“Please tell me everything is going to be all right”
The dollar is hitting all-time lows. Serious inflation of nearly every commodity has taken place in the past three years. Gold is hitting all time highs. The national debt in the US is higher than it has ever been, and it continues to rise. The markets have not seen this sort of evisceration since 2008. Soon we will find out if Ben Bernanke will fire up the printing press for QE3.
The one thing that could bring us out of this recession (soon to be depression) is something that we do not have – an entire new industry. Something that could double or triple employment rates (e.g., biotechnology companies that can grow you a new non-cirrhotic liver, or launching spaced based solar stations that microwave energy down to Earth and drastically reduce/eliminate our need for carbon fuels).
Stimulus spending will deepen the ditch, devalue the dollar, further inflate commodities, and hasten our demise. It is too late for austerity measures. Even if we liquidated all of the major oil companies, raised taxes on the rich pre-bush era, and stopped ALL federal government spending for a year, we wouldn’t even scratch the surface of our deficit. We need an entire new industry to pull us out of this mess.
So the question remains: In such a turbulent market, and when we are in dire need of investment in new industry, why would Warren Buffett decide to acquire 5 billion dollars of stock in Bank of America?
As was the case with GE and Goldman, Bank of America also gets a strong endorsement from Buffett. He calls the investment a vote of confidence in both BofA and the United States.
A close friend and trading guru suggested to me that perhaps Obama called Buffett and asked him to buy the shares as a favor. Even I wasn’t that pessimistic, until:
So apparently Buffett made this decision in under 24 hours, and after a phone conversation with President Obama. Also, he is planning to hold a fundraiser for Obama in September:
Now, of course, this evidence is all circumstantial. From this information, we can’t prove whether or not part of Obama’s plan to “restore confidence”(1) in regards the US economy includes asking one of the most influential investors on Wall Street to buy $5 billion in shares in Bank of America.
However, it is apparent that Buffett’s message and the media’s interpretation of it is entirely in the realm of the blue pill: never mind the deficit, never mind the inflation, never mind the lack of new industry, never mind that no other countries are willing to buy our debt anymore — the markets will return back to normal, as they always do.
After all, “This isn’t 2008″.
You’re right, Mr. Buffett. It’s much, much worse.
(1) Stick your heads in the sand