Buffet Sells The Banks And Buys GOLD!

[tabs]

Originally Posted by cstreit

I predict the sun Will die out. That the earth will succumb. That a black hole will swallow the universe. It will, eventually. Doesn’t make me an astrophysicist....

I would never have mistaken you for a Astrophysicist...maybe an Astrologist.

That the Sun will burn out one day is common knowledge that any 5th Grader would know. So that is no mean feat. Even 10 years ago it was virtually unthinkable that the USA days were numbered. Anybody can say anything that like but to give you a logical rational as to why it is going to happen is quite uncommon.

[Crowbob]

Buffett is not trading cash for gold.

He is trading high risk of eventual worthlessness (USD) for demonstrated history of value (Gold). This is not an income-generating decision. It’s a wealth-preservation decision.

If the dollar collapses, he has the gold. If the dollar doesn’t collapse, he has the gold.

[Sooner or later]

Originally Posted by Crowbob

Buffett is not trading cash for gold.

He is trading high risk of eventual worthlessness (USD) for demonstrated history of value (Gold). This is not an income-generating decision. It’s a wealth-preservation decision.

If the dollar collapses, he has the gold. If the dollar doesn’t collapse, he has the gold.

He bought no physical gold. He bought gold producer stock.

[Crowbob]

Originally Posted by Sooner or later

He bought no physical gold. He bought gold producer stock.

Oh.

That changes my thinking.

Maybe he thinks banks mining money have less value than mines mining gold.

Irregardless* he’s looking at gold having more value than cash.

Interesting. Thanks, SorL.

[GH85Carrera]

So if the dollar collapses, how will the stock be priced? Assuming the dollar does what Venezuelan money did, he has a bunch of stock of a company that mines gold. How are they paid to produce that gold? They have a thousand pounds of gold on hand ready to sell, how will it be purchased? Russian rubles or Chinese or Japanese money? Then what, they have a stack of that money that is likely unstable if the dollar has collapsed.

And when I go to the grocery store to buy food, will I have to bring my silver or gold coins and weigh them out?

[Crowbob]

Currency is simply the metric of an agreement between parties as to the valuation of a tangible ‘asset’, if you will. The currency itself is irrelevant. In a collapse a company that produces a dark-colored carbonized sugar water may not be as valuable as a company that produces gold simply because humans have always valued gold. Be it in dollars, rubles or banana leaves, somebody will pay for it.

As to the grocery store scenario, if the dollar collapses, whomever has the most gold will determine how you pay for your crumbs of bread. The bread-seller will gladly take your specks of gold but more likely will ask how much gold you got: ‘Here’s a buncha banana leaves for all of it. Take it or leave it.

[wildthing]

He invested like $564M in a 50Bln company. That's 1%. Also Berkshire has over $100B in cash, and about 250B in holdings. This is not even a drop in the bucket.

He reduced stakes in other banks but bought more Bank of America...

[flatbutt]

Originally Posted by GH85Carrera

So if the dollar collapses, how will the stock be priced? Assuming the dollar does what Venezuelan money did, he has a bunch of stock of a company that mines gold. How are they paid to produce that gold? They have a thousand pounds of gold on hand ready to sell, how will it be purchased? Russian rubles or Chinese or Japanese money? Then what, they have a stack of that money that is likely unstable if the dollar has collapsed.

And when I go to the grocery store to buy food, will I have to bring my silver or gold coins and weigh them out?

My kids think I'm paranoid for doing so but I have silver ounces for just such a scenario.

[Alan A]

Originally Posted by flatbutt

My kids think I'm paranoid for doing so but I have silver ounces for just such a scenario.

Lead should work, no?

[brainz01]

Gold is money. But like all currencies it fluctuates in value based on supply, demand, and perceived value.

In an environment where yields are low, the stock market seems overvalued, and governments world wide are printing lots of money (and/or incurring debts they can't pay), then the value of gold will increase.

Buffett buying a gold miner is a bit surprising. He's historically loved to hate on gold the commodity, preferring cash. But alas, the NIRP environment likely makes cash that much less attractive. And he's a value investor, and this doesn't look like a value market. So buying a gold miner allows him the fig leaf of "not buying an asset with no inherent income potential" but rather the business that produces more gold in a market that's like to demand more gold.

Makes sense.

