Warren Buffett Sells Bank Stocks in Favor of Gold Exposure

Warren Buffett’s Berkshire stock has tripled the performance of the S&P 500 over the past 20 years. This latest move though says a lot about where we are headed over the next decade possibly.

Banks are toxic and possibly could have bankrupt balance sheets

Buffett cut his Wells Fargo stake by 26%, his JP Morgan stake by 62%, and sold several other bank stocks as well according to Berkshire’s latest 13F filing. He dumped his stake in Goldman Sachs. Mr. Buffett is still positive on Bank of America and added to his holding by $2 billion. There has been much chatter about money printing and banks using this free money to make their balance sheets look better. It’s not a secret that financial engineering has played a big role in the last decade. Financial engineering has made speculation, derivatives, and corporate earnings suspect and very dangerous to a degree according to many experts. We are not suggesting that Mr. Buffett’s latest moves are a signal to completely abandon the financial industry and add gold. We are merely saying that Mr. Buffett has shunned gold in the past and this is very noteworthy. We have seen many blue-chip companies recently cut staff dramatically and possibly their dividend is in jeopardy as well. Lower free cash flow due to this pandemic and a struggling economy is definitely a valid point and investors need to take notice and plan accordingly.

The reasons Mr. Buffett would buy a stake in Barrick Gold

Berkshire took a new position in Barrick Gold, a global gold mining company, buying 20.9 million shares, or 1.2% of the company’s outstanding stock, with a current market value of $585 million. Gold miners are benefiting from surging bullion prices that are boosting profit margins as costs of production have steadied. Interest rate cuts and a lower bond yield has made investing in gold more attractive recently. This was an unusual move considering Buffett, a long-time value investor has long professed a dislike for gold, preferring assets that have cash flows or pay dividends. The position is small compared to over $80 billion in Apple stock. Barrick Gold is a business, not a commodity. It has a 1.2% dividend and boosted its quarterly payout 14% recently. Buffett may also like the fact that Barrick has a strong cash flow.

The US dollar could be in serious trouble

Max Keiser of the Keiser report recently said

“Buffett is dumping banks and is buying Barrick Gold stock. This is a sea-change and the importance cannot be overstated. He sees global central banks have completely lost control; they’re printing trillions and killing fiat money. The entire $100 trillion global funds biz just got turned on its head.”

A pretty strong statement by a person who has been right about many things over the past decade. We all should know that the US dollar has lost 80% of its value against gold in the last twenty years. All fiat currencies have lost 97–99% of their value against gold since 1971. Our economy and markets are now basically controlled by six central banks. The Fed, The ECB, the PBOC, the BOJ, the Bank of England, and the Swiss National Bank have completely lost their way. The only tools left are stimulus, money printing, and credit expansion. The monetary system is insolvent and money printing is not a permanent fix in any way. Fiat currencies are being devalued and nothing can be done over the long haul to fix it. The fat lady is singing and Elvis has left the building. Our dollar was close to 103 in March and is now close to 93. That’s a drop of almost 10% on our money. Our cash buys 10% less than it did six months ago. Some economists think another 30% soon is possible. If you made 10% on your stocks or real estate in the last six months, you are breakeven. Any sane investor could conclude that Mr. Buffett is looking for different ways to protect himself and diversify.

Gold has been one of the best performing assets over the past year. It’s been a store of value since the beginning of any monetary system. The fiat currency experiment started in 1971 is going up in flames. Political uncertainty, global unrest, pandemics, and a corrupt banking system is adding serious fuel to the raging fire. American investors would seriously work a lifetime, save, and not protect their nest egg somehow? American investors are willing to risk it all on dollar-denominated paper assets? Is it safe to leave all your money in the banking system and financial markets? If you are willing to listen to different ways to protect your assets, call Midas Gold Group today at 480-360-3000 or 805-601-6000. The nation’s #1 veteran-owned gold dealer will fight to protect your legacy. It’s really difficult today to find an honest advisor, banker, or broker. Midas Gold Group does business over the phone in all 50 states and in-person in two physical locations. Central bankers have dug a huge foxhole. Midas Gold Group is there to help you navigate your way out of it. Call today at 480-360-3000 and 805-601-6000 and set up a conversation today about what’s keeping you up at night financially. Yes, we are all going through a tough time. Money printing is not the answer. Do something about it before reality becomes a financial nightmare.

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