How far will gold and silver fall?

I can't find any notices on CME on this since the 8/12 increase in margin. Where did you find it ?

Jim

 

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Its fair to talk about the lawsuits, how you don't like a company's prospects, whatever you like. I guess I was reacting to how so many people make relative values of companies simply based on share price, without factoring in total equity. If BoA is $6 share price, that is still a $60 billion firm, but most think BoA is doing poorly simply because of its $6 share price. That is what the majority of my post was about.

 

I should have clarified it was the Shanghai Gold Exchange, not the CME that adjusted margin requirements.

http://business.financialpost.com/2011/08/23/shanghai-gold-exchange-lifts-margins-for-gold-forwards/

Chris, I think we just had a misunderstanding. You are right that the share price alone doesn't mean much at all as it can split or consolidate without affecting the actual value. It has to be taken in context.

 

I think it was a misunderstanding as well sir. Sorry if I get animated sometimes, its just the teacher in me reacting to common mistakes many people make. I just want to jump in and correct misconceptions that get so many people in trouble.

You are right as well that BAC, (Bank of America), is not for the faint of heart. It literally hurts my stomach to buy when prices have tanked, yet my head believes its a winner long term buy at those prices. I had the exact same pain in my stomach buying silver at 3.2 times face when it had a 10 year downward track record at that point. At least I was only out one third of my money in that investment if it went bad, securities can lose 100% of their value.

Chris

 

With Warren Buffett's investment in and endorsement of BofA today, I guess we can put to rest your incorrect theories about the bank. The market has a way of crushing incorrect theories with cold hard reality.

 

Hmm. It means the bank was lying about needing the money. They are paying loan shark rates to Buffett. No sensible bank would pay him what they are paying unless they were desperate. Did you even bother to look at the terms? A healthy bank, like the one you claimed BofA was, doesn't just hand over that many preferred shares to a private individual unless they had to. They just gained another master. I think it confirms what I am saying.

Buffett also violated his own tried and true investing advice in this deal so obviously there is more here than meets the eye. The DNC convention where it's expected that Obama will be nominated again, is going to be held literrally across the street from BoFA's HQ. How would it look for Obama to be standing in the shadow of a boarded up 60 story bank skyscraper? (There is already one like this down the street that Wachovia built, being rented in part by Duke Energy, which BTW is footing the bill for the DNC.) Buffett is a close adivsor of Obama's.

 

You will want to read this guy's blog.

http://harveyorgan.blogspot.com/

 

Well, you're wrong again. Buffett called BofA. BofA didn't approach Buffett asking for money. 6% on preferred is far below what GE and GS paid Buffett for their preferred issues, so one can infer that BofA is far more sound than those companies were when Buffett invested. And the warrants were also above yesterday's price and could raise additional money for BofA at a price above what you said was too high. With informed investors throwing money at BofA, it is obvious that the low price far understates the true value of the company.

So this is total confirmation of your error in analysis of BofA, and the price is already well above the level at which you trashed the stock even though the general market is down.

Case closed. LOL.

 

Along the same lines as the gold margin hikes, I don't see how an interventionist action such as this changes anything fundamentally. Not to say that this won't make the bank turn around and become stable again, but the fact that Buffet is doing this in the first place just supports what I said or he wouldn't have needed to do it. Now that the situation has changed, and thus the facts, so too will my outlook, for now.

 

You didn't make your case.

• What Buffet paid for other investments is irrelevant to this deal.
• Who called who is irrelevant. If you believe that Buffett did this on his own then so be it.
• His preferred status means his investment is protected and above that of the common stockholder.
• He is guaranteed 6%+ return on his investment regardless of the earnings of the bank,
• If there is a bankruptcy, he will get paid back his investment.
• He also gets the extraordinary privilege of the right to buy 700,000,000 shares of common stock at the fixed price of a little over $7, should the bank do well.

This is a deal that is not available to other investors and it comes at the cost of the common stock holder.

So let's see. He can't lose any money on this deal. He is guaranteed a rate of return far in excess of what any other person can get relative to the risk. He gets all his money back if the bank fails and gets a kings ransom in money if the bank, by some miracle, manages to survive. ****, I would invest money in that, but alas, I am a common person and these deals don't come to us.

If this was just a matter of Buffett wanting to invest in BofA because he thought it was a good deal, he could have just gone onto the stock market like everyone else. The common stock is very cheap right now if you believe in this bank. nuff said.

So to answer your question, it confirms what I said. You said they had a strong balance sheet, yet banks with such things, don't need to make these kinds of deals.

 

The end user has something to say about how high the cost of a metal could become. When metals get to be too expensive what is the end user going to do. Manufacturing will change metal usage. Jewlery will sell less or people will buy silver instead of gold. Stainless steel, nickel based instead of silver. As the ecomomy gets better and the sky is falling group gets less press people will not be so upset and have to have silver and gold. Good dividend paying stocks or high quailty bonds pay you and if your house burns down you can get a replacement cert instead of a pile of metal that would have to be assayed. Just a thought as I was around in the 70's when silver hit $50 and then dropped as it became out of favor.

