Buffett is a bullshitter

I have a long standing prediction in regards to the global debt Ponzi and that is that those who made their names on the back of the inflationary expansion and who were carried on the shoulders of the herd as heroes during the boom will be thrown to the ground in utter disgrace and trampled by the herd during the bust.   These confidence peddlers always traded on insider information but they want to portray that they are just smarter and more insightful than everyone else when in fact they are simply part of the con.  I think Warren Buffett will eventually be exposed for this.

I don't have any evidence for this view.  To most eyes he looks like this gentle, magnanimous old wise man.  But my world view says that those who benefited from the rise of the Global Debt Ponzi know damned well what is happening and why and that they were allowed to have a leadership position if and only if they play a needed role in the Grand Operatic Illusion.

That said, I am starting to see some smoke coming from Buffett and where there is smoke there is fire.  Back in Feb of this year (2019) he sat with Becky Quick for an interview.  Interestingly, Becky was in fact Quick to point out that Buffett was changing his long time focus from his multi-decade historical go-to metric of delta book value (i.e. capital growth) and was now more interested in market value of Berkshires holdings.  Now we all know these interviews are completely scripted.  So what I see is the old maestro of bullshit (the Greenspan of industry) trying to get ahead of the real analysts out there who clearly noticed this same thing since it was called out in his annual letter. 

But as she was asking the question you hear him clearing his throat, which is not something you normally see from him when others are talking.  Even though he knew it was coming, he was nervous about the way to answer it on camera.  In any case, this is an old con man trick.  Sit with a pretty girl who is showing a lot of leg and explain calmly why the elephant in the living room is normal.  Everything he preached for 30 years as being "timeless insight" is now changing, but pay no attention to the man behind the curtain.

Another data point along this same line is that in the past Buffett would always say in his folksy, down-to-earth little way that to evaluate a business you have to go see their operations and talk to their customers.  You have to immerse yourself in their business to understand their business and only by doing that can you evaluate their business.  This is Buffett 101, something he has been saying for as long as I have seen him talk.  But at this offset in the video he apparently belittles analysts who are doing exactly that.  Listen to the condescending tone he uses talking about the complexity of it all and how there are so many moving pieces and maybe it's all just a bit over your pretty little head.  Again the message is the same: pay no attention to that man behind the curtain.

I call complete bullshit on these con man tactics from Buffett.  There are forensic accountants out there that know EXACTLY what they are looking at.  They are the new breed of glassy eyed bankers of the 1950s; number and data oriented people who know bullshit when they hear it.  Buffett can talk down like that to Becky Quick and to her viewing audience but those who he is really trying to convince, the forensic accounting fraud investigators, are not going to be put off by these antics.  More than likely they will double down because Buffett is showing fear with these tactics.

Now again, here I go with this apparent crazy talk.  Yes, roll your eyes if you dare.  But I see the big picture and all things are part of the big picture.  All boats float on the same ocean.  We have a Global Debt Ponzi based on fake money.  Of that I am 10,000% sure.  It is not an emotional "belief".  It is an engineering conclusion of fact based on more hours of study than it would take to receive 2 PhDs (20000+ actual hours by my best reckoning).  And the study was not encumbered by the logistical need to go look up things in paper books in far off libraries, or to physically attend lectures by the smartest minds in academia, etc.  The Internet makes all of this information available to everyone.  Heck, YouTube even lets me skip the video and just read the transcripts.  So I can blow through a 2 hour interview in less than 10 minutes and get all the salient data.  It's a Global Debt Ponzi for sure and for certain.  The collapse will come, not if but when.  And when it comes it will arrive with exponential speed such that childish naive minds are left saying "we never saw it coming".

Like any Ponzi, we have winners in this and we have losers in this.  When someone is winning all the time in the casino, the pit boss starts to look at them with the discerning eye of someone looking for cheaters.  I predicted long ago the coming resurgence of investigative reporting, which of course includes the modern iteration of whistle blowing. 

To remind, it used to be that a whistle blower was an insider who got tired of seeing the corruption and decided to come forward.  But everyone in the system is highly captured by the system.  And so the corruption has grown so huge that it's stench can now be smelled far outside of the boundaries of the system.  And that is bringing in the external sharks in this new version of "whistle blowing".  The SEC is captured and toothless but there are whistle blowing laws on the books that now make forensic accounting a very profitable business for those who really know how to do this work.   VERY profitable.  In fact, external "whistle blowing" is becoming the modern day version of treasure hunting.  And think about how treasure hunting affects people.  Once they see someone else pull up a chest of gold they say, "well that seemed easy; there must be a LOT of treasure out there".  Success begets success and so more and more minds, money and resources are focused on hunting treasure. 
Well, that is the last thing a con man needs.  A Ponzi cannot survive real and actual investigation. 

I will also say that the regulatory walls are closing in on the con men.  Read here in Buffet's annual letter where the supposedly conservative accounting Buffett complains about new reporting requirements:

"Berkshire earned $4.0 billion in 2018 utilizing generally accepted accounting principles (commonly called "GAAP"). The components of that figure are $24.8 billion in operating earnings, a $3.0 billion non-cash loss from an impairment of intangible assets (arising almost entirely from our equity interest in Kraft Heinz), $2.8 billion in realized capital gains from the sale of investment securities and a $20.6 billion loss from a reduction in the amount of unrealized capital gains that existed in our investment holdings.

A new GAAP rule requires us to include that last item in earnings. As I emphasized in the 2017 annual report, neither Berkshire's Vice Chairman, Charlie Munger, nor I believe that rule to be sensible. Rather, both of us have consistently thought that at Berkshire this mark-to-market change would produce what I described as "wild and capricious swings in our bottom line."

The accuracy of that prediction can be suggested by our quarterly results during 2018. In the first and fourth quarters, we reported GAAP losses of $1.1 billion and $25.4 billion respectively. In the second and third quarters, we reported profits of $12 billion and $18.5 billion. In complete contrast to these gyrations, the many businesses that Berkshire owns delivered consistent and satisfactory operating earnings in all quarters."

People who know about markets will understand why Buffett is complaining about this new transparency requirement.  While Buffett wants everyone to believe that Berkshire is some kind of reliable, "sure thing", stable money making machine, the truth is that it only appears that way when you smooth out all the volatility. But volatility is a key indicator of risk.  So Buffett is just complaining that the new rules require Buffett to expose this information to the public so that the public can see that Berkshire is filled with risk for those with eyes to see.

One final thing from Berkshire's annual letter that tells me the Ponzi is long in the tooth: enter the fall guy(s):

"Before moving on, I want to give you some good news -- really good news -- that is not reflected in our financial statements. It concerns the management changes we made in early 2018, when Ajit Jain was put in charge of all insurance activities and Greg Abel was given authority over all other operations.

These moves were overdue. Berkshire is now far better managed than when I alone was supervising operations. Ajit and Greg have rare talents, and Berkshire blood flows through their veins."

Anyone with a brain knows that insurance is very profitable until the "black swan" happens and then it all goes to shit (AIG, anyone?).  Why?  Because by definition insurance is fractionally reserved business.  For a fee you promise to make someone whole from some kind of loss.  But the fees are quite low relative to the promised payouts.  So in order to make money in the short term, you have to make a fuck ton of long term promises and then hope they all don't get called in at the same time.  But they eventually will all get called in at the same time because of rogue waves, black swans, call it what you want.  I call it the collapse of an obvious Ponzi.  And Buffett the con man knows this.  So, after all this time of taking credit for running the insurance con, he has now passed it off into the capable hands of two expendable idiots who have no idea how badly they have been set up.

Watch and see.