[Porsche-O-Phile]

Fiat currency has no inherent value - it only has value when people commonly agree it does.

Gold has no inherent value (unless you build semiconductors or do restoration dentistry) - it only has value when people commonly agree it does.

What’s the difference exactly? Gold just has more of a history of being commonly accepted but that doesn’t mean it will be. I have some but wouldn’t ever expect it to save my butt if I needed something critical for survival. Might come in handy, might not.

If there’s ever a global collapse of the sort that could destroy the USD I doubt gold would fare a heck of a lot better. Lead would probably do pretty well. I’m pretty well stocked in that so I’m probably ok when the volcano blows.

[tabs]

Originally Posted by Porsche-O-Phile

Fiat currency has no inherent value - it only has value when people commonly agree it does.

Gold has no inherent value (unless you build semiconductors or do restoration dentistry) - it only has value when people commonly agree it does.

What’s the difference exactly? Gold just has more of a history of being commonly accepted but that doesn’t mean it will be. I have some but wouldn’t ever expect it to save my butt if I needed something critical for survival. Might come in handy, might not.

If there’s ever a global collapse of the sort that could destroy the USD I doubt gold would fare a heck of a lot better. Lead would probably do pretty well. I’m pretty well stocked in that so I’m probably ok when the volcano blows.

No full deck here

[GH85Carrera]

Originally Posted by Porsche-O-Phile

Fiat currency has no inherent value - it only has value when people commonly agree it does.

Gold has no inherent value (unless you build semiconductors or do restoration dentistry) - it only has value when people commonly agree it does.

What’s the difference exactly? Gold just has more of a history of being commonly accepted but that doesn’t mean it will be. I have some but wouldn’t ever expect it to save my butt if I needed something critical for survival. Might come in handy, might not.

If there’s ever a global collapse of the sort that could destroy the USD I doubt gold would fare a heck of a lot better. Lead would probably do pretty well. I’m pretty well stocked in that so I’m probably ok when the volcano blows.

The difference is governments can't just print a few trillion more gold ounces.

[tabs]

Originally Posted by brainz01

Gold is money. But like all currencies it fluctuates in value based on supply, demand, and perceived value.

In an environment where yields are low, the stock market seems overvalued, and governments world wide are printing lots of money (and/or incurring debts they can't pay), then the value of gold will increase.

Buffett buying a gold miner is a bit surprising. He's historically loved to hate on gold the commodity, preferring cash. But alas, the NIRP environment likely makes cash that much less attractive. And he's a value investor, and this doesn't look like a value market. So buying a gold miner allows him the fig leaf of "not buying an asset with no inherent income potential" but rather the business that produces more gold in a market that's like to demand more gold.

Makes sense.

YEP

When governments prints money to save their azz regardless to the damage of it's intrinsic value it is time to bail out of that currency.

He is seeing a decline in the value of the USD, because of the wanton printing and spending..he is moving to an asset that produces the stuff that is perceived as being the stuff that has historically been the money since time began...

Demand for that producers stock will provide appreciation as the demand for gold grows as the situation becomes ever more unstable politically, economically an socially.

It is in essence a BET AGAINST THE USD, the STABILITY of America and the Global economy..call it hedging his bets.

With this move he has gotten out of Dodge and is headed for the high ground.

That is the import of his move.

[Sooner or later]

He sold Goldman. He has bought 2.1 billion of Bank of America over the last three weeks.

Carry on.

[pmax]

Any of the cheerleaders here a real buyer ?

[on2wheels52]

I snuck a bit of metal out of the pawn shop before selling it

[KFC911]

Originally Posted by on2wheels52

I snuck a bit of metal out of the pawn shop before selling it

The gold or the shop ?

I only listen to G. Gordon Liddy fwiw.... the G stands for Gold or Gullible.... yer choich....

[island911]

with the trend of people strapping paper across their faces when told, because they are told; I seriously doubt that people are going to stop trading USD any time soon.

[Tidybuoy]

I watched a good interview with Warren Buffet the other day.

He sold certain banks (like Wells & Chase) because they are poorly managed. He is very pro Bank of America.

Be bought into a gold mine, not buying gold per say. He said he is not real fond of buying gold as an asset because it just sits there where as buying a mining company produces something - in this case gold.

The original post here implies that he is dumping banks for gold and that is not the case.