Wow, Warren Buffett’s (Berkshire Hathaway) Cash Position Rockets by an Astounding 34%! Bullish in Words, Bearish in Action

Wow, Warren Buffett’s (Berkshire Hathaway) Cash Position Rockets by an Astounding 34%! Bullish in Words, Bearish in Action

The world’s most successful and revered stock market investor Warren Buffett has been an inveterate bull. In his 2015 letter to his flagship’s Berkshire Hathaway, Mr. Buffett asserted betting against America would be a losing proposition, “For 240 years it's been a terrible mistake to bet against America, and now is no time to start.”

In September of 2017, he made a bold and controversial claim that the Dow Jones Industrials, which was then at 22,400, would hit 1,000,000 in 100 years. However, even the mainstream media smelled the dissimulation from the Sage of Omaha’s prediction. The CAGR for the 100 year period would tally to only 3.87% compared to the CAGR of 10.7% since 2008! Mr. Buffett essentially framed the public to believe in his optimism while concealing his dampened expectations on returns!

Yet, because of his popularity, a countless number of followers has turned every Berkshire Hathaway’s shareholders meeting into the “Woodstock for capitalists”.

Mentored by the great value investing guru Benjamin Graham, the folksy Mr. Buffett has been renowned for his value investing approach

However, Mr. Buffet’s investing approach has long evolved. It has metastasized from value investing towards taking advantage of the political environment, through insider privilege and as a “champion of bailouts”, the establishment “investment moats” from politically bestowed monopolies and from the Federal Reserve’s insidious transfer policies to generate outsized profits. These practice defined in two words, political entrepreneurship.

And cronyism has reverberated on Mr. Buffett’s brand of politics. Mr. Buffet has repeatedly called on fellow billionaires to pay higher taxes. Paradoxically, Mr. Buffett’s companies have not only squared off with the IRS, they have used loopholes and accounting tricks to skirt tax payments.

Now to the heart of the story.

Striking self-contradicting insights seem to encompass Mr. Buffett’s latest bonfire for investors.

As Mr. Buffett has harped on higher taxes for the rich, he attributed the significant jump in the company’s book-value growth to Mr. Trump’s tax reform, “The $65 billion gain is nonetheless real – rest assured of that. But only $36 billion came from Berkshire’s operations. The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code” Berkshire Hathaway 2017 Annual Report p.7 

And instead of putting his words into action, Berkshire Hathaway amassed the biggest cash and cash equivalent position ever! (bold mine)

Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers – or even that of friends who may be facing liquidity problems of their own. During the 2008-2009 crisis, we liked having Treasury Bills – loads of Treasury Bills – that protected us from having to rely on funding sources such as bank lines or commercial paper. We have intentionally constructed Berkshire in a manner that will allow it to comfortably withstand economic discontinuities, including such extremes as extended market closures. (P.7)

Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions. We certainly have the resources to do so. At yearend Berkshire held $116.0 billion in cash and U.S. Treasury Bills (whose average maturity was 88 days), up from $86.4 billion at yearend 2016. This extraordinary liquidity earns only a pittance and is far beyond the level Charlie and I wish Berkshire to have. Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets (p.9)

Wow, that’s a whopping 34% surge in liquidity that “earns only a pittance”!!!

Why? Because “economic discontinuities” may be an obstacle to Dow Jones 1 Million????

For every USD invested in stocks, Berkshire has .68 cents in cash. Or, the ratio of stocks-cash is 60-40. Total equity position as of 2017 was USD 170 billion. That’s hardly a staunchly bullish position!

And if you should notice, this hasn’t been an anomaly. Berkshire’s cash hoard has vaulted in the past 3 years, growing by 20.4% and 13.4% in 2016 and 2015, respectively.

Note from the above data, I tabulated only the cash and cash equivalent segment of the insurance business sans the rail and financials.

Given the way the market has behaved, lack of opportunities can hardly explain Berkshire’s swelling cash pile.

Shouldn’t this hoarding of cash, coming at the expense of stocks, be discerned as “betting against America”?

Or has the lessons of the Great Recession sank into Mr. Buffett? Berkshire has had little elbow room to use during the ensuing fire sale triggered by the Lehman collapse. (see above)

And interestingly, while Mr. Buffett told the public that the Dow would hit 1M, he was silently amassing cash!

