Warren Buffett Predicts Dow 1,000,000; But There’s A Catch…

The Wall Street Journal won the award for the greatest “Shock And Awe” financial headline of the day when it published a story earlier entitled “Warren Buffett Says the Dow Is Going Over One Million.” The ‘Oracle of Omaha’ apparently made the ‘bold’ prediction at the 100-year anniversary celebration of Forbes magazine in which he also said that “being short America will continue to be a loser’s game.” Here are the highlights from WSJ:
You heard it from Warren Buffett first: the Dow Jones Industrial Average is headed above one million.
The blue-chip stock benchmark is likely to be above that milestone in a hundred years’ time, the Berkshire Hathaway Inc. chief executive and chairman said Tuesday night.
‘The Dow will be over a million and that is not a ridiculous forecast at all if you do the math,’ he said.

This post was published at Zero Hedge on Sep 20, 2017.

Julian Robertson: “There’s A Bubble” And “It’s The Federal Reserve’s Fault”

Call it the “bearish billionaire” curse. One month ago, MarketWatch penned “7 billionaires who are worried about a stock-market correction” which listed Carl Icahn, David Tepper, Howard Marks, George Soros, Jeff Gundlach, Warren Buffett and Eliot Singer as some of the world’s wealthiest people who are losing sleep over the S&P trading at all time highs.

This post was published at Zero Hedge on Sep 12, 2017.

Wells Admits It Created 1.4 Million More Fake Accounts Than Previously Thought

Remember the outrage one year ago when it was revealed that in its push to pad its top, and bottom line, Warren Buffett’s favorite bank had engaged in outright criminal account churning and “cross selling”, opening some 2.1 million unauthorized client accounts without permission (subsequently this extended to unsolicited car insurance policies extended on Wells auto loans). Well it turns out there was not nearly outrage, because as the bank revealed this morning, the “real” number was higher. 67% higher.
According to the outside review whose findings were released today, Wells Fargo said employees created two-thirds more bogus accounts than initially thought. According to the review, an additional 1.4 million “potentially unauthorized” deposit and credit-card accounts opened when the bank was encouraging employees to sell multiple products to retail customers, bringing the total to about 3.5 million, according to a statement Thursday from the San Francisco-based firm. The revised estimate covers January 2009 to September 2016, almost twice as long as the period examined in the initial review.

Wells new CEO was, predictably, all apologies:

This post was published at Zero Hedge on Aug 31, 2017.

Warren Buffett Reveals His Biggest Fear

Bloomberg’s David Westin spoke with Berkshire Hathaway Chairman Warren Buffett on his 87th birthday before his charity auction lunch at Smith & Wollensky’s in New York.
Among the topics discussed was the Fed’s upcoming balance sheet normalization: Buffett told Westin that the Federal Reserve will be ‘very careful’ with how they handle quantitative easing as the Fed may have to find buyers for “trillions” in assets. Predictably, Buffett argued in support of QE which added tens of billions to his net worth: ‘[QE] did wonders for us coming out of 2008. Without it we would have gone back to the economics of 100 years ago. If the Fed had not been there to ease, we would have had a far different recovery. I think the Fed has overwhelmingly done the right thing. Now, we’ve never gone through a period like this and how it will all work out, we will find out. I think they will be intelligent about it but they’ve never played this game yet either.’

This post was published at Zero Hedge on Aug 30, 2017.

Why Suddenly Two Mega Utility Takeovers?

Do the buyers know something that we don’t?
Two major electricity industry takeovers were announced within a few days of each other. Energy Capital Partners, a private equity firm, announced its planned acquisition of Calpine, the nation’s largest generator of electricity using natural gas as a fuel. The acquisition valued Calpine at $17.3 billion ($5.6 billion for the common stock plus assumption of $11.7 billion of debt).
Days later, Sempra, a California-based utility, outbid Warren Buffet’s Berkshire Hathaway to buy Oncor, a Texas utility spin off from a disastrous private equity acquisition of TXU (the old Dallas-based Texas Utilities). Sempra’s bid values Oncor at $18.8 billion ($9.8 billion for equity and $9 billion to take responsibility for ex-isting debt).
In the case of Oncor, both final bidders had clear motives. Berkshire Hathaway has cash to invest and Mr. Buffett and Co. have targeted U. S. electric utilities for investment As a relatively large financial player, his investments have to be of a size to make a positive impact. In this case that means making relatively large acquisitions. Small ones barely register at Berkshire Hathaway.

This post was published at Wolf Street by Bill Tilles and Len Hyman ‘ Aug 26, 2017.

