Why Did Warren Buffett Buy all of that Silver Anyway?
The Stock Market & Dollar Bulls today, would have you believe that Warren is too smart to buy his silver for any old time traditional belief about money, gold, or silver, rather that he must know of some wonderful new technology that will arrive, and which will require plenty of silver in its applications. This may be true, but an aggressive move like that would contradict his decidedly more conservative modus operandi, and besides, it would make more sense that he corner the palladium market then. Let's consider that Mr. Buffett has always tried to stay away from timing the market, on the premise that he is not a market timer or speculator, but rather, an investor. His recent withdrawal from the stock market coupled with no real reported change in his silver holding then, remains a conundrum. On the surface, it would seem too risky to buy into such an outdated argument for the accumulation of tangibles. If you can keep your mind open, however, consider the more plausible argument for his silver purchases.
His father was a United States Congressman from Nebraska, The Honorable Mr. Howard Buffett. It was an accident that I recently stumbled upon a lecture that he had given to Congress in 1948,2 reprinted from "The Commercial and Financial Chronicle," on May 6th, 1948. The title was "Human Freedom Rests on Gold Redeemable Money", and after reading it, it became clear that Warren Buffett comes from a long line of financial people who understand the concept of monetary "value." That Warren Buffett has an unequaled grasp of value cannot be disputed by anyone except for maybe Larry Kudlow, now the chief economist/promoter for ING Barings. Recently, I have found it exceedingly difficult to comprehend why most investors see the price and value of a currency, as being the same. I have spent up to 30 minutes trying to illuminate the difference to otherwise intelligent people. The problem is that the subject of money has always been a difficult one for most people to understand. If you can accept that, consider that Mr. Buffett perhaps understands this better than we do. Why not? He's richer than you or I are. If nothing else, accept that premise. In any case, it is more plausible to me, in light of his family's historic predisposition to the invisible concept of value, that he believes his silver purchases to be a conservative decision that perhaps somehow regard monetary value. It sounds more plausible to me because for Mr. Buffett to hoard a sum of tangibles, in "anticipation" of some wonderful application for them, is either an outright speculation or an act of insider trading. It is more plausible to me now more than ever, after announcing his exit from the stock market and using words like massive wealth transfers, etc. Thank you, I'll think that his move will predict a trend toward the accumulation of tangibles at some point in the near future. In fact, his father says this in his 1948 lecture:
"For a long time shrewd people have been quietly hoarding tangibles in one way or another. Eventually this individual movement into tangibles will become a general stampede unless corrective action comes soon. "--The Honorable Mr. Howard Buffett, May 6, 1948.
He was right. That trend occurred, and accelerated, but over a long, long period of time. By 1973, however, he was about to be right in a big way. His reasoning was correct, in the end. But instead of applying the proper, disciplinary, solution, the decision was made to do away with the gold standard all together, unleashing the potential for another long reign for the paper money system, technically known as a "Fiat Monetary System," but today, known as the status quo, if only it could be harnessed. Richard Nixon made this decision, when he officially did away with the Bretton Woods system of money, incorrectly perceived as a gold standard. Of course, legalizing the ownership of gold was an important element in harnessing and extending the life of this paper money system. The government essentially gave people a choice, whether to own the Dollar or whether to own gold. As you will see, however, this was quickly followed by a campaign to demoralize that choice. When Paul Volcker came in to stabilize the global financial system, he threw the Global economy into a deep recession with double digit interest rate increases. The demand for new money came to an abrupt halt, and people saw that the US government had the wherewithal and resolve to restore confidence in the Dollar. This is an age-old battle. It (the battle) hasn't stopped there; it has, however become less relevant (read less understood) than the initiative, and desire to finance the new economy has become, today. In this context, with all the excitement about the next big technology billionaire maker, with the delusion of a "lender of last resort" (which is really, you and I) and the familiarity with the status quo, it is easy to understand why most people today find this subject of money, an old and boring debate not worth talking about, if only for the moment. Nevertheless, a nadir has been reached in the psychology of gold, and some new facts and conclusions have become inescapably clear.
Sincerely,
Edmond J. Bugos
GoldenBar.com
Edmond J. Bugos is the founder and editor of the Goldenbar Report - calling markets accurately since 2000. To subscribe to his letter click the link below: The Goldenbar Report P.O. Box 4642 V.M.P.O. Vancouver, BC Canada V6B 4A1 The GoldenBar Report is not a registered advisory service and does not give investment advice. Our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.
