By Dominique de Kevelioc de Bailleul
“Let blockheads read what blockheads wrote,” Warren Buffett once said.
The man who loves being photographed with his favorite prop, an ice cream cone, also said this about gold:
Gold 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.
Since the earth is a place for humans, those unique creatures of the cosmos who have sought gold for 5,000 years, and who’ve eaten Warren Buffett’s See’s peanut brittle more recently, what Buffett’s hypothetical Martians have to do with making his case against owning gold is telling, as well as nonsensical and manipulative, strongly suggesting that people who buy gold are foolish and are laughed at by Buffett’s imaginary Martians.
He’s right; fiat currency isn’t dug out of the ground; it’s printed, created out of thin air, everywhere, and that same Martian would wonder why it has any value at all to us silly humans. And what value is there in See’s peanut brittle other than people like to eat it.
Gold has no utility? Who categorized gold as an investment in a power company or auto firm? Indians of India find spiritual value in owning gold, for one thing, and there’s about a billion of them, at last count. Why do Indians like gold? Why do people like sunsets? Many people don’t like See’s peanut brittle, but they like gold and sunsets. Maybe Buffett is truly different from the majority of the human race.
In a great post by David Cohen on DeclineOfTheEmpire.com, titled, Sociopaths in America,he writes:
. . . some proportion of the population is “sick” and there’s nothing you can do about it. However, a Decent Society uses a multitude of checks & balances to rein in conscienceless people, to prevent them from running amuck. But in America, the most dangerous inmates are now running the asylum. These elaborate controls on immoral (unethical) behavior have been lifted. (This is often called deregulation or regulatory capture.) The corrupt politicians have rewritten the laws in such a way as to make it legal to rip people off. There is no longer any fear of punishment.
Sociopaths can run wild—
ñTrue sociopaths have no conscience—none.
ñThey make life a game
ñThey get their kicks from kicking others, from manipulating, and most of all from WINNING.
And Warren Buffett surely hates to lose, according to his own words.
The first rule is not to lose. The second rule is not to forget the first rule.
He also refers to his life’s adventure as a game—again, according to his own words.
If past history was all there was to the game, the richest people would be librarians.
The game. How many people call life a game with a straight face?
Back to Buffett’s argument against owning gold.
You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?
Instead of Martians, Buffett now talks about cubes, an irrelevant and manipulative obfuscation of thought. How many Hope Diamonds can fit in the trunk of his car?
Or this, from Greenlight’s Capital Fund Manager David Einhorn, who wrote in a recent report to investors:
The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing. In a thousand years, it is likely that the cash will either be worthless or worth very little. It will not pay you interest or dividends and it won’t grow earnings, though you could burn it for heat. You’d have to pay someone to guard it. You could fondle the money. Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska. Of course, if you managed to assemble all that money into your own private stash, the Federal Reserve could simply order more to be printed for the rest of us.
Einhorn knows quite well the system is rigged against investors, those Warren Buffett suckers who must lose for him to win. Buffett’s original empire of insurance companies, by definition, are rigged to profit the ‘deep pockets’ at the expense of the ‘scared money’ with no pockets, if things don’t work out. But Buffett wouldn’t understand that; he gets bailed out from his corrupt political friends when he doesn’t take out his insurance: GOLD. Insurance is for suckers, not for vampires who view life as a “game”.
Another Buffett quote:
Only when the tide goes out do you discover who’s been swimming naked.
If he had not cared what a Martian would think of him, he would not have lost three-quarters of his fortune in realterms, that’s right, in terms of gold—real money! —a currency that he and his Martian friend don’t seem to ‘get’.
Why would someone pay a quarter of a billion dollars for the Hope Diamond? Answer: Because they want it.
Essentially, Buffett shows a huge blind spot in his understanding of the wholeness of the human race. But he insists on telling us how foolish we all are for owning gold, the Hope Diamond and holding spiritual beliefs, beliefs that are no less noble than his—in fact, more noble in many cases. He never talks about human feelings other than the feelings of fear and greed, but he talks about value, cold cash, critical journalists, Martians and cubes.
He once said, “Value is what you get.” Is this some kind of riddle? Is value only derived from cash flow? If so, why didn’t he speak up about overvaluations of the housing market? But he wants to talk endlessly (through he’s lately enlisted his sidekicks Munger and Gates into the fray) about the overvaluation of gold. And he should have know better, too. Munger talked about persecuted Jews, and Gates couldn’t come up with anything intelligible to say about gold.
And another one-liner from Buffett:
There are 309 million people out there that are trying to improve their lot in life. And we’ve got a system that allows them to do it.
But then he said:
The rich are always going to say that, you know, just give us more money and we’ll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on.
Yeah, ‘Blockhead of Omaha’, the American public is “catching on.” And kudos to Greenlight Capital’s David Einhorn for his critique (the ice-cream-cone slam to the Buffett face) and very generous and charitable giving at such a young age. And it’s unlikely, too, Einhorn will disown his granddaughter, if he ever receives one in the future.