Jubilee Prosperity

The most successful long-term investor in modern times wrote a Buy American, I Am essay for equities in the New York Times. He loaned General Electric and Goldman Sachs eight billion dollars at 10% with five year warrants to buy GE at 22.25 and GS at 115.

So far, both warrants are out of the money. Mr Buffett does not claim to predict short-term movements of the market.

http://www.nytimes.com/2008/10/17/opinion/17buffett.html

Long-term, some perhaps forgot Goldman Sachs went from 222.50 in 1929 to 1.75 in 1932, according to congressional testimony detailed on pp 23-24 of JK Lasser’s Pick Stocks Like Warren Buffett et al.

LEH’s closure and subsequent bank bailouts accelerated the Great Deflation into the Great Panic, subtitle of our 1200 page life opus, The Gift, $28 email order on CD.

With trillions of fiat dollars and fiscal deficit fuel attempting to offset credit defaults, nominal mortgage rates briefly fell to 4.875%, if people want to qualify, or bankers actually lend.

In fact, some banks are lending to top credits, demanding collaterals many times the value of the loan.

This is how the father of a Merrill mentor lost all his LA County properties in 1932 to the bank after his tenants could not pay him and he could not pay the bank.

Warren Buffett and our parents or grandparents warned against borrowing money and bad times. So did the Bible and Shakespeare:

Deuteronomy 28:44: He shall lend to thee, and thou shalt not lend to him: he shall be the head, and thou shalt be the tail.

Polonius to his son Laertes in Hamlet before travel abroad: Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.

With the CPI contracting at a 12% annual rate in October, the true cost of 5% loans is 17%. No wonder interest rates fell along with everything else in deflation. How long?

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This entry was posted on Monday, April 6th, 2009 at 12:28 am and is filed under Prosperity. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.