The Stock Market & Dollar Bulls today, would have you believe that Warren is too smart to buy his silver for any old time traditional belief about money, gold, or silver, rather that he must know of some wonderful new technology that will arrive, and which will require plenty of silver in its applications. This may be true, but an aggressive move like that would contradict his decidedly more conservative modus operandi, and besides, it would make more sense that he corner the palladium market then. Let's consider that Mr. Buffett has always tried to stay away from timing the market, on the premise that he is not a market timer or speculator, but rather, an investor. His recent withdrawal from the stock market coupled with no real reported change in his silver holding then, remains a conundrum. On the surface, it would seem too risky to buy into such an outdated argument for the accumulation of tangibles. If you can keep your mind open, however, consider the more plausible argument for his silver purchases.
His father was a United States Congressman from Nebraska, The Honorable Mr. Howard Buffett. It was an accident that I recently stumbled upon a lecture that he had given to Congress in 1948,2 reprinted from "The Commercial and Financial Chronicle," on May 6th, 1948. The title was "Human Freedom Rests on Gold Redeemable Money", and after reading it, it became clear that Warren Buffett comes from a long line of financial people who understand the concept of monetary "value." That Warren Buffett has an unequaled grasp of value cannot be disputed by anyone except for maybe Larry Kudlow, now the chief economist/promoter for ING Barings. Recently, I have found it exceedingly difficult to comprehend why most investors see the price and value of a currency, as being the same. I have spent up to 30 minutes trying to illuminate the difference to otherwise intelligent people. The problem is that the subject of money has always been a difficult one for most people to understand. If you can accept that, consider that Mr. Buffett perhaps understands this better than we do. Why not? He's richer than you or I are. If nothing else, accept that premise. In any case, it is more plausible to me, in light of his family's historic predisposition to the invisible concept of value, that he believes his silver purchases to be a conservative decision that perhaps somehow regard monetary value. It sounds more plausible to me because for Mr. Buffett to hoard a sum of tangibles, in "anticipation" of some wonderful application for them, is either an outright speculation or an act of insider trading. It is more plausible to me now more than ever, after announcing his exit from the stock market and using words like massive wealth transfers, etc. Thank you, I'll think that his move will predict a trend toward the accumulation of tangibles at some point in the near future. In fact, his father says this in his 1948 lecture:
"For a long time shrewd people have been quietly hoarding tangibles in one way or another. Eventually this individual movement into tangibles will become a general stampede unless corrective action comes soon. "--The Honorable Mr. Howard Buffett, May 6, 1948.
He was right. That trend occurred, and accelerated, but over a long, long period of time. By 1973, however, he was about to be right in a big way. His reasoning was correct, in the end. But instead of applying the proper, disciplinary, solution, the decision was made to do away with the gold standard all together, unleashing the potential for another long reign for the paper money system, technically known as a "Fiat Monetary System," but today, known as the status quo, if only it could be harnessed. Richard Nixon made this decision, when he officially did away with the Bretton Woods system of money, incorrectly perceived as a gold standard. Of course, legalizing the ownership of gold was an important element in harnessing and extending the life of this paper money system. The government essentially gave people a choice, whether to own the Dollar or whether to own gold. As you will see, however, this was quickly followed by a campaign to demoralize that choice. When Paul Volcker came in to stabilize the global financial system, he threw the Global economy into a deep recession with double digit interest rate increases. The demand for new money came to an abrupt halt, and people saw that the US government had the wherewithal and resolve to restore confidence in the Dollar. This is an age-old battle. It (the battle) hasn't stopped there; it has, however become less relevant (read less understood) than the initiative, and desire to finance the new economy has become, today. In this context, with all the excitement about the next big technology billionaire maker, with the delusion of a "lender of last resort" (which is really, you and I) and the familiarity with the status quo, it is easy to understand why most people today find this subject of money, an old and boring debate not worth talking about, if only for the moment. Nevertheless, a nadir has been reached in the psychology of gold, and some new facts and conclusions have become inescapably clear.
Sincerely,
Edmond J. Bugos
GoldenBar.com
Edmond J. Bugos is the founder and editor of the Goldenbar Report - calling markets accurately since 2000. To subscribe to his letter click the link below: The Goldenbar Report P.O. Box 4642 V.M.P.O. Vancouver, BC Canada V6B 4A1 The GoldenBar Report is not a registered advisory service and does not give investment advice. Our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.
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