Warren Buffett’s saying one thing and doing another serves as a noteworthy example of DEMONSTRATED PREFERENCE.

Contra Warren Buffett, America’s best days exists for a tiny elite

Sovereign Man’s Simon Black points out why Warren Buffett is wrong with the latter’s sanguine view of America. (bold mine) 

In his most recent annual report just released yesterday, Mr. Buffet lauds the United States of America, writing:

“Indeed, who has ever benefited during the past 237 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America’s best days lie ahead.”

Such language is typical for Mr. Buffett, he is one of America’s biggest cheerleaders. Again, with good reason.

For one, the unprecedented monetary expansion over the last decades has created a major boon for Mr. Buffet and his net worth. 

His company Berkshire Hathaway has a balance sheet worth $485 billion. 25% of that is simply invested in the stock market with big chunks of Coca Cola and American Express. 

These stock prices have boomed in an era of unprecedented money printing, adding billions to Mr. Buffett’s net worth.

Second, it’s important to note that over 75% of Berkshire’s revenue comes from highly regulated, absurdly profitable, tax advantageous businesses that are simply not accessible to the average guy. 

For example, Mr. Buffett gleefully writes about the $77 billion ‘float’ from his insurance businesses.

This is money that is collected from insurance customers. And while he might have to pay out insurance claims someday, for now he gets to borrow from that kitty at 0% and generate higher returns elsewhere.

On top of this, Mr. Buffett has been able to defer a full $57 billion in tax, indefinitely kicking the can down the road on his IRS bill thanks to industry-specific tax rules.

Again, you and I couldn’t do this because we don’t have access to these special privileges. Warren Buffett does.

Warren Buffett also has special access to lawmakers in the US who clamor to be in his favor.

During the early days of the financial crisis in 2008, for example, Buffett was getting desperate phone calls from the Treasury begging him to make investments in the financial system.

And as a result, he was able to arrange sweetheart deals, brokered by the US government.

It also may just be a wild coincidence that the US government has rejected the Keystone XL pipeline… and Mr. Buffett’s railways just -happen- to be among the prime beneficiaries.

Yes, I think if we all had the special privilege, access, and benefit that Warren Buffett enjoys, we too would all be jumping for joy about America.

But Uncle Warren lives in a different America– the America of the past.

With due deference to his investment acumen, Mr. Buffett should know that no nation in history has been able to -permanently- stand atop the world’s economic mountain. 

Like human beings ourselves, nations also rise, peak, and decline. It is their own life cycle. 

And the America that Mr. Buffett doesn’t acknowledge is the one that is in debt past its eyeballs. 

It is the America that spies on its citizens and threatens people with imprisonment for victimless crimes and administrative transgressions.

It is the America that conjures trillions of paper dollars out of thin air in total desperation, sending the labor force participation rate to multi-decade lows.

It is the new America that exists for a tiny elite at the expense of everyone else.

The above article exposes on what I call as “people up talking their industry” or a prime example of the the agency (principal agent) problem or the invisible conflict of interests between industry participants and their clients and or the public. [I should know I am a part of Mr. Buffett's industry but based on the Philippines.]

The cheerleading of Mr. Buffett on the economy has been designed to bolster Berkshire's financial interests (through implied advertisement) by encouraging the unwitting public to patronize the businesses offered by his companies via the "economy".

The other ramification is that the average investors pile into Berkshire’s stocks thereby pumping up share values and therefore magnify Berkshire's "returns" which will eventually reflect on Mr. Buffett's wealth status.

Of course what Mr. Buffett didn’t say too, which has been lucidly explained by Mr. Black, has been that Berkshire’s “economic moat” or competitive advantage has hardly been due to Ben Graham’s “value investing” but rather to “value” provided by political privileges via rent seeking political entrepreneurship, which meant special access to politicians and their regulations or exemptions in order to protect Berkshire’s interests. In terms of proportionality, 25% in stocks and 75% in rent privileges hardly speaks of value investing. 

In addition, some of the 25% of Berkshire's portfolio also benefits from political cover, as noted above.

