaps he advised the Warren Jr that while they continue to debase the dollar stocks will continue to head northwards...?

Either way Warren Buffet has made a considerable fortune in the mean time by riding the wave.

Perhaps Mr Buffet has enjoyed the party but stayed close to the door, sensing that the music is about to stop he's grabbed his jacket , said his good buys and made his get away .....while remembering the advise of his ol' man . All fiat currencies head to Zero

Enjoy the read and listen

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About the Author

Chandreshpatel1

Premium Member

14 comments

Macro

16th Aug '20

Not quite sure why this thread has been awarded a vote of minus 4, at the time of writing. ...Whatever.

Not quite sure that I buy into the idea that _all_ fiat currencies are headed to zero. At least not in my lifetime. Certainly the historically strong dollar may weaken over time but as most citizens have very little in the way of money they are unlikely to worry much.

As to Warren Buffet selling Financials and buying Gold/PGMI Stocks, I cannot really criticse him as I did that too. And given how much more Cash he has compared to me it is a good thing that he did!

Airlines: Ditto. Surely the national flag carriers dependent upon long haul business flights will all need to be restructured? I can understand that Airline corporate bond holders will be protected to some degree, but my guess is that Airline stock holders will suffer horrible levels of dilution by the time this is over.

As to Schiff's predictions: Will Gold go up tomorrow morning? I hope so. Will half of all restaurants close? I hope not! I pray that the Restaurant God will at least spare some of my favourites, please. As to his Libertarian Party views I simply note that Rand Paul did not even choose to stand for President this time. If I had the franchise I wouldnnot vote for him or Schiff!

dmjram

17th Aug '20

"All fiat currencies head to Zero"

By definition they cannot as their value is quoted relative to other currencies.

Snowbum

17th Aug '20

Which are relative to what may I ask?

Manipulation by central banks = my turn to print some money, then your turn to print some money. Oh, my currency is too strong, I’ll print some more....

All the while, Gold is a finite resource which relates specifically to the USD.

shipoffrogs

17th Aug '20

Do we actually know that Buffett has bought gold?

There have recently been purchases at Berkshire Hathaway that seem contradictory to some of his strongly held views (airlines).

Maybe it's his new lieutenants who are buying these stocks.

dmjram

17th Aug '20

Relative to every other quoted fiat currency in the world! Hence ALL fiat currencies cannot by definition go to zero.

Individually they can e.g the Weimar Mark and Zim$. Collectively they cannot.

So....a central bank expands its balance sheet and holds bonds which it buys with newly created reserves. That does not trigger hyperinflation/drive a currency value to zero. If in doubt, see the Japanese yen....

Gold is a commodity priced in US$. Which is going up in value at present. Just as it did in the 70's before plunging.

Snowbum

17th Aug '20

https://www.google.co.uk/amp/s...

An older article with increased relevance today.

JohnEustace

17th Aug '20

Berkshire Hathaway has bought shares in the largest gold miner Barrick Gold. I haven’t seen that they have bought physical gold.

dmjram

17th Aug '20

"We haven't seen gold go ballistic yet but it will"
Indeed. It will also crash in value at some unspecified point in the future. The tricky bit is knowing when...

Also highly relevant to today:
"Gold prices have been too volatile to play a reliable role as a hedge against inflation, a study of financial assets over the past 112 years showed on Tuesday."
https://www.reuters.com/article/equities-inflation-idUSL5E8D738S20120207

Rusty2

17th Aug '20

Gold price is going up but the $ is going down.

dmjram

17th Aug '20

The inverse correlation is quite common.

https://www.macrotrends.net/1335/dollar-vs-gold-comparison-last-ten-years

Jack Corsellis

17th Aug '20

I remember an old interview where Buffett was on CNBC talking about how 'pointless' gold is relative to own something like farmland that can produce goods.

It's a significant change in his mindset.

Alphaflight

17th Aug '20

Anybody that has confidence in fiat currencies surviving this debasement serious needs their head examined. Gold/Silver is the logical hedge against this legalized form of theft.

Note that central banks are still buying and then hoarding gold. Meanwhile sovereign bond rates are all going further negative. The junior PM mining companies haven't reacted much to this so there is still plenty of scope for investors to benefit from this gold bull run.

Here is a quick list of negatively yielding 10 year bonds. Notice that Japan's 10 year is a positive number just to put things into some perspective.

The bond markets are not pricing in much future inflation which to me looks insane. The short end of the yield curve is clearly being manipulated by Yield Curve Control. What's coming next is likely to be more Yield Curve Control but on the longer dated maturities...

Also note that the UK's short term government debt is pretty much all negative now all the way up to the 6 year longer dates bonds. The UK 7,8,9 and 10 year will surely go negative before Christmas, more money printing (QE) will invariably be carried out.

Source: http://www.worldgovernmentbonds.com/

Alphaflight

17th Aug '20

The statement means "The purchasing power of all fiat currencies will go to zero". The velocity at which these different fiat currencies head for zero may differ however. However, some existing fiat currencies could be backed up by gold (e.g. the Russian ruble) if necessary as their central bank took measures to mitigate risk away from the USD hegemony space.

Note that the US came off the gold standard in 1971, the Swiss Franc in circa 1999. Mainly thanks to Maynard Keynes what we have now is a new experiment called Modern Monetary Theory (MMT). It is failing miserably hence why central banks / governments are resorting to Friedmanian helicopter money / money printing and other forms of debasement. The fact that one of the world's most successful investors is now buying a large chunk of the Barrick (=world's largest gold mining company) is probably not a good sign for what is coming I'm afraid.

dmjram

17th Aug '20

The statement means "The purchasing power of all fiat currencies will go to zero"

Well....sterling in one form or another has been used in the UK for 1200 odd years. It still buys goods and services.

Does a unit of sterling buy fewer goods and services over time? Yes. Is that equivalent to claiming that all currencies will head to zero in any non infinite time frame? No.

If you look at the data, the gold standard gave lower price inflation over the long term coupled with far greater volatility in prices over the short term. It didn't eliminate inflation and the cost in short term volatility was high. Along with output variation.

No. Keynes was not a supporter of MMT.
“Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.”
Economic Consequences of the Peace, 1919.

Note however the Weimar collapsed because of the Bruning deflation, not because of the prior hyper inflation. Which is why central banks want to avoid the former at all costs.

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Warren Buffet Buys into gold

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Chandreshpatel1

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