Party On…

A former fed official once said that it was his job to “take away the punch bowl” just as the party was getting started. He’s talking, of course, about interest rates that the federal reserve is in charge of pushing up and slowing down the flow of money just as the party gets going or the economy starts to rebound.

One of the reasons we are seeing the market do what it is doing today, is because the word came down over the weekend from the G20 meeting in Scotland, that the punch bowl is going to stay in place for the time being. Lower interest rates are good news for corporations and good news for the stock market, even if  the economy hasn’t really turned. The S&P 500 is now up about 20% year to date.

All That Glitters…

Gold continues to move higher, today it’s because of India purchasing two hundred tons of gold. Basically, exchanging gold for dollars. They sold American dollars to buy gold and other central banks could do the same at some point as they diversify their holdings. A lot of folks are wondering about gold. Now, one thing to remember about gold is everyone is most bullish right at the top….I’m not saying we are right at a top, especially since we could see inflation nine, twelve, fifteen months down the line. So gold could go higher, but you always want to make sure you have a sell discipline. A basic sell discipline of the past few years that would have worked very well is sell at least a portion of your holdings when you are at a record high. Imagine if you had done that with real estate. Imagine if you had done that with the stock market when the dow was at 14000. Now gold is chugging along, but it is at a record high of  above $10,090 an ounce. How high will it go? Well, nobody knows. Make sure you have some thought process as to when you want to sell some of that gold.

The Buffett Way

So is Warren Buffett a patriotic capitalist or a capitalistic patriot? I would argue the former. Yes, he loves to make big statements. Yes, he loves to lend confidence to the American investor. He did it last October when he purchased a big chunk of Goldman Sachs and  loaned them some money. He did it today when he bought Burlington Northern Railroad calling it an “all in wager” on the American economy. Make no mistake, the man is about making money…he is truly a capitalist. The interesting part about Warren Buffett is that for a man who is nearly 80 years old, his time horizon is still amazingly long! This is not a short-term play. He believes though, that as the railroads get more efficient, they will become very useful in moving goods around the country as this economy improves. He also believes railroads in general are undervalued BUT make no mistake…he is a capitalist with patriotic tendencies.