The point is that what benefits Mr. Buffett’s Berkshire isn’t largely shared by the public. But Mr. Buffett makes it appear otherwise.

I’d like to add that Berkshire Hathaway is just one of the major recipients of government subsidies. According to a report by Philip Mattera of the taxpayer watch group Good Job First over the last two decades: 

…subsidy awards worth more than $1billion have been given to Warren Buffett’s Berkshire Hathaway by way of its holdings such as Geico, NetJets, Nebraska Furniture Mart, General Re Corporation, Lubrizol Advanced Materials, and Webb Wheel Products.

It’s not just Mr. Buffett though. An increasing number of US companies have become welfare recipients of the US government. About 75% of cumulative disclosed subsidy dollars to the tune of a whopping $110 billion notes PandoDaily.com have gone to 965 large companies where Fortune 500 firms have received receive more than 16,000 subsidies at a total cost of $63 billion. And more US government subsidies have also covered foreign firms. The 10 largest welfare corporate beneficiaries include Boeing, Alcoa, Intel, General Motors, Ford, Fiat, Royal Dutch, Nike, Nissan and Cemer. Mr. Buffett's Berkshire ranks 15th.

Bottom line: Be careful of what industry promoters say. In today’s world where politics has increasingly become a dominant force whether in the US, Asia, Europe, Latam and even in the Philippines, the rose colored-Pollyannaish outlook may all be about promoting the interests of the “tiny elite at the expense of everyone else".

Warren Buffett’s Declining Popularity; Fund Raising Charity Lunch Crashes by 71%

Perhaps, like me, many may have come to realize that a shift of investing paradigm from “value” to “rent seeking” cronyism requires little financial acumen. 

And a political route towards investing means partisanship that leads to polarization and ethical erosion. Thus Warren Buffet may have been losing lots of fans as measured by the latest charity fund raising lunch.

Writes the Zero Hedge (bold original)

Demand for Warren Buffett, the investor, peaked in 2012 when an anonymous donor bid $3,456,789 for the annual Glide Foundation's eBay lunch with the Octogenarian of Omaha. Demand for Warren Buffett, 82, the Obama tax and fairness advisor, however, is a mere fraction as the stunned Glide Foundation found out last night when the final bid for the "Power Lunch for 8 with Warren Buffett to Benefit GLIDE Foundation" auction closed at the lowest possible 6 digit increment, or an embarrassing $1,000,100. This was the lowest demand to have lunch with Buffett since 2007.This is a stunning result considering that with every passing year, for obvious reasons, the likelihood of many more such "power lunches" drops exponentially. We hope Buffett-demand is not a proxy leading indicator for the stock market or else a 71% plunge is coming.

Poetic justice?

Why Warren Buffett Loves to Tax the Rich

In a recent article, Billionaire Warren Buffett proposes, once again, to tax his contemporaries, but this time by imposing a “minimum tax on the wealthy”.

Does Mr. Warren Buffett truly practice what he preaches? Or is he merely a sly and sleek talking famous personality promoting a hidden political agenda?

Well it would seem that despite his progressive “soak-the-rich” class warfare rhetoric, in reality, Mr. Buffett has been averse to taxes.

Mr. Buffett’s flagship, Berkshire Hathaway, still has tax issues with Internal Revenue Services. The company hasn’t even been paying due taxes since 2002.

As the New York Post notes in August of 2011

As Americans for Limited Government President Bill Wilson notes, the company openly admits that it owes back taxes since as long ago as 2002.

“We anticipate that we will resolve all adjustments proposed by the US Internal Revenue Service (“IRS”) for the 2002 through 2004 tax years ... within the next 12 months,” the firm’s annual report says.

It also cites outstanding tax issues for 2005 through 2009.

In November 2011, Berkshire Hathaway subsidiary NetJets also sued the IRS for “mistakenly assessing ticket tax” to recoup $643 million in taxes

So Mr. Buffett hasn’t been pro-tax at all: That’s when taxes applies to his business interests.

