The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

A. Probably Worse Than You Think

Posted on | August 25, 2011 | 12 Comments

Q. How bad is the economy right now?

Warren Buffet reportedly bought $5 billion — that’s billion, with a “b” — of Bank of America stock, and yet the Dow Jones Industrial Average still lost 170.89 points. That broke a 3-day streak of gains, and now we notice that mortgage rates are rising, an indicator of bond-market worries, and here’s a scary sentence for you:

A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.

Monty’s got more DOOM, if you want it. (And you know you want it.) Now, our  periodical “You Should Have Listen to Glenn Beck” Update:

Gold prices rebounded Thursday as more U.S. workers sought unemployment benefits and concerns about Europe’s debt problems took back the spotlight.
Gold rose $5.90 to finish at $1,763.20 an ounce after falling $134.60 in the past two days. . . . The price of gold is up 8.7 percent this month.

An 8.7% gain in a single month, despite the recent slide. Look at your investment portfolio and see if anything else you’ve got has done as well.

UPDATE: Banks in U.S. Face Main Street Squeeze as Sputtering Economy Saps Earnings. And to remind you what I wrote yesterday: If you buy gold now, and the price goes to $2,100 an ounce within six months — an entirely plausible scenario — that’s a sweet 20% profit.


12 Responses to “A. Probably Worse Than You Think”

  1. Steve in TN
    August 25th, 2011 @ 9:53 pm

    What good does all this “buy gold” crap do if the majority of us have nothing with which to buy gold?  Come on, quit rubbing our poverty in our faces.

    At any rate, the guys buying gold will only be transferring that to those of us that have been buying arms/ammo and non perishables…

  2. Mike
    August 25th, 2011 @ 10:04 pm

    The slide in gold was mainly due to the margins being raised in the far east and by the CME in an effort to cool the gold market after its recent run up. Steve in Tn, a lot of gold owners believe in other assets as well like ammo and the guns it goes to, and they can afford some nice shootin irons, those gold owners also believe in the Second Ammendment as well.  mpw

  3. Patrick DeBurgh
    August 25th, 2011 @ 10:22 pm

    You mention $5 billion like it’s some huge amount of money!
    Insofar as keeping or helping to keep BofA from crashing it’s merely a drop in the bucket. Get real already.

  4. Obama Rakes in Cash from Hollywood, Bankers and Lawyers | The Lonely Conservative
    August 25th, 2011 @ 6:29 pm

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  5. Anonymous
    August 25th, 2011 @ 11:21 pm

    $5B is a drop in the bucket?  Spoken like a true, big Gubmint Dim.  I hope, Warren “the Prog” Buffett has finally stuck his neck in a noose.  Believing his/The Progs’ mantra – too big to fail.  No matter how incompetent, “you” the taxpayer must bail us out, and heap $100s millions of “bonus” for the awesome job we’ve done.
    BoA’s mismanagement/incompetence is second only to Citi.  How many Saudi & Emirates bailouts have they needed so far.  Let ‘em fail.  Weed out the weak, the failures, ……  Let Warren, reap what he’s sowed – an unsustainable, tax payer funded of the incompetent elite, and the expense, of we lowly surfs. 

  6. Chuck Coffer
    August 25th, 2011 @ 11:29 pm

    Buffett buys deals. That’s all he does. He doesn’t do anything else. He doesn’t innovate. He doesn’t inspire. He doesn’t create.

    He just buys deals. The whole stock market is a deal right now.

  7. McGehee
    August 26th, 2011 @ 12:27 am

    If anybody wants to give me a “drop in the bucket” worth $5 billion, I won’t throw it across the room.

  8. GAHCindy
    August 26th, 2011 @ 1:38 am

    It’s times like this that I’m really grateful that we’re already broke. (My husband and I, I mean.)

  9. Anonymous
    August 26th, 2011 @ 3:29 am

    Keep your eyes peeled for hordes of Vandals and Ostrogoths.

  10. Adjoran
    August 26th, 2011 @ 5:55 am

    Buffet buys deals, as Chuck Coffer said, but the market isn’t a deal yet IMO.  I believe we are in for an extended bear which has only been postponed by the huge influxes of currency via “quantitative easings” and the investment banks being saved by bailout infusions.

    BAC looks awful by the chart, poised for a drop.  On the other hand, it’s under $8 a share and hasn’t so far to fall, especially if you believe it is “too big to fail.”  And while they are losing money currently, banks don’t lose money for very long, and their forward P/E is 5.17, which is almost stealing.

    The biggest thing about Buffet is his method approximates a form of legalized insider trading.  By proposing mergers and acquisitions, he gets access to far more detailed information about a company than is required to be made public for investors.  He makes the deal or doesn’t based in part on information not available to others, at a price he can negotiate with more leverage because of having it.

    Of course, all M&A does this to a degree, but Buffet has a particular nose for the scent of the internal information.  No one should take away from his talent, but it would be nice to get a whiff ourselves now and then.

  11. Adjoran
    August 26th, 2011 @ 6:10 am

    I also agree the “buy gold” campaign is quite puzzling.  If you own gold, you should disclose this every time you make statements which could affect the price, else you might be accused of pumping the price illegally.  Of course Warren Buffet’s attorneys could find a way to make it legal, but those guys charge by the quarter-minute, and they never talk fast.

    If you don’t own gold, it looks odd to be urging readers to buy it all the time.  Glenn Beck and others get a kick-back on what they sell, while Gordon Liddy and several others are just paid to shill the stuff, but everybody’s getting paid.

    Can you buy gold through Amazon?

  12. Dean Logan
    August 26th, 2011 @ 2:27 pm

    Buffet might get about a $2 billion return on that investment within a year’s time.

    He probably should send all of that to the IRS.