 

In spite of what I think the most likely scenario is I really do hope things turn around, but I wouldn't use the 70's as an example. Does anybody really think the economy can handle sustained high interest rates? Europe is discussing reversing their recent interest rate hikes, and the Fed has committed to 2 more years of ultra low interest rates. We've outsourced our labor due to globalization so it's hard for me to envision a scenario like Volcker's being successful unless we can figure out something innovative, but they aren't even thinking about trying that anyway.

 

Market manipulation through the media at it's finest

Warren Buffet making a big buy today, is news they want you to hear. So now, everyone buys in because Warren Buffet bought in. You can bet that somewhere down the road, he will bail out and make a huge profit off the backs of the ones who bought in because he did. This is market manipulation through the media at it's finest. Now you know why Warren Buffet has so much money. This game is played by the Carnival Hawkers on Wall Street on a daily basis and I laugh everytime I see it happen.

Ask yourself, why was this news.

 

Except this is exactly what the economy needs, among other things, to keep it from falling into the abyss. Though even this might be too late.

The problem with the economy is too much cheap credit. it resulted in the housing bubble, the dot com boom before that, etc. It's a failed economy policy that has proven not to work. Yet the only solution applied thus far has been more cheap credit except it's now being created by the public sector since the private sector is already on life support. They tried to create the next bubble but failed. It's like trying to cure a crack addict by giving them more crack.

 

http://www.berkshirehathaway.com/qtrly/links2ndqtr11.html

If you read the Berkshire last SEC report, you will see that your accusation does not hold. He bought Billions of Goldman Sachs and GE. He still owns the GE portion, and the GS portion that wasn't called back by GS, which gained him 5.5 Billion. He didn't do it, they did, as it was worth more to them then to let him keep it. He still owns a lot of GS. These deals were in 2008 when the market was in more dire straits. Some times he is in the negative, but his advantage is that he has the best corp of Financial forensic experts, who probably knows more about BAC than BAC knows themselves. This does not mean they can tell what will happen tomorrow , but what should in the future. So he isn't making any really risky investment, instead he is making a well backed, well researched investment. He may have decided as the story goes " to make the investment yesterday in his bathtub ", but it was being in the "possible action" files for a while I am sure.

As to making an profit off of the backs of those, who also buy in, the reason many are, is that they know of Buffet's reputation and already today they have made over 8% on his back. If we get a good Bernarke speech, they could gain another 8+% by Monday.

I see the same things from PM proponents all the time also, and laugh at the end of the US or world as we know it propositions. One has to research the subject beyond the various blogs. IMO.

 

So, why do people follow Mr. Buffet? Was he handed down from heaven as a holy stock picker? No? Maybe he is a smart man who has navigated and made good profits for over 50 years in all market conditions. He has no control of what investors does with knowledge of his moves. Why is he to blame in any way?

It is the media and other investors that make it a big deal of what Berkshire does, not Berkshire. Trying to ssay they are profiting off of the people who follow them is downright silly. Did Berkshire ASK anyone to try to horn in on their trade?

I bought BAC early this week, I posted about it here. Am I profiting on the backs of Berkshire? Why doesn't the market listen to Chris the Financial Prophet? Its because I have not run a financial business so successfully for over 50 years.

Sorry, but Warren Buffet should be abotu the last man in the US accused of market manipulation. He invests at fair terms for long term. He never day trades or do all of the other shady stuff Wall Street does every single day.

Chris

 

Buffett made my case for me. But I'm happy that you finally think that Buffett is guraranteed to make money as an investor in the bank. That means it is sound. That's what people have been telling you and you insisted the bank would go out of business. And just to correct another error of yours, in a bankruptcy, the preferred stock is usually worthless or seriously impaired, and the warrants are, of course, worthless. Preferred stock has no guarantees in a bankruptcy. This is investment 101. Buffett would not put the money in the bank if he expected a loss.

It would be to your credit if you would just admit you are wrong instead of digging yourself into a deeper hole.

 

He is getting a guaranteed return and taking no risk. This isn't investing. He is getting it on terms that are being made unique to him. It reeks of a bank that is in a desperate situation, of favortism, and ultimately continues to destroy confidence from the average investor looking for a fair shake. There are none anymore.

I've answered your question and you haven't proven anything to the contrary. BAC, BTW, has allready lost most of the gain that it picked up from the Buffett announcement. It only took a few hours.

 

This is a certainly an unique position as I believe it will enhance the confidence of the average investor. The average investor probably doesn't even read the SEC filings of the companies they are invested in, nor do they base their investments on what may happen a quarter or year in the future. The average investor in stocks, commodities, or corporate bonds tend to base their decisions on what they hear on CNBC or MSNBC rather than reading.

The average investor does tend to make decisions based on hours or couple of day market reaction. Buffet doesn't.


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Anyone with 1 hour of investment training knows that preferred stock and warrants are not risk free, but enjoy your little fantasy world.