And this extends to the way Mr. Buffett and or his company uses tax avoidance maneuvers. Harvard Professor Greg Mankiw exposes them

But on closer examination, one realizes that Mr Buffett never mentions doing anything to eliminate the tax-avoidance strategies that he uses most aggressively.  In particular:

1. His company Berkshire Hathaway never pays a dividend but instead retains all earnings.  So the return on this investment is entirely in the form of capital gains.  By not paying dividends, he saves his investors (including himself) from having to immediately pay income tax on this income.

2. Mr Buffett is a long-term investor, so he rarely sells and realizes a capital gain.  His unrealized capital gains are untaxed.

3. He is giving away much of his wealth to charity.  He gets a deduction at the full market value of the stock he donates, most of which is unrealized (and therefore untaxed) capital gains.

4. When he dies, his heirs will get a stepped-up basis.  The income tax will never collect any revenue from the substantial unrealized capital gains he has been accumulating.

In short, Mr. Buffett proposes taxing everyone else but himself.

Lastly, Mr. Buffett seems to be promoting President Obama’s agenda because he benefits substantially from them.

Mr. Buffet’s Berkshire Hathaway had been a major beneficiary of the Wall Street Bailout

Writes Eric Fry at the Daily Reckoning,

During the depths of the 2008 Credit Crisis and stock market selloff, “Wall Street was of fire,” recalls Peter Schweizer in his expose, Throw Them All Out. “[But] Buffett was running toward the flames…with the expectation that the fire department (that is, the federal government) was right behind him with buckets of bailout money…Indeed, Buffett needed the bailout…Beyond Goldman Sachs, Buffett was heavily invested in several other banks that were at risk and in need of federal cash. He began immediately to campaign for the $700 billion TARP rescue plan that was being hammered together in Washington.”

“As the political debates surrounding the proposed $700 billion Troubled Asset Relief Program (TARP) bailout bill heated up,” recalls blogger, Pat Dollard, “Buffett maintained an appearance of naiveté, an ‘aw shucks’ shtick that deferred to the judgment of politicians. ‘I’m not brave enough to try to influence the Congress,’ Buffett told the New York Times.

“Behind closed doors, however, Buffett had become a shrewd political entrepreneur,” Dollard continues. “The billionaire exerted his considerable political influence in a private conference call with then-Speaker of the House Nancy Pelosi and House Democrats. During the meeting, Buffett strongly urged Democratic members to pass the $700 billion TARP bill to avert what he warned would otherwise be ‘the biggest financial meltdown in American history.’”

“If the bailout went through,” Schweizer correctly observes, “it would be a windfall for Goldman. If it failed, it would be disastrous for Berkshire Hathaway.”

Buffett’s “hard work” paid off.

“In all, Berkshire Hathaway firms received $95 billion in bailout cash from the Troubled Asset Relief Program (TARP). Berkshire held stock in the Wells Fargo, Bank of America, American Express, and Goldman Sachs, which received not only TARP money but also $130 billion in FDIC backing for their debt. All told, TARP-assisted companies constituted a whopping 30% of its entire company disclosed stock portfolio.”

But these billions of dollars represented only the most visible portions of the bailout funds that flowed to Berkshire’s companies. Wells Fargo, for example, received “only” $25 billion of TARP funding, but it also received another $45 billion at the same time from the Federal Reserve’s Term Auction Facility (TAF).

Incredibly, Wells Fargo’s borrowings paled alongside those of Goldman Sachs. Throughout the crisis, Goldman gorged itself at every available government trough. The morally challenged investment bank borrowed only $10 billion from the TARP. But at the same time Goldman was griping about “being forced” to take the $10 billion TARP loan, the company was borrowing tens of billions of dollars more from obscure government lending programs with acronyms like: CPFF, PDCF and TSLF.

And that’s not all!

Amidst much fanfare and self-congratulatory press releases, Goldman repaid its TARP loan in June 2009, but only after securing $25 billion of government capital at a different trough. As we observed in a December 15, 2010 edition of The Daily Reckoning:

On June 17, 2009…thanks to some timely, undisclosed assistance from the Federal Reserve, Goldman repaid its $10 billion TARP loan. But just six days before this announcement, Goldman sold $11 billion of mortgage-backed securities (MBS) to the Fed. In other words, Goldman “repaid” the Treasury by secretly selling illiquid assets to the Fed.

