Remember the CNBC interview with Buffet in March? Buffet was talking about stocks, no double dip and gold.
“…I’ve said consistently for the last few years I would vastly prefer to own common stocks than fixed dollar investments over a five or 10-year period. I don’t know any about the next five hours or five days. And that might very well extend to rental real estate, it might extend to farms. I mean, an investment you’re looking for something where you put out money now and that asset that you buy gives you back more money over time. Now, the problem with commodities is that you’re betting on what somebody else will pay for them in six months. The commodity itself isn’t going to do anything for you.
So there’s two types of assets to buy. One is where the asset itself delivers a return to you, such as, you know, rental properties, stocks, a farm. And then there’s assets that you buy where you hope somebody else pays you more later on, but the asset itself doesn’t produce anything. And those are two different games. I regard the second game as speculation. Now there’s nothing immoral or illegal or fattening about speculation, but it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something you expect to produce income for you over time…”
S&P is down some 15% and Gold up some 25% from that interview. That sums up to around 40% outperformance for gold. Don’t forget, Buffet is probably holding the biggest short S&P put option in the world, but on the other hand, the man loves selling insurance, especially with expiry dates where he most likely won’t be around to mark to market.
And for some comparison this century;
|Year||Berkshire Hathaway||Gold||Relative Results|
Table; Daily Markets
Three words to describe today’s action. Volare for Italy (to fly), mierda in Spain (shit) and the US has it’s own plain crap, Bofa. Needles to say, the French banks also contributed to the melt down in European equities. With Italian banks struggling big time, Soc Gen joined the party (for real) today. With all major banks holding mega short gammas in their exotic books, look for further volatility and further panic, as the market offers absolutely no liquidity to hedge positions, unless you are going to buy VIX at these somewhat elevated levels….As The Trader has been arguing over the last four months, risk has been mispriced for very long time.
With the World in total confusion after having been in denial for way too long, let’s bring out a not so old video from earlier this spring. There are bears and there are mega bears.
Video with Rusell Napier, sees SPX bottoming out at around 400, give or take a couple of handles. Great interview by Authors, FT Long View, we wonder how long his view is? Napier’s book Anatomy of a Bear is a must read. Meanwhile please (re)view his video below.
Frequent readers know what we think of the HFT Algo Machines. Strategies full of predatory behavior not creating any liquidity, on the contrary just destroying the liquidity. Yes, the banks have invested a lot of money in these “super machines” and will lobby to keep them busy trading. Below some points on the HFT Trading by Jon Najarian.
Last night over 14 months after the Flash Crash, US regulators finally sent subpoenas to HFT firms. In light of that and the games that were played last week, I offer more insights into HFT from my friends at Nanex, which supports what our HeatSeeker saw as the quants had their way with the markets to the detrement of all investor classes:
On Friday, Aug 5, 2011, we processed 1 trillion bytes of data for all U.S. equities, options, futures, and indexes. This is insane. A year ago, when we processed half of that, we thought it was madness. A year before that, when it was 250 billion bytes, we thought the same. There is no new beneficial information in this monstrous pile of data compared to 3 years ago. It is noise, subterfuge, manipulation. The root of all that is wrong with today’s markets.
HFT is sucking the life blood out of the markets: liquidity. It is almost comical, because this is what they claim to supply. No one with any sense wants to post a bid or ask, because they know it will only get hit when it’s at their disadvantage. Some give in, and join the arms race. Others leave.
On how Faber would play the markets right now:
“I think right now the technical picture is so horrible that I would use a rebound as a lightning up opportunity. I think [equities] will move lower. I mean, some say you should move back into emerging economies because the fundamentals of emerging economies are far better than the fundamentals of European countries and the fundamentals of the United States. This is something I will consider.”
“The only thing I have to say, basically the market has sold off in such a rapid way and with so much momentum that I am smelling as if something really wrong happens in the next two or three months, because the market is a discounting mechanism. Like March 2009 the market started to go up and people were baffled why it started to go up. Now it starts to go down, and maybe after three months people will wake up and scratch their heads and say now, we know why it started to go down, because maybe there is geo political problems, maybe the Middle East blows up, maybe the economy is horrible.”
Full video continue,
All UK deposit-takers and large investment firms will have to draw up “living wills” by the end of next year that would allow them to be wound down over a weekend and quickly return assets to clients, http://ftalphaville.ft.com/thecut/2011/08/10/648996/all-uk-banks-told-to-draw-up-living-wills/
Apple has won a preliminary injunction barring Samsung‘s sale of its Galaxy Tab in every European Union member nation but the Netherlands, the FT reports, in the most significant victory so far in an escalating legal clash between the two technology powerhouses. The ruling came in a case brought by Apple in Germany, http://ftalphaville.ft.com/thecut/2011/08/10/648986/apple-wins-eu-victory-against-samsung/
China’s trade surplus rose sharply in July, Xinhua says, to $31.48bn from 22.27bn in June. Exports climbed 20.4 per cent from a year earlier, reports Bloomberg, compared with the 17 per cent median forecast among economists surveyed by the news agency. http://ftalphaville.ft.com/thecut/2011/08/10/648966/chinas-trade-surplus-surges/
Meanwhile businesses are counting the cost of the riots, the FT reports, with insurers expected to face more than £100m of claims and retailers tens of millions of pounds in costs, as businesses calculate the effect of three nights of rioting http://ftalphaville.ft.com/thecut/2011/08/10/648951/focus-of-rioting-moves-beyond-london/
Standard & Poor’s has objected to an SEC proposal that ratings agencies be required to disclose “significant errors” in how they calculate their ratings, Reuters reports. S&P raised concern just days after the Obama administration accused it of making an error in calculations determining its downgrade of US debt. http://ftalphaville.ft.com/thecut/2011/08/10/648931/sp-pushes-back-against-disclosure-proposals/
Bank of America has agreed to sell part of its home-loan portfolio to Fannie Mae, the WSJ says, in a deal that will give the government-controlled mortgage giant the rights to process and collect payments on a pool of 400,000 loans with an unpaid principal balance of $73bn. http://ftalphaville.ft.com/thecut/2011/08/10/648876/bofa-and-fannie-mae-in-mortgage-deal/
Japan’s prime minister, Naoto Kan, came under intense pressure to resign on Tuesday after his finance minister indicated he would compete in a race for the leadership of the ruling party, reports the FT.http://ftalphaville.ft.com/thecut/2011/08/09/648826/kan-under-renewed-pressure-to-quit/
The US Federal Reserve attempted to tackle a rapidly weakening economy on Tuesday by freezing short-term interest rates for two years and opening the door to more quantitative easing, in a move that sent the dollar and Treasury yields sharply lower. The rate-setting Federal open market committee said: “The committee currently anticipates that economic conditions – including low rates of resource utilisation and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.” http://www.ft.com/intl/cms/s/0/078d0708-c2ad-11e0-8cc7-00144feabdc0.html#axzz1UVK21rdL