Gulag Blog

I’ve been discussing the recent purchase Buffet made with some friends and associates trying to figure out what he is up to. This is our/my take. You mileage may vary.

Warren Buffet was emphatic for years that CASH IS KING and DO WHATEVER YOU CAN TO PROTECT YOUR CREDIT. Well, he done spent everything he has plus some and lost his AAA rating by buying BN. Why would he ditch his cash and torpedo his credit? This is a total paradigm shift for BH.

My best guess is that Warren discussed his purchase in depth with Goldman Sachs and they clued him in that yes the dollar is toast. The best way to save his fortune would be to spend all of it getting rid of his dollars and let inflation skyrocket his equities. Likewise, with oil looking to get really expensive again as inflation takes hold transportation costs are going to skyrocket. Everyone knows that there is no cheaper way to ship mass tonnage of goods than with a railroad; private trucking is doomed with $150+/barrel oil. Also with a new socialist government structure in place now where do you think more public funds are going to be diverted; highways or mass transit?

With Berkshire at the helm of BN all of a sudden 70% of the corporate overhead is outta there and now less than 10 people can call the shots for BN instead of the usual corporate clusterf**k that’s been in play for years strangling their profits with countless cubical accounting jobs and tons of brainless "consultants"; GONE! No more bloat, no more earnings reports, no more whiny shareholders to keep happy, and no more SEC interference. BN is now an official cash cow that doesn’t have to answer to anybody exept for the 10 head honchos at BH.

Love him or hate him, it looks like Warren had made a GREAT play on pending inflation. His message looks clear; you are better off spending your dollars and getting into inflation positive equities than holding onto them. Then there was that lovely rumor article that was posted on Bloomberg’s site for all of 15 min that stated BH B-shares may get dissolved into a common stock in the $50-60 price range (for some STRANGE reason the article was pulled almost immediately). If true then BH could theoretically recoup all purchasing cost for BN in about a week.

Just my take on this situation. By all means DYODD.

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