Buffett Sees Market Crash Coming? His Cash Speaks Louder Than Words

The Sage of Omaha’s adage is ‘it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’
Editor: Mark O’Byrne
But for Warren Buffett the current environment doesn’t appear to be offering up any wonderful companies at fair valuations. The situation is so bad that the cash stockpile of Berkshire Hathaway has more than doubled in the last four years, from under $40 billion to $100bn.
The infamous investor is famed for his investment approach of pouncing on companies when they run in to problems and are seemingly undervalued. At the moment though, there aren’t many out there.
The large stockpile is a likely indicator of not only how Buffett negatively views the current market environment but also how he sees the near future and what opportunities it will bring.
Buffett hates cash, he wants to spend it
Buffett has previously stated how much he hates cash, telling investors at the Berkshire AGM that it was a poor way to keep their money.
During the Omaha-based meeting Buffett expressed his frustration with a cash pile that is approaching $100 billion, ‘We shouldn’t use your money that way for long periods… The question is, ‘Are we going to be able to deploy it?”
It may well be the case that Buffett is prepared to pay a dividend, stating that dividends could be paid ‘reasonably soon, even while I am around.’ But this is unlikely.

This post was published at Gold Core on August 21, 2017.

Wells Chairman Out Following “Unbelievable, Outrageous” Scandal

Two weeks after the latest consumer scandal involving Warren Buffett’s favorite bank, Wells Fargo, broke when the NYT reported that as many as 800,000 people who took out car loans from Wells were also charged for auto insurance they did not need, with many of them still paying for it, while some were forced to default as a result of this obligations, and just days after the NYC Comtroller Scott Stringer, said that what happened at Wells Fargo is an “unbelievable, outrageous, full-blown scandal“…
This is a full-blown scandal – again. It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm. It’s reflective of a system that Americans feel is rigged against the little guy, and sadly symbolic of a culture that puts short-term profits ahead of creating sustainable value for shareowners. Everyday families have suffered and tens of millions of hard-earned dollars were stripped from unsuspecting Americans, many of whom are struggling just to get by. In the end, shareowners ultimately suffer the long-term consequnces.

This post was published at Zero Hedge on Aug 10, 2017.

Despite What CNBC Says, Gold Has Many Purposes

Researchers have discovered a process using gold that appears to increase the effectiveness of a lung cancer treatment.
CNBC reported on the promising development in a story headlined, ‘Could gold finally have a purpose?’ This silly headline plays into a common fallacy: this notion that gold doesn’t actually do anything. Warren Buffet encapsulated this attitude in a speech decades ago.
[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility.’
Of course, gold has many purposes, starting with the fact that gold is money. And it’s increasingly being used in technological applications from biomedical processes to energy production.

This post was published at Schiffgold on AUGUST 8, 2017.

“The World’s Most Feared Investor” Lashes Out At Safe Spaces

Several days after Paul Singer released his much anticipated letter to investors (key excerpts here), the founder of Elliott Management was profiled on Bloomberg as the “most feared activist investor in the world – by hedge fund rivals, companies and even countries”, and for good reason. Singer’s Elliott Management, which manages $34 billion of assets, has not only rarely been out of the headlines the past 18 months – in the process targeting the world’s biggest mining company, taking on Warren Buffett, ousting CEOs on both sides of the Atlantic and setting off a chain of events that led to the impeachment of South Korea’s president – but as shown in the table at the bottom, has generated unprecedented and consistent returns, putting the rest of the activist sector to shame.
Some more details:
… his impact is undeniable. He started with just $1.3 million from family and friends in 1977, and the fund’s investments in equity and debt have since led to at least $93 billion in corporate asset sales and share buybacks, according to data compiled by Bloomberg. While he’s been scorned for employing bullying tactics at times, Singer doesn’t worry about his tough reputation. He sees it as a selling point for his investors.

This post was published at Zero Hedge on Aug 7, 2017.

“This Is A Full-Blown Scandal: It’s Unbelievable, Outrageous” – Comptroller Demands Heads Roll At Wells

Wells Fargo is in boiling hot water. Again.
One day after the NYT reported the latest major scandal involving Warren Buffett’s favorite bank, in which the bank was busted less than a year after its miss-selling fraud cost the former CEO his job, revealing that the bank charged some 800,000 customers for auto insurance they did not need (with some still paying for it), the demands for resignation have arrived.
In a statement from NYC Comtroller Scott Stringer, he demands that Wells Fargo must immediately “jump-start” necessary board change by replacing Chairman Stephen Sanger with a new independent chairperson following the latest “mismanagement” revelations.
In surprisingly harsh words, Stringer does not hold anything back against the worst performing bank stock today (WFC -2.8%):
“This is a full-blown scandal – again. It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm. It’s reflective of a system that Americans feel is rigged against the little guy, and sadly symbolic of a culture that puts short-term profits ahead of creating sustainable value for shareowners. Everyday families have suffered and tens of millions of hard-earned dollars were stripped from unsuspecting Americans, many of whom are struggling just to get by. In the end, shareowners ultimately suffer the long-term consequences.

