Saturday, May 06, 2006

 

Buffett On Commodities And Real Estate

Warren Buffett made some comments about various markets today. "Warren Buffett and Berkshire Hathaway (Research) vice chairman Charles Munger threw Saturday's entire morning open to a question and answer session with shareholders just as they do every year. But their views on housing prices and the energy and commodity markets may ruffle some feathers."

"On a commodities bubble: Buffett: 'I don't think there's a bubble in agricultural commodities like wheat, corn and soybeans. But in metals and oil there's been a terrific [price] move. It's like most trends: At the beginning, it's driven by fundamentals, then speculation takes over. As the old saying goes, what the wise man does in the beginning, fools do in the end. With any asset class that has a big move, first the fundamentals attract speculation, then the speculation becomes dominant."

"Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing."

"Berkshire mostly avoids commodity speculation because Buffett said he's 'not good at the game of figuring out how far the speculative gains will go.' That means Berkshire won't make as much money as other investors who stay on until 'the final 30 days or weeks of a wild orgy,' he said, recalling a big investment Berkshire made in silver."

"Buffett said Berkshire didn't make any money on his silver investment because he 'bought it very early and sold it very early. Other than that, everything I did was perfect.'"

"On the real estate bubble: Buffett: 'What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. [Buffett singled out Dade and Broward counties in Florida as an area that has experienced a rise in unsold inventory and a stagnation in price.]"

"The day traders of the Internet moved into trading condos, and that kind a speculation can produce a market that can move in a big way. You can get real discontinuities. We've had a real bubble to some degree. I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market."

"On mortgage financing: Munger: 'There is a lot of ridiculous credit being extended in the U.S. housing sector.' Buffett: 'Dumb lending always has its consequences. It's like a disease that doesn't manifest itself for a few weeks, like an epidemic that doesn't show up until it's too late to stop it Any developer will build anything he can borrow against."

"If you look at the 10Ks that are getting filed [by banks] and compare them just against last year's 10Ks, and look at their balances of 'interest accrued but not paid,' you'll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt]."

Comments:
Interesting... first I've heard that Buffet actually sold his silver. Even Barclay's had been rumored to have approached him about buying it in order to launch the ETF.

Antal Fekete also just wrote a contrarian silver piece.

I guess these are the times that test silver bug's souls, eh?
 
Correlating history: Many smart people recognized the housing bubble and got out in 2004. They did not forsee that 2005 (until Q3) would be the best appreciation year yet.

Silver has jumped a lot. I've gained 47% on my physical holdings so far. I will stay the course and buy more on big dips.

I think an investor just has to wait until there is a critical mass speculation involved with any bubble X before unloading. Housing was a slow moving market and timing was easy. Fast moving bubbles will prove to be more of a challenge.
 
Berkshire mostly avoids commodity speculation because Buffett said he's "not good at the game of figuring out how far the speculative gains will go." That means Berkshire won't make as much money as other investors who stay on until "the final 30 days or weeks of a wild orgy," he said, recalling a big investment Berkshire made in silver.


Buffett said Berkshire didn't make any money on his silver investment because he "bought it very early and sold it very early. Other than that, everything I did was perfect."


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We now know the speculation that Barclays was getting there silver from Buffett/Berkshire can't be true. If silver prices are rising and Buffett is out of silver, this is good news for silver! Where is the silver the shorts need to cover?
 
New Highs? or Same old lows? This fellow lays out what many of us have been saying until we are blue in the face. The media does not get it, because they have no clue what the word inflation means. They are tuned into the gub-ment speak!



http://www.silverminers.com/publications/showpub.aspx?id=3024
 
I do find it a bit disturbing that so many publications have (for such a long time) been stating as fact, that Buffet holds millions of ounces of silver.

Right now on ResourceInvestor.com, they're posting the breaking news that Buffet not only *doesn't* own silver, but hasn't owned silver for a very long time.

Which brings us to an even more important issue: All these same publications are still discussing silver's scarcity (as determined by the number of globally available ounces). If they were wrong about Buffet, are they wrong about the overall global supply as well?
 
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Interesting news on Buffet. Its not going to make a difference in the price of silver.

With RE going down, interest rates going up, problems with Iran and this country having a zero savings rate, the precious metals will rise.

I am not changing my positions and will buy more on dips, however thus far havent seen a buying opportunity since Feb or March.
 
The Hunt Brothers unilaterally brought silver to $50 in 1979(?). Reserves have to have declined since, so it's only a matter of time before it happens again, especially with the ETF out there collecting ounces.

Gee... what's that $50/oz adjusted for 26 years of inflation??? :)
 
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