Berkshire Hathaway
"Buffett Knew it all Along"

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By downisland
October 15, 2008

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Whether you like Cramer or not many people look to him as an advisor to the public at large. In this video, Cramer is talking to his millions of viewers on Main stream TV about Short Sellers and he is saying that they were a big part of the problem. He is stating it as if it was a fact and he is talking directly to Joe Sixpack. Cramer says he is letting them in on just another one of Wall Street's dirty little secrets.

I have to agree that reforms are overdue. If we Americans are going to be expected to save for our own retirements and are participating by the millions through our 401Ks and IRAs in this securities system of ours then the system cannot be able to be gamed by hedge funds, sorry. Credit default swaps with no insurable interests, naked shorting, these are obvious repairs that must be made to make this financial system sustainable.

As a Buffet follower, I remember being confused a while back. I was hearing phrases like "The World is awash with liquidity". Visions of rich Chinese, Arabs and Russians, all dying for a piece of the American action were in my head. They were standing by throwing their money around. Sovereign Wealth Funds, Hedge Funds, OK. I guess I bought it and the idea that the third World was Movin' on Up and they would be our new customers.

But then I kept reading how Buffett was saying he was short the dollar, and yet he was continuously holding on to his 40 Billion hoard. I assumed most of the hoard was in Dollars so I felt confused. Why was he shorting the Dollar but holding on to tons of them? Buffett also kept saying that everything was too expensive and people really didn't have clothes on under the liquid water. It turns out he was right the liquidity was just debt, leverage, margin, "on paper" money, call it whatever you want. However, Buffett's money was real and his accounting was real. How could we have all been so blind? There was liquidity all right but that's not the same as real cash money.

Now I wonder if all the flooding of the markets that the Fed is doing to get the liquidity going again won't hurt people like Buffett who are thrifty and who actually earn and save real dollars. It seems obvious to me that running the Federal printing presses and forcing cash on banks will make the value of the dollar fall. Oh yeah, but then they'll raise rates after they've lowered them. What a mess. We need to go back to basics which Buffett never left. Anyway, I hope more realism enters into the picture.

I guess the moral of the story is watch out for people with lots of borrowed money and most importantly that an actual cheap, beaten up dollar is better than no dollar at all. Buffett knew it all along.