Warren Buffett: Please go on another anti-gold tirade tomorrow

May 4, 2012
Santiago, Chile

Tomorrow morning, an expected 30,000 faithful Berkshire Hathaway shareholders will file into the CenturyLink Center in downtown Omaha to hear their leader wax philosophically on just about every topic imaginable.

You have to give credit where credit is due: Warren Buffett is damn good at picking stocks and finding undervalued treasures; plus his jovial, grandfatherly demeanor make him pretty hard to dislike.

It’s for these reasons that Buffett has achieved, at least when it comes to financial matters, a moral authority and credibility previously reserved for the likes of Nelson Mandela. When he speaks, the public takes it as truth.

Yet for a man who has been so right about his portfolio, he’s completely misguided about so much else.

Buffett has been one of the loudest champions of higher taxes… which, as we explored earlier this week, only provides the government with even more resources to squander.

Calling for higher taxes is in no way patriotic… it’s idiotic. Why give the people who are notoriously corrupt and incompetent even more ammunition to drive the economy into the ground?

Buffett fails to realize that, in the US, more tax revenues mean more bombs, more bailouts, more child-molesting TSA agents. In the UK, more tax revenues mean more nanny state nonsense. In Greece it means– well, never mind, they’re too broke to even print tax forms in Greece.

Perhaps more strikingly, though, Buffett has been dead wrong about gold.

He famously quipped that all the gold in the world could be melted down into a cube that would fit inside an American baseball infield… and that you could do nothing with such a hunk of metal save look at its glossy shine.

It’s not terribly surprising that Buffett is so wrong on precious metals having (1) lost his ass in the silver market in the 1990s, and (2) been one of the biggest beneficiaries of the Federal Reserve’s long-term destruction [inflation] of the US dollar.

It’s just as well. The longer Buffett keeps telling people that gold is a useless investment, the longer it delays the mania phase.

Given how much silver jumped in the 90s on the news that Buffett was buying, I hate to think what would happen to gold prices if the same happened today.

Personally, I’m happy for the opportunity to trade my paper for gold at today’s relatively low prices… and I sincerely hope Buffett goes on another anti-gold tirade this weekend to scare potential buyers away.

Last but not least, I would be completely remiss if I didn’t mention the Oracle’s failed prophesies on the US housing market. Wrong, wrong, and wrong.

Buffett has written a number of times that the US housing market would turn around in… 2010. Make that 2011. Make that 2012. Oops.

In his annual letter to shareholders from earlier this year, Buffett finally admitted that he was “dead wrong” predicting the end of US housing woes, but is still convinced that a turnaround is in the works.

His reasoning? Coitus.

Buffett’s latest hypothesis is that good ole’ fashioned American sex drive will cause a population boom that generates demand for housing:

“People may postpone hitching up during uncertain times, but eventually hormones take over. And while ‘doubling-up’ may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.”

There you have it: America is going to fornicate its way out of the housing crisis.

Never mind that the woefully dismal unemployment rate among young Americans (ostensibly the source of said hormones) precludes their ability to pay for, and generate, meaningful housing demand… even despite their hormones.

Can someone please show Warren Buffett what a condom is? It’s not like people have stopped having sex for the last three years… it’s the family planning that’s been put on hold.

According to the National Center for Health Statistics and the Center for Disease Control, the US birth rate is at an all-time low, and dropping fast. Moreover, the cost of raising a child keeps rising steadily.

When you’re the richest man in the world, you don’t have to think about these things. But regular people do. Regular people put off having kids when we’re unemployed and without housing. We put off having multiple kids when the future is uncertain and healthcare costs are spiraling out of control.

Declining birth rates are typical in civilizations which hit massive economic speed bumps, from Japan’s lost decades to the Roman Empire. This time is not different.

The danger with Buffett’s running commentary from taxes to gold to housing to general ‘pro-America’ bombast, is that the masses listen to him. He is a rare likeable billionaire who ‘drives around Omaha looking for the best deal on Cherry Coke.’

The false hope that he’s selling keeps many people from acknowledging reality: that the game is being reset, and the rules have completely changed.

With all due respect to Mr. Buffett’s integrity and stock-picking abilities, he is a vestige of the old system ruled by central bankers and corrupt politicians where you get rich surfing a tidal wave of fiat currency. You get mega rich doing so while picking great companies.

This system is collapsing more by the day, and the sooner it happens, the sooner the real recovery can begin. It’s those who acknowledge this reality and prepare for it who will come out on top in the end.

About the Author

Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.