You must think I have lost my mind. No, I’m not yet. Buffett is the most successful investor in the history, ever! I have full respect for Buffett and his words are usually just like proverbs, to which I listen very carefully. However, recently I have found Buffett is dead wrong on 2 aspects:
First is about his opinion on gold. Buffett does not like gold and he even thinks gold is just something useless. In a speech to the 1998 Harvard graduating class he said:
First is about his opinion on gold. Buffett does not like gold and he even thinks gold is just something useless. In a speech to the 1998 Harvard graduating class he said:
“Gold, It 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. Anyone watching from Mars would be scratching their head.”
I like Buffett’s humor. But I’m just puzzled by his stubbornness that he still sticks to his opinion when gold’s value has increased more than 5 times in the past decade. No any other asset has ever had such kind of performance to increase its value year after year consecutively for 10 years. Very likely this year will be its 11th year of success for gold.
Second is about his optimism about the US prospects. He has said severally times that the US has gone through all kinds of difficulties and challenges in the past decades since Great Depression but the US has always come back strongly. No difference this time. REALLY?
Buffett, the world has changed significantly and this time it is very different for the US. US had always been the greatest creditor in the world in the past and therefore it could endure a lot of financial challenges but still survive well and strong. But not this time. Why? Because US has become the greatest debtor in the world now. Americans are relying on life-support from other creditor countries like China and its world reserve currency status will be lost for sure. Just a matter of time. See a few facts below:
I like Buffett’s humor. But I’m just puzzled by his stubbornness that he still sticks to his opinion when gold’s value has increased more than 5 times in the past decade. No any other asset has ever had such kind of performance to increase its value year after year consecutively for 10 years. Very likely this year will be its 11th year of success for gold.
Second is about his optimism about the US prospects. He has said severally times that the US has gone through all kinds of difficulties and challenges in the past decades since Great Depression but the US has always come back strongly. No difference this time. REALLY?
Buffett, the world has changed significantly and this time it is very different for the US. US had always been the greatest creditor in the world in the past and therefore it could endure a lot of financial challenges but still survive well and strong. But not this time. Why? Because US has become the greatest debtor in the world now. Americans are relying on life-support from other creditor countries like China and its world reserve currency status will be lost for sure. Just a matter of time. See a few facts below:
- Americans grew their debt from around 70% of their income in 1990 to about 120% in 2010
- About 70 percent of the U.S. economy is built on consumer spending, but Americans don’t have much money to spend. The trend will only become worse
- The official US national debt is $14 trillion, in which about $4 trillion was added in the past 2 years since this administration took the power
- The total debt could be $75-100 trillion or more when you account for Medicare and Social Security, or about $700,000 per family. Simply the interest for this amount of debt at the current super low rate is equivalent to the current budget at around $4 trillion. Think about what will happen if the interest rate just increases a little bit. Actually the interest rate will increase significantly in the next few years for sure, which will crash the US government
- Per Bill Gross, the United States will default on its debt while picking the pocket of every citizen through inflation, dollar devaluation, and interest rate games
Yes, US could survive this time as well but only if it can make fundamental and structural changes to resolve its life-threatening debt crisis through some very painful choices. Unfortunately we cannot see any political will till now in the US from anyone to seriously tackle this problem. Believe or not, Greece is the tomorrow of the US, which is taking the exact path towards self-perishing.
I happened to see a long-term chart for Dow. It is presenting a very ominous long-term trend for the stock market. The Dow appears to be completing its right shoulder. A head and shoulders pattern is very dire for stocks technically speaking. If it is true this time, Dow could drop to the level of below 8000. Of course I’m not talking about a 30-50% plunge or more in the next few weeks or months. It is a long-term trend, which can take 3-5 years to materialize. This long-term pattern actually is very consistent with the overall bleak US prospects. I’d strongly advise you to keep this in mind in managing your portfolio and your nest eggs for your retirement.
I happened to see a long-term chart for Dow. It is presenting a very ominous long-term trend for the stock market. The Dow appears to be completing its right shoulder. A head and shoulders pattern is very dire for stocks technically speaking. If it is true this time, Dow could drop to the level of below 8000. Of course I’m not talking about a 30-50% plunge or more in the next few weeks or months. It is a long-term trend, which can take 3-5 years to materialize. This long-term pattern actually is very consistent with the overall bleak US prospects. I’d strongly advise you to keep this in mind in managing your portfolio and your nest eggs for your retirement.
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