This post was published at Zero Hedge on Jul 28, 2017.

Five Reasons to Buy Gold

Despite what Warren Buffet might tell you, there are good reasons to buy gold.
In a speech several decades ago, the billionaire basically called the yellow metal useless.
[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility.’
In the first place, the statement is patently false. Gold is increasingly being used in technological applications from biomedical processes to energy production. But even if Buffet was right and there were no practical uses for the yellow metal, there would still be good reasons to buy gold – starting with the fact that gold is money.
Here are five reasons to own gold gleaned from a Forbes article by analyst Olivier Garret.
Gold is money – Gold possesses all of the characteristics of money Aristotle listed 2,000 years ago.

This post was published at Schiffgold on JULY 25, 2017.

Visualizing The Countries Suffering Most From Low Oil Prices

As Warren Buffet says, ‘Only when the tide goes out do you discover who’s been swimming naked.’
And, as Visual Capitalist’s Jeff Desjardin details, in 2014, when oil prices crashed and burned, the tide was gone – and it was shown that too many countries were relying on frothy oil revenues to balance out their trade deficits.
Fast forward to today, and low oil prices are still causing big problems for many countries. The interactive visualization below from the Council of Foreign Relations shows how the world economies most reliant on oil exports have fared since the 2014 crash.

This post was published at Zero Hedge on Jul 21, 2017.

Preparing for the End Game

A Potential Road Map for the End of the Current Bull Market & Economic Expansion
History books refer to the last economic slowdown we experienced, triggered by the 2007-2008 financial crisis, as the Great Recession. Its impacts were so severe – the worst global recession since the Great Depression of the early 1930s – that central banks across the globe responded with an unprecedented emergency stimulus. But that era is now drawing to a close and, with it, the countdown to the next economic recession and bear market in equities has begun.
Economic, Market Cycles and Monetary Policy
Central banks raise interest rates when they feel an economy is overheating and they are more concerned about price stability (inflation) than growth. Central banks cut interest rates when their primary concern is growth. A natural question to ask is, ‘How do central banks know when to stop raising rates?’ When something breaks!
Those who are the most leveraged with the weakest balance sheets are the first casualties when the Federal Reserve begins to raise interest rates and remove liquidity from the financial system. These are the entities Warren Buffet was referring to when he famously said, ‘It’s only when the tide goes out that you learn who has been swimming naked.’
As the casualties build and those naked run for cover, eventually the increased financing costs and slower economic activity culminate in a recession (in red).

This post was published at FinancialSense on 07/18/2017.

Lies, Damned Lies, and Statistics

Economics and finance are thought to be more predictable than other disciplines such as politics because they are quantifiable. This is debatable. The extent to which quantitative economic analysis is possible depends on the relationship between the number and reality. That there is a relationship is true, but the relationship is more tenuous than might be thought.
I am not talking about the possibility that economic statistics are manipulated for political reasons. This is certainly the case in some countries like China but less so, in my opinion, in Europe and the United States. But I want to put aside that theory and examine the validity of data assuming that everyone, everywhere, was honest.
Before we begin, a question…
Do you know how to separate the signal from the noise? It’s one of the most useful abilities a person can possess. But it’s also one of the hardest to acquire in the age of big data, big media bias, and the Internet, the biggest communication platform we’ve ever had. Reality gets diluted by the surreal.
Cutting through the noise to find insight and value is what has made Warren Buffett one of the most successful investors the world has seen. It’s what we strive to do here at Geopolitical Futures as well.

This post was published at Mauldin Economics on JULY 17, 2017.

The Tripwire on the Next ‘Black Monday’

‘Black Monday’ – Oct. 19, 1987 – the bloodiest one-day carnage in market history…
The Dow plunged 508 points that hell-mouth day – an unthinkable 22%.
A similar stock market event today would spell a 4,724-point cataclysm.
We liken that October day in 1987 to the ancient Battle of Cannae… when invincible Rome lost as many as 70,000 legionnaires to Hannibal’s armies – in a single day.
Or July 1, 1916, the first day of the Battle of the Somme, when nearly 20,000 British soldiers fell before the German guns… and never got up.
What could lead today’s market to its own Cannae, its own Somme… another Black Monday?
Today we set aside our renowned optimism… enter into the spirit of doom… and consider one possibility.
Harley Bassman is a world-class expert in derivatives – what Warren Buffett has termed ‘weapons of mass destruction.’
Bassman’s taken the current market and put it under his microscope.
He specifically wanted to answer:

This post was published at Wall Street Examiner on July 12, 2017.