One month later, Goldman’s CEO Lloyd Blankfein beamed, “We are grateful for the government efforts and are pleased that [the monies we repaid] can be used by the government to revitalize the economy, a priority in which we all have a common stake.”

As it turns out, the government continued to “revitalize” that small sliver of the economy known as Goldman Sachs. During the three months following Goldman’s re-payment of its $10 billion TARP loan, the Fed purchased $27 billion of MBS from Goldman. In all, the Fed would purchase more than $100 billion of MBS from Goldman during the 12 months that followed Goldman’s TARP re-payment.

Is it any wonder that Buffett’s $5 billion “investment” in Goldman Sachs succeeded so nicely?

“Later, astonishingly,” recalls Peter Schweizer, “Buffett would publicly complain about the bailouts in his annual letter to Berkshire investors, claiming that government subsidies put Berkshire at a disadvantage…”

And as previously pointed out, Berkshire Hathaway’s Burlington North Santa Fe has also profited from Obama’s energy (oil pipeline) policies.

In essence, Warren Buffett not only has altered or overhauled his winning investing formula from "value investment" to the political entrepreneurship of rent seeking by becoming Obama’s premier crony, he has been using Obama’s policies to quash competitors. It looks as if Mr. Buffett's tax increases have been implicitly designed to attain this.

[As a side note, maybe the Occupy Wall Street movement should consider occupying Berkshire Hathaway too]

It’s sad to see how Mr. Buffett seems to have condescended or has sold his soul to the political demons by veering away from the laudable libertarian principles embraced by his dad, Howard Buffett. Or perhaps Mr. Buffett’s string of investing success may have gotten into his head. 

Howard Buffett’s portrait in Warren Buffett’s office (courtesy of Business Insider’s Tour of Warren Buffett’s office)

Given son Warren’s patent hypocrisy, dad Howard must be rolling in his grave.

Warren Buffett’s Political Entrepreneurship Investing Paradigm

Warren Buffett has been unabashed crony for the Obama regime, to the extent that has even spited on the principles embraced by his Dad, Howard.

From an erstwhile venerable “value” investor, today Mr. Buffett’s investing formula has pronouncedly shifted into rent seeking.

Peter Schweizer of Reason reckoned in his March exposé on Warren Buffett that this folksy fellow “needed the TARP bailout more than most.”

Let’s run through the numbers. Berkshire Hathaway firms in total received $95 billion in TARP money. Berkshire, you’ll recall, held stock in Wells Fargo, Bank of America, Goldman Sachs and American Express. Not only did these companies receive TARP funds… they also dipped into the FDIC’s treasury to back their debt. Total bailout: $130 billion. TARP-enabled companies accounted for 30% of the Oracle’s publicly disclosed stock portfolio.

He’s definitely one of the top beneficiaries of the big bank bailout. And to sharpen the sting, he even got a better deal to help ailing Goldman Sachs than our own government. Buffett got a 10% preferred dividend while the Feds got all of 5%. He cleaned up with $500 million a year in dividends. Without the bailout, you can bet many of his stock holdings would have gone near-zero instead.

That’s from Addison Wiggins of the Daily Reckoning.

As I previously wrote, I think Mr. Buffett has been desperate about preserving his popularity, social privileges and political clout which seems to have mainly been latched on the sustenance of his track record, where the scale of his portfolio may have met the law of diminishing returns using his traditional "value" methods.

So instead of admitting reality, egoism has motivated him to radically shift strategies and to sacrifice principles for convenience.

Warren Buffett versus his Dad Howard Buffett on Gold

Warren Buffett has long been averse to gold as an investment (and as part of his political philosophy), focusing on the polemics that gold does not account for a productive asset.

In a recent Fortune article he continues with this line of rant. (bold emphasis mine)

The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As "bandwagon" investors join any party, they create their own truth -- for a while…

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See's peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.

Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial "cows" will live for centuries and give ever greater quantities of "milk" to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).

It’s bizarre to see Mr. Buffett argue about the non-productive role of gold yet imply of gold’s potential as a currency or as money.

Mr. Buffett ignores that, money, to quote the great Murray N. Rothbard, forges the connecting link between all economic activities. This only means that any massive debasement of the currency, which again is used as link to all economic activities, will undermine the division of labor which thereby erodes the productive capacity of an economy (and specifically Mr. Buffett’s or anyone’s investments or ‘capacity to deliver milk’).

