Who’s an Uncivilized Jerk?

[20MillionDinar]

Who’s an Uncivilized Jerk?

By Andy Hecht, Senior Commodities Editor

Dear Sovereign Investor,

Berkshire Hathaway’s annual meeting is always a circus and this weekend in Omaha, Nebraska, was no exception. Chairman Warren Buffet and his chief henchman, Vice Chairman Charlie Munger, held court and answered questions for five hours. But this time, they made some of their craziest comments yet.

Munger said: “Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939, but civilized people don’t buy gold – they invest in productive businesses.”

Is he saying that Jewish families in Vienna in 1939 were not civilized? Or is he saying it is “uncivilized” to buy gold?

Either way, I think he’s a jerk – on both counts!

Berkshire Hathaway Claims to Hate Gold

There is no doubt that Buffet’s track record is impressive. Recently, the so called “Oracle of Omaha” has become a spokesman for higher taxes. President Obama has even nick-named his tax-raising plan the “Buffet Rule.”

Certainly, Buffet has never been shy when it comes to gold as an investment. In October 2010, he said, “You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all – not some – all of the farmland in the United States. Plus, you could buy 10 Exxon Mobiles, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

As an investor, Buffet has a point of view, and of course he’s entitled to that. I simply don’t agree with him. And here’s just one small reason why: since October 2010, Exxon Mobile’s share price climbed by around 27%. However, gold appreciated by 57% over the same period.

The Oracle of Omaha prefers Exxon Mobile. Which would you choose? Duh…

Last year, 88-year-old Munger said: “I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me, that’s not optional; that’s a moral obligation. If you’re capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you’re a jerk.”

This weekend Munger took his vitriol to a new level when he raised the specter of Vienna in 1939. Think gold vs. Exxon Mobil. Who’s a jerk?

I guess Munger forgot that Berkshire bought 130 million ounces of silver in 1997 and pocketed several hundred million from the deal.

But Why Do They Own Jewelry Businesses?

Munger seems also to have forgotten that Berkshire Hathaway has significant stakes in two jewelry companies – Ben Bridge Jewelers and Borsheims Fine Jewelry. These companies sell gold and, as a stakeholder, Berkshire profits! Does Munger regard his customers as uncivilized jerks?

Why the anger at this investment vehicle Charlie? What about the central banks of the world who hold gold as a reserve asset? Are they also jerks? Central banks added almost 20% of all new gold production to reserves last year. Are they uncivilized?

I don’t really get his unabashed anger toward gold, an object that has been a store of wealth for centuries.

An essay written by Howard Buffet, the Oracle’s father, in 1948, noted: “Human freedom rests on gold redeemable money.”

In this essay, the elder Buffet went on to say that paper money systems generally collapse in economic chaos. He also wrote that a gold standard would restrict government spending and give people greater power over the public purse. Is it possible that a $16 trillion U.S. deficit and a huge ongoing debt crisis in Europe constitute a degree of economic chaos?

Was Howard Buffet also an uncivilized jerk?

Munger and Buffet are public relations machines and they use their considerable influence to sway public opinion. Some of our political leaders rally them on as public pawns. Munger and Buffet provide justification for Washington’s continued printing of worthless currency and tax-raising forays.

The Oracle and his sidekick don’t seem to understand that gold is not an investment – it is a currency, the ultimate currency! The price of gold simply reflects the economic mess we are in today.

And let’s not forget Buffet and Munger are master manipulators. They invest in companies on a different level than you and me. When they make an investment they often get a special kicker, a huge dividend. When he invests in a company, Buffet, through Berkshire Hathaway, structures a convertible preferred stock that ordinary humans cannot buy. We can participate in his investment only by purchasing stock in Berkshire Hathaway.

And when scandal hits their company, the press, regulators and politicians turn the other cheek. For example, David Sokol, an heir apparent, last year bought stock in specialty chemicals manufacturer Lubrizol two months before Berkshire Hathaway invested in the company. Sokol, who recommended the company to Buffet, stood to make a pretty penny from Berkshire Hathaway’s investment in Lubrizol. Didn’t Buffet ask if Sokol had an interest in the company at the time? Berkshire and Sokol parted ways in the wake of the Lubrizol affair.