Geopolitical Risk, Business, and Investment

When people think about geopolitics, they tend to think about war, as if the two issues were the same. But that is only partly true.
Geopolitics is the study of the power of nation states, and war is certainly a determinant of power. But it is only one of many. Things like economics, politics, ideology, and technology work together to form national power, and however useful it may be to learn about any single element, they are inseparable. It’s for this reason that the situation in North Korea is (rightly) seen as a geopolitical problem but the Italian banking crisis (wrongly) is not.
Before we begin…
At the risk of stating the obvious, Warren Buffett is an extraordinary forecaster. At the risk of displaying hubris, I am struck by how similar his approach to forecasting the future of companies is to our method of forecasting geopolitics.
At Geopolitical Futures, we have pinpointed a way that our similarities can benefit you. You’ll find out more at the bottom of this issue.
But for now, let’s dig in to This Week in Geopolitics.
Rooted in Geography
Multifaceted though it may be, geopolitics is nonetheless rooted in geography. Geography dictates what is possible and what is impossible. Iceland, for example, can never conquer Europe, nor will it become a major industrial power.

This post was published at Mauldin Economics on JULY 10, 2017.

Norway’s “Voluntary” Tax Collects A Paltry $1,325

It’s too bad for Norway’s ruling center-right party that Warren Buffett isn’t a resident. After becoming the object of unceasing criticism by their politicized slashing of taxes and funding a profligate spending program with the country’s oil wealth, Norway’s center-right party hit upon a novel idea: Impose a ‘voluntary’ tax, according to Bloomberg.
However, when it came time to tally the total for this past fiscal year, the great northern policy ploy failed to evoke in the country’s 5.3 million citizens a patriotic fervor: When it was all said and done, the government collected $1,325.
Launched in June, the initiative has received a lukewarm reception, with the equivalent of just $1,325 in extra revenue being collected so far, according to the Finance Ministry. That’s not much for a country of 5.3 million people, many of whom are already accustomed to paying some of the highest taxes in the world (the top rate of income tax is 46.7 percent).
‘The tax scheme was set up to allow those who want to pay more taxes to do so in a simple and straightforward way,’ Finance Minister Siv Jensen said in an emailed comment. ‘If anyone thinks the tax level is too low, they now have the chance to pay more.’
Left-of-center opposition parties claimed the tax cuts would benefit the richest and boost inequality. Jonas Gahr Store, the wealthy Labor Party contender who is leading in the polls ahead of the September 11 elections, has so far refused to take up the government’s offer.

This post was published at Zero Hedge on Jul 7, 2017.

As The S&P 500 Becomes One Giant ETF, BofA Has Four Major Warnings

Over the last few years, as nervous investors worried about a market that has risen to record highs on trillions in central bank liquidity, and seeking some particular market product to which they could transfer their concerns and fears, ETFs quickly emerged as the current generations’ “CDO” – the product that will accelerate the next crash when the BTFD mentality that has defined the market for the past 8 years, finally ends as central bankers pull the rug from under an entire generation of traders.
Two months ago, Arik Ahitov and Dennis Bryan, who run the $789 million FPA Capital fund, took the subconscious fears about ETFs to the next level, when in taking a page out of the Warren Buffett warning books, the duo said that Exchange-traded funds are ‘weapons of mass destruction’ that have distorted stock prices and created the potential for a market selloff.
In an April letter the two warned that “when the world decides that there is no need for fundamental research and investors can just blindly purchase index funds and ETFs without any regard to valuation, we say the time to be fearful is now.” They also noted a previously voiced warning that that “the flood of money into passive products is making stock prices move in lockstep and creating markets increasingly divorced from underlying fundamentals” and that “as the market moves ever higher, there’s the potential for a sharp decline.”
‘This new market structure hasn’t been tested,’ Bryan said, noting that the stock market has never gone through a major downturn when passive investors were as important as they are now. ‘We could get an onslaught of selling.’
The simplest summary of the latent worries about ETFs is that i) they provide phantom liquidity: there when not needed and gone when needed, and ii) as a result of wholesale capital flows, they misprice risk among bulk asset classes, so when selloffs occur, the most liquid underlying stocks – usually the most attractive ones – are hit the most.

This post was published at Zero Hedge on Jul 5, 2017.

Work is for Idiots

Disproportionate Rewards
The International Monetary Fund reported an unpleasant outlook for the U. S. economy on Wednesday. The IMF, as part of its annual review, believes the U. S. economic model isn’t working as well as it could to generate shared income growth.
On the same day, in an unrelated interview on PBS Newshour , billionaire investor Warren Buffett offered a similar outlook:
‘The real problem, in my view, is – this has been – the prosperity has been unbelievable for the extremely rich people.
‘If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one. This has been a prosperity that’s been disproportionately rewarding to the people on top.’
No doubt, U. S. wealth has become exceedingly concentrated into a very small number of hands over the last 40 years. At the same time the middle class has been hollowed out into a shell of its former self. Wages have stagnated. Well-paying jobs that could support a family on a single income have disappeared.

This post was published at Acting-Man on July 1, 2017.