In short, it would be a serious gaffe to think that economic activities can be isolated from the ever changing conditions of money. Thus, his objection that gold represents a non-productive asset is essentially a non-sequitur.

And obviously Mr. Buffett admits to such spurious reasoning through some of his actions in his flagship Berkshire Hathaway: (bold emphasis added)

Under today's conditions, therefore, I do not like currency-based investments. Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be.

So Mr. Buffett holds non-gold currency based investments in spite of his reluctance to incorporate them as part of his portfolio. So Mr. Buffett practices a deny but apply strategy.

And finally, here is another blatant inconsistency in his letter

Berkshire's goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety -- but we will also be owners by way of holding sizable amounts of marketable stocks

The folksy Mr. Buffett is not being candid at all.

Today, his investments have not been about taking on first-class ‘efficiently deliver goods and services wanted by our citizens’ but rather on businesses that heavily relies on government’s support. For instance Mr. Buffett has profited from Obama’s anti-competition energy policies such as the Keystone pipeline controversy, and earlier, Mr. Buffett also profited immensely by participating in the various bailouts conducted by the US government in the US financial system.

In short, Mr. Buffett has morphed from value investor to a political entrepreneur or a crony. This hardly represents the ideals Mr. Buffett has been preaching about.

And importantly the sage of Omaha’s actions runs to the contrary against the virtues espoused by his venerable father Mr. Howard Buffett, the staunch ‘old right’ libertarian.

My guess is that Mr. Buffett’s antipathy towards gold has really nothing to do with economics (which he uses as a flimsy cover or camouflage) but could most likely represent a personal issue—specifically based on an implicit division with his father (for whatever reasons)

Here is an excerpt on Mr. Howard Buffett’s celebrated treatise on “Human Freedom Rests on Gold Redeemable Money”

Far away from Congress is the real forgotten man, the taxpayer who foots the bill. He is in a different spot from the tax-eater or the business that makes millions from spending schemes. He cannot afford to spend his time trying to oppose Federal expenditures. He has to earn his own living and carry the burden of taxes as well.

But for most beneficiaries a Federal paycheck soon becomes vital in his life. He usually will spend his full energies if necessary to hang onto this income.

The taxpayer is completely outmatched in such an unequal contest. Always heretofore he possessed an equalizer. If government finances weren't run according to his idea of soundness he had an individual right to protect himself by obtaining gold.

With a restoration of the gold standard, Congress would have to again resist handouts. That would work this way. If Congress seemed receptive to reckless spending schemes, depositors' demands over the country for gold would soon become serious. That alarm in turn would quickly be reflected in the halls of Congress. The legislators would learn from the banks back home and from the Treasury officials that confidence in the Treasury was endangered.

Congress would be forced to confront spending demands with firmness. The gold standard acted as a silent watchdog to prevent unlimited public spending.

I have only briefly outlined the inability of Congress to resist spending pressures during periods of prosperity. What Congress would do when a depression comes is a question I leave to your imagination.

I have not time to portray the end of the road of all paper money experiments.

It is worse than just the high prices that you have heard about. Monetary chaos was followed in Germany by a Hitler; in Russia by all-out Bolshevism; and in other nations by more or less tyranny. It can take a nation to communism without external influences. Suppose the frugal savings of the humble people of America continue to deteriorate in the next 10 years as they have in the past 10 years? Some day the people will almost certainly flock to "a man on horseback" who says he will stop inflation by price-fixing, wage-fixing, and rationing. When currency loses its exchange value the processes of production and distribution are demoralized.

For example, we still have rent-fixing and rental housing remains a desperate situation.

For a long time shrewd people have been quietly hoarding tangibles in one way or another. Eventually, this individual movement into tangibles will become a general stampede unless corrective action comes soon.

Mr. Warren Buffett is being exposed for his rhetorical sophistry. Besides, the markets will eventually expose on his equivocation, which apparently he has taken on some 'deny and apply' insurance. He should instead pay heed to his Dad's wisdom, if not at least follow his Dad's legacy of honesty.