Meanwhile, Munger also owned stock in a company called BYD, a Chinese auto maker. Munger held the stock for a few years before suggesting that Berkshire invested. Isn’t this the same situation as the Sokol affair? I guess not. When you are Warren Buffet and Charlie Munger the rules are different.

The SEC decided not to bring a case against Sokol, even though they surely would have done so if it were you or me.

Nothing More than a Public Pawn

Being a public pawn has its advantages. You get to avoid scandal, invest on better terms than everyone else and there’s even the possibility of manipulating markets through outrageous comments.

My advice here is simple: Forget what Charlie Munger and Warren Buffet say. They have been saying the same thing for a decade and gold has just gone higher. If gold dips buy it.

And if you have any doubts, consider this: Since January 2002, Berkshire Hathaway’s share price has climbed 65% and gold is up 483% over the same period.

Who is the uncivilized jerk, Charlie?

Your eyes and ears in the commodities market,

Andy Hecht

P.S. Fiat currency instability is driving the price of gold and it’s only going to grow stronger. I see another commodity in particular that’s in the perfect position to take a meteoric rise in value in the coming years because of it – natural gas. I see natural gas looking a lot like silver did twenty years ago… before it went on an 800% climb. To find out how you can profit from natural gas’s coming boom, click here.

[The Machine]

cheers 20million, nice article buddy

[20MillionDinar]

cheers 20million, nice article buddy

No problem.

I really liked the last part where it said: And if you have any doubts, consider this: Since January 2002, Berkshire Hathaway’s share price has climbed 65% and gold is up 483% over the same period.

Edited May 7, 2012 by 20MillionDinar

[WallyWeaver]

It is an interesting spectacle to watch, there is no doubt about it. Gold bugs bash Buffett, and Buffett and Co. bash gold and gold bugs.

Who's right? I'm sure this Hecht guy is a pretty sharp cat but I doubt he will ever be the World's Richest Man as Buffett was in 2008. Buffett is currently the third richest man in the world, right now, and Berkshire Hathaway just reported first quarter earnings of $3.8+ billion. That carries a lot of weight, to be sure.

Of course, I also follow pm guru's like Jim Sinclair and Jim Rogers who see gold going much higher in the coming years... Maybe they are all right?

As stated before, I like both and am invested in both.

I do find the back and forth banter interesting, though. I do think there is some poilitical motivation behind Buffett and Co.'s comments, also. Which also puzzles me because it seems to be in support of Obama who is a disaster to private industry and, therefore, a disaster for Wall Street.

But hey, like Hecht, I've never been the richest man in the world either. So maybe I should Just keep watching, learning, and profiting, without criticizing any of the giants.

WW.

[20MillionDinar]

WW,

I also find it interesting. I'm going to post somebody else's comments on Warren Buffets' recent interview.

Kno's Comments:

Perception and Reality

This thread is a good example of PERCEPTION and Reality.

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Another member responded with this:

Keep in mind that Warren Buffet is an investor and not a trader. Therefore his views are much longer term than what is useful to the rest of us and as you know, long term forecasts can change overnight. The "real" traders will not be swayed by his comments.

My Thoughts: It could be either Politics, difference of personal preference, or even a little bit of both.

But the fact is, Warren Buffet is an extremely successful business man and I will take the time to listen to what he says any chance I get!

Edited May 7, 2012 by 20MillionDinar

[WallyWeaver]

Another member responded with this:

Keep in mind that Warren Buffet is an investor and not a trader. Therefore his views are much longer term than what is useful to the rest of us and as you know, long term forecasts can change overnight. The "real" traders will not be swayed by his comments.

My Thoughts: It could be either Politics, difference of personal preference, or even a little bit of both.

But the fact is, Warren Buffet is an extremely successful business man and I will take the time to listen to what he says any chance I get!

Good post, 20.

I agree with you, definitely.

I also think this last poster makes a very good point. It is my experience that financial channels like CNBC and FBN, and most market related articles and books, are geared towards "traders." Buffett is not a trader, he is an investor who typically holds his postitions for many years. That means he and traders are simply not on the same wave length when they look at the information in front of them. Buffett doesn't care about market fluctuations, he is very long on his postions. That is probably where most of the disagreements come from, in my opinion: the difference in the perspectives of traders and investors.

I just recently got the book he (Buffett) bases his trading strategy on. It's called the "The Intelligent Investor" by Benjamin Graham. Looking forward to getting through it.

Thanks again, 20, good thread.

WW.