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Buffett Takes a Small Step Away from the Dark Side

Bullion fans got revved up after Friday's close when they learned that Warren Buffett had taken a plunge in bullion, acquiring shares of Barrick Gold worth about $563 million. This is welcome news, but it is also small potatoes for Berkshire Hathaway. Recall that when the investment firm bought $9.7 billion worth of Dominion Energy's gas transmission lines six weeks ago, it was seen as just a token bet on the energy patch. Still, if anyone is going to be early in jumping on a long-term trend, it is Buffett. He may be a johnnie-come-lately compared to gold bugs who have been sitting on physical and accumulating mining shares for years, but it seems unlikely that Buffett would even bother with bullion if he did not see a favorable trend developing for the very long term.

Kissing Off Goldman Sachs

To be sure, the Sage of Omaha's defensive instincts are probably ratcheted to-the-max these days, in no small part because of the large position he has amassed in Apple. No one, least of all a legendary bargain-hunter like Buffett, could believe the consumer electronics firm's shares offer good value for a current $2 trillion. It should therefore come as no surprise that Buffett is edging toward hard-money assets to preserve is capital in these far-too-interesting times. Perhaps even more significant than his gold bet is a corresponding decision to exit the remainder of his position in Goldman Sachs and to greatly reduce positions in JP Morgan Chase and Wells Fargo. We can reasonably infer that he sees lower profits ahead for paper-shufflers and deal-makers, and perhaps even for their trade desks. It does not require a big leap in logic to suggest as well that Buffett sees an end to financialization itself.  Although Berkshire has gone along with the global shell game for many years, albeit with far less leverage than the big banks, no one could believe he trusts a game that enriches mountebanks and con-artists whose main skill is hyper leveraging money created from thin air.

Gold bugs should take encouragement from Buffett's baby steps away from the Dark Side, for he could be signaling nothing less than the dawning of a new era for honest money.  The consequences for debtors will not be pretty, but it is the only way back for a financial system that has been fatally corrupted by hubris and greed.

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