Peter Schiff slams Obama, Geithner and Buffett

As global stock markets crash in the backdrop of a soaring gold price, Euro Pacific Capital CEO Peter Schiff unleashed a series of salvos on the Obama Administration in the handling of the budget crisis, and slammed billionaire investor Warren Buffett for encouraging continued profligate policies of the White House and, by implication, the Congress.

Standard & Poor’s downgrade of U.S. debt kicked off a firestorm of financial and political calamity that has now required an all out damage control operation from the White House and the government’s go-to “private sector” operative Warren Buffet.

“In Wall Street parlance, any downgrade means get the hell out … If they [rating agencies] go from a Strong Buy to a Buy, it means, you know, look out below,” Schiff told Max Keiser of Russia Today’s Keiser Report.

“What S&P is saying, as far as I’m concerned, is get out of U.S. debt, any dollar-denominated debt, because what they’re really downgrading is not Treasury bonds, but the dollar.”

And, immediately after the S&P downgrade, investors fled the dollar—in mass.  As U.S. Treasuries soared (dollar positive), gold sailed past Treasuries (dollar negative), turning what seemed like a dollar-positive event into a catastrophein the dollar in purchasing power against the ultimate currency, gold.

Even the Wall Street Journal headlined an article on Monday, following the rating agency’s announcement of a U.S. downgrade on Friday, heralded U.S. Treasuries as the “gold standard” of debt, in a well-place position atop Yahoo’s financial news feed.  The orchestrated response, crafted over the weekend, couldn’t be more obvious to those following closely the 3-year-long slow-motion global financial crisis.

Of course, the U.S. has other options apart from defaulting in a manner Argentina, Mexico or German had defaulted in the past.  Instead, it appears the U.S. has predictably chosen to inflate its way out of overburdening debt, which Schiff said, is the point of S&P’s downgrade.

“Because S&P knows—as Alan Greenspan said, and Warren Buffett said—they don’t have to default, they can print,” Schiff explained. “But that’s worse, especially if you’re a bondholder; you get paid back in Monopoly money.”

In complete agreement with European leaders, Schiff went on to ridicule a rating agency system that rates the world’s largest creditor, China, below the world’s largest debtor, the U.S.

“Why is China, the world’s biggest creditor nation—we owe China trillions—how could they be rated AA-, and we’re rated AA+?” Schiff asked, rhetorically.  ”What kind of twilight world is the world’s biggest debtor a bigger risk [meant to say, better risk] than world’s biggest creditor?”

Then, in a typical Schiff rapid-fire rant, U.S. Treasury Secretary Timothy Geithner entered Schiff’s sites.

Geithner, who said S&P made a math error in its calculations of projected U.S. deficits, calling the error a “$2 trillion mistake,” only serves as a red herring, or a canard, as Keiser put it in his question to Schiff about Geithner’s comments.

Schiff responded to Geithner’s comment by pointing out that the Congressional Budget Office (CBO), a political arm of the White House, had made grandiose growth and unrealistically low inflation assumptions in its forecast, which Schiff implied, were nothing more than typical self-serving propaganda budget forecasts out of Washington.

“The reality is that we are going back to recession,” Schiff scoffed.  “So you take all those rosy scenarios and throw them in the trash can where they belong.  The budget deficit is going to be much worse than both the Administration and S&P believe.  So they’re all wrong on the math.”

And on the subject of Warren Buffett’s comment following the S&P downgrade announcement, in which, he said U.S. Treasuries should hold a “AAAA rating,” Schiff again commented by implying that Buffett is a has-been, a kept man of the rigged system, and has become more of a humorous sideshow during the crisis than a man whose comments should actually be taken to heart by investors.

Buffett’s opinion is “moronic,” said Schiff.  In his advanced age, “senility is catching up with Warren.”

Warren Buffett Moves on Citigroup

Citigroup (NYSE:C) is back in the spotlight once again. After plummeting to near penny-stock status, then rebounding, this banking stock became the darling of the hyper active high frequency trading brigade. The robot traders had a ball with Citi’s deep liquidity and ultra tight spreads. However, this algorithmic army quickly lost interest in the stock when Citi instituted a 10-for-1 reverse split pushing the share price above $40 per share.  This strategic move knocked the high frequency trading boys out of the game, but may create more long term institutional interest in the financial stalwart.

Now, perhaps the most interesting Citigroup rumor of all, has hit the underground secrets media network.  The Oracle of Omaha Warren Buffett’s juggernaut acquisition machine Berkshire Hathaway (NYSE:BRK) may be part of a consortium to purchase Citi’s troubled consumer finance division, One Main Financial. Pre-financial bust, this unit was known as Citi Financial.

Center Bridge Partners and Leucadia National Corp. (NYSE: LUK) are also rumored to be part of the buyout group.  Interestingly, One Main only has a book value of $2 billion but may obtain a bid in the $8 billion range due to its extensive asset base.  Citi has been in talks for the last several months about spinning off this division, but this is the first time that Buffett has been involved.  The star power of the Oracle combined with his mountain moving resources may just be the impetus Citi needs to actually flip this troubled unit away from itself.  Time will tell, watch this one closely!

Jim Rogers on the Latest Commodities Plunge

Speaking with Alix Steel of TheStreet, yesterday, legendary commodities trader Jim Rogers said he isn’t buying into Wall Street’s popping commodities bubble thesis following the sharp sell-off in all commodities last week, especially those two commodities most widely watched recently—silver and oil.

Instead, Rogers said he’s “delighted” to see the massive sell-off in commodities prices—and in the case of the silver price, “was hoping it would go down” so he could buy some more of the white metal—a precious and monetary metal, whose price has still not achieved an all-time high to match gold’s multiple all-time highs first achieved in January 2008 with a $857 per Troy ounce closing print.

In all, the 68-year-old commodities market version of Warren Buffett has routinely stated that swooning corrections are normal occurrences during commodities bull runs—runs that grossly outperform stocks to the upside, downside and volatility.

And what does Rogers think of the latest across-the-board price plunge?

“Well, not much if you ask me. Markets correct all the time,” Rogers told The Street. “Silver went down a great deal but if you raise margin requirements 150%-200% you would expect there’s something to collapse. It’s good for the market as far as I’m concerned. Silver especially needed a set back and a consolidation. I’m delighted to see everything.”

Buyers who consume every day commodities, such as food and energy, don’t cheer during bull market rallies in “things,” so it’s natural for Wall Street to play down, or even attack the complex with negative comments and impromptu regulation changes, as witnessed by the Chicago Mercantile Exchange’s five margin requirement hikes within eight trading days in the silver market.

The prevailing view of financial commentators and their guests is that the sharp drop off in commodities is good for the world economy and, therefore, good for stocks.

Moreover, calls for bubbles in silver and oil prior to the CME’s coordinated attack on the silver market (and now, the oil market) created a scenario that can easily be spun as evidence of a finally-pricked bubble. Therefore, the crowd should move back into stocks now that the menace of escalating input costs, rising consumer goods prices as well as weaker consumer spending thereafter have now been dispensed with quickly, so goes the logic.

Rogers sees it differently, however.

“I hardly see how silver could be a bubble when, even at its top, it’s still below it’s all-time high,” Rogers explains. “That’s not much of a bubble. A bubble is when things are screaming up every day and they go to new highs, two to three times their old highs. We’ll have a bubble, we’ll have a bubble in commodities, we’re not there yet.”

In fact, when asked about any sales he’s made within his vast commodities holdings, Rogers said, “No, no, no I have not sold any commodities.”