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Tuesday, October 21, 2008

Warren Buffet is a pro-State Troll

Warren Buffet recently wrote a widely-cited editorial in the NY Times. He wrote "Now is the bottom of the recession! It's a great time to buy stocks! Many good corporations are available cheaply right now!"

If I were managing a multibillion dollar holding company or hedge fund, I certainly would be buying more stocks right now. What about the average person?

Many Americans are squeezed by inflation/hyperinflation and unemployment. Most Americans are struggling to pay their mortgage. Most Americans have living expenses that are rising faster than their salaries. They don't have the spare savings to invest in the stock market.

If you have stock investments and a mortgage, you might be forced to sell your stocks right now so you can pay your mortgage. The average person is probably forced to sell right now to meet their living expenses. The average person tends to buy at the end of the boom and sell at the bottom of the recession.

From the point of view of the average person, trying to time the market is a losing game. You don't know whether now is the bottom or if it's going to decline another 10%-20%. The recovery might start next week or two years from now.

In my case, I've been 100% fully invested in the stock market. I don't have cash on hand to purchase more stocks. Further, I'm unemployed, so I don't have any income to invest. Right now, at the best time for buying stocks, most Americans are likely to be unemployed or struggling to meet their living expenses.

Over a 5+ year period, the stock market is almost definitely better than leaving your money in a checking account or bonds. However, over the past 10 years, gold was a better investment than the S&P 500. The price of the stock market has crashed recently, but the price of gold has decreased by a lower percentage. (For details, go to Yahoo Finance and look at a stock price comparison chart for GLD vs. SPY.)

If Warren Buffet were a true champion of individual freedom, he would be advising people to convert some of their savings to physical gold and silver. Of course, a mainstream media source would never broadcast such a message.

Warren Buffet sincerely believes that now is a good time to buy stocks, so he technically isn't lying. However, he's broadcasting a fnord that says "The US stock market is a safe long-term investment!" From the point of view of someone managing billions of dollars of other people's money, now probably really is a good time to buy stocks.

If you anticipate complete economic and political collapse in the next 20 years, then the stock market is a lousy investment. In a SHTF scenario, a stock investment is worth zero. Physical gold and silver will hold their value, provided you can survive the crisis. The severity and suddenness of the coming crash is uncertain.

As CEO of a large financial institution, Warren Buffet is able to borrow for close to the Fed Funds Rate. In the reinsurance business, you collect premiums now and make payouts later. Berkshire Hathaway is really a reinsurance company. Berkshire Hathaway borrows from reinsurance policyholders at attractive rates.

I don't control a multibillion dollar business. I don't have the perk of borrowing at the Fed Funds Rate. Even if I had all the investment insight of Warren Buffet, that advice is useless to me. Even if I wisely invest in the stock market, I still might not outperform a simple gold or silver investment.

Warren Buffet also has another special perk. When he invested in Goldman Sachs and GE, he negotiated a special deal that isn't available to the common person. Warren Buffet negotiated very favorable terms for his equity investments.

The stock market goes up and down. Most stock market volatility is actually due to the Compound Interest Paradox. There is the illusion that a clever person can profit, but short-term market speculation is like playing in a casino. Saying "If you bought stock XYZ a month ago, you would have made a huge profit!" is just like saying in a casino "If you just bet on black, you would have won!" Unless you're the casino or the dealer is helping you cheat, the stock market is a losing proposition.

At the bottom of a recession, the average person is likely to be unemployed or struggling to pay his bills. The average person does not have spare wealth to invest in the stock market. If you hold cash so you can buy at the bottom of a recession, then you're going to get ripped off by inflation during the boom. As a non-insider, you don't know what is going to occur.

I used to be very interested in the stock market. It was depressing to realize that it's one big scam and that stocks don't outperform true inflation. I won't cash out all my investments at once, due to the effect of taxes. Over the next few years, I'll switch more of my savings to physical gold or silver. I'll probably hold my existing investments, but focus more of my new investments in gold or silver.

6 comments:

Sphairon said...

"If you anticipate complete economic and political collapse in the next 20 years, then the stock market is a lousy investment. In a SHTF scenario, a stock investment is worth zero. Physical gold and silver will hold their value, provided you can survive the crisis. The severity and suddenness of the coming crash is uncertain."

What makes you think a SHTF scenario is likely to occur within the next two decades, and what kind of social meltdown are you expecting?

Denalli said...

Stock market is a trap, and this should be obvious to anyone who isn't asleep at a wheel.

Stock market is open to anyone, - as is any trap, anyone is welcome to fall into it.

Consider the ability to borrow from FED at negative rates, or to borrow Gold bullion from treasury... Can you get your hands on it? Can you borrow a buck and then write checks for 10 bucks?

Nope!!! You can't do any of these things!!! You need to invest in stock market, you, slave!
You ain't good enough to make it like they do. Now, those are the vehicles for profit. Those aren't just for everyone. All good things will have limited access.

The biggest lie ever told is that you can have something positive open to anyone. Never. Mildly negative or very negative, yes. Never something positive, that will move you forward.

Why? Simple, you can't steal from some to give to many, you will be upside down in no time. You have to have a system that uses many, extracts their wealth, and delivers it to few. Therefore anything that is welcoming many is a wealth collector, and something that welcomes only few is a wealth distributor.

Whenever you see something advertised as a money-maker, but it is available to anyone, you do not need to know anything else. You know they are looking for a patsy.

Now, anyone is welcome to argue spitting "free market" rhetoric, but nobody can deny that what I said is true, and you can't get any of the things that big guys are getting. So, go ahead and "invest".... if you're patsy.

Anonymous said...

Warren is a troll. Two years ago I remember him arguing in favor of a death tax.

I didn't forget, I put a checkmark on his name.

He is a pro-state troll.

yakuza90 said...

If you say, you have lost all your money at the market, you are unemployed and can't buy anymore stocks, you forget, that there are still some people who dont. So don't judge Warren Buffet for taking care of them :-). If you cannot serve these (Wall)street criminals by shoving your money into their asses anymore, they would be more happy about you committing suicide than isolating your wealth from their authority. If they notice, that finally you are the one, who is profiting from your work, they might consider if it was cheap enough to put you away ^^.
Good Luck for the future!
And beware of the Gold Seizure!^^

edzillion said...

While I like Buffet, for his old school buy & hold strategy if nothing else, I was suspicious of his investment in Goldman Sachs.

Surely it wasn't the best time to buy? Maybe he was just being cynical, knowing that Goldman would never be allowed to fail, since it is basically a semi-state body.

"..over the past 10 years, gold was a better investment than the S&P 500."

Even better than that (I never get tired of this stat):

Gold has outperformed both the S&P 500 and Dow Jones since 1971!

Anonymous said...

Sphairon,

How about seeing a country the size of United States turning communist in two weeks time? How regular is an event like this? 1913, 1969 were like this but at a far lesser scale. Do you think there will be no consequences? Do you think Soviet Union failed with a bang simply because they weren't as smart as us?

Abomination is punishable, and since it has been committed, the punishment is coming.

Your question is a bit like:-"I know we're all in a speeding bus that has no brakes nor a left front wheel, on a mountain road, and the bus has just lost control - these are the things my eyes are telling me, but what is it that makes you think the bus isn't just going to magically straighten itself, accelerate a bit more, and continue on it's way? Why do you think we are going to crash?"

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