Small Time Blog

Warren Buffett Echo's Smalltime Blog Post from September 13, 2012

by Bradley Voight on 05/06/13

Warren Buffett, speaking at the annual shareholder meeting for Berkshire Hathaway, echoed almost to the word what I said about the Federal Reserve Banks' famous quantitative easing program of buying US treasury bonds and mortgage backed securities in my Blogpost titled Fed Pulls Trigger on Massive Stimulus. The holders of these instruments are the ten largest banks in the US and they are using the proceeds of the sale of these assets to invest in equity markets, thus the new highs on the Dow and S&P 500.

Mr. Buffett, who happens to be one of my personal heroes, spoke here http://finance.yahoo.com/news/buffett-shot-heard-around-world-145802594.html

In the article he says that when the Fed stops the buying and starts the selling, no one, not even the Fed knows what is going to happen. If you read our blog you can stay up to date on the effect these actions undertaken by the fed will have on your life. When one of the top 5 wealthiest men on planet Earth talks, people listen, but you can say that you read it first on the Smalltime blog.

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Anyone Thanked a Large Corporation Lately?

by Bradley Voight on 04/26/13

Jim Cramer was interviewing the CEO of Kimberly-Clark, Tom Faulk, on Mad Money the other day and I was suddenly enlightened to the fact that large corporations and their CEO's aren't so evil after all. Mr. Faulk spent the entire interview talking about all the things he and his company do for the consumer, from the products themselves, everything from Huggies to Kleenex and many others, to the innovation of new products, all for the customer. I recall a night last winter when my wife had a nagging cold and a very raw nose from repeated use of toilet paper. I bought her a box of Kleenex and she was so thankful to not have to rub her nose raw any more.

From simple things like soft tissues to your car, AC, furnace, left and right shoes, indoor plumbing and all of the other creature comforts you (and I) can't live without we have corporations to thank for making our lives easier and cleaner, yet all we ever hear is bashing of executives and companies. Not once have I ever heard anyone thank a CEO for devoting his/her life to making things for the rest of us. I am not suggesting that CEO's or large corporations are without fault or that CEO pay is not out of line, but I am saying that the leaders of large companies are due some kudos from the people they strive to help everyday. The original titans like Henry Ford and Karl Benz saw a need and they went about creating a solution. Entrepreneurs are problem solvers and we are the beneficiaries of their tireless efforts. Will you thank a CEO or a large corporation today?

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Base Metal Sell Off Could Be Ominous Sign

by Bradley Voight on 04/18/13

Copper, Lead, Aluminum, Nickel, Zinc. These are known as the base metals and they are the raw materials of the world economy. Base metals have been falling in value since early February and on Monday of this week the selling accelerated after China reported economic growth of 7.7% for the first quarter 2013. China is seen as the driving force of demand in the world economy right now because western economies are growing at a much slower pace of around 2-3%. Think of it this way, America is built out and expanding slowly and China is moving population to urban areas like America was in the early 20th century. The growth rates of both economies reflect this reality.

Smalltime is all about education on matters that will ultimately affect the pocketbooks of ordinary people. Slowing demand for base metals could mean a slowdown in the emerging economies, the so called BRICS countries (Brazil, Russia, India, China, South Africa) This could cause the already heavily propped up by stimulus world economy to slow even further. Smalltime thinks that some parts of the world are already in a semi-depression, such as Europe, North Africa and the Middle East.

Smalltime thinks that the world economy is at a crossroads and could go either way from here, which is scary because it seems closer to collapse than boom.

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Precious Metals Hammered, Base Metals Also Down

by Bradley Voight on 04/12/13

Gold Futures contracts for June on the New York Comex Exchange went under $1500 for the first time in 2 years and silver was crushed even worse declining by nearly 7% to $25.95 per ounce. The people who have championed the cause for gold and silver believe that the Federal Reserve Bank's actions to stimulate the economy known as "quantitative easing" will cause the dollar to crash and thus gold to shoot over $2000 per ounce, which almost happened in September 2011 when gold reached an all time high over $1900 per ounce.

Smalltime is here to educate you, the layman, on what this means and we think there are two possible explanations to the gold price decline year to date. First, gold has been on a 10 year run, fueled by precious metals ETF's, which are like mutual funds. These paper instruments aren't gold, but being tied to miners, futures, and some physical gold caused money to rush into them over the last 10 to 12 years and now that stocks are roaring again it is a simple trade from high to low.

The second reason is that the central bank of Japan began "quantitative easing" of its own in December 2012 which has brought the Yen from 84 against the dollar to 99 Yen per 1 dollar, This strengthens the dollar and since gold is priced in dollars then the gold price goes down.

Smalltime thinks that both of these factors are at play and we also believe that Japanese central bank policy could be partially to blame for the North Korean rhetoric. Currency manipulation usually does not end well and we have WWII to look back on for that. At the end of World War II the US dollar became the worlds reserve currency via the Bretton Woods Accord in 1944, before that it was the British pound, what is next the bitcoin? Large wars are the result of currency wars and the largest war in human history could be on the horizon. That is my humble opinion but it is based on my observation of the marketplace, the past, and the various hot spots of potential conflict around the world like Pakistan and India, North Korea and Japan, China and Taiwan, US and Iran. I sure hope I am wrong.

Unfortunately for our scrapping friends the base metals have also been on a downturn since the beginning of 2013. A home building rebound could boost demand for copper this summer but as for the other base metals it could be a rough year. We still want to see all the metals that you find recycled even though prices are down and we still think you should accumulate scrap during price downturns. My strategy is to stockpile my scrap and wait for an upturn in the price.

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S & P 500, Dow Forge On

by Bradley Voight on 04/11/13

The S & P 500 stock index closed last Thursday at a new all time high at just over 1569 points (for a list of the 500 stocks that make up the S&P 500 click here). This week the two major U.S. averages continued their ascent into even more rarefied air with the S&P index nearly cresting 1600 for the first time in it's history.

With debt at all time highs and stocks at all time highs I don't think anyone can say what is next on the horizon. I have said before on here that the Federal Reserve Bank is pumping new money into the economy to the tune of 85 billion, yes billion with a "B" per month into the economy via purchases of treasury bonds and mortgage backed securities. This is what is artificially keeping interest rates low and driving investors out of the safety of bonds and into the stock markets in search of yield. For mom and pop bank savers this is a disaster. When interest rates on a 6 month CD are less than 1/2 a percent, you may as well stuff it in the mattress, or you can risk your cash in the market. Since we are being chased into the market to find a decent return on our money, Smalltime thinks that you should use the free resources available online to learn as much as you can about quality companies with solid earnings power long into the future. Companies in sectors of the economy like utilities, energy, food, and other products that people can not live with out.

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