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Tuesday, January 6, 2015
Jim Rickards article in Darien Times: Warren Buffet and Hugo Stinnes
Here is another excellent article by Jim Rickards published in his local paper (the Darien Times). Some common themes on this blog are that people need to take the issues we talk about here seriously, they need to stay alert and informed, and they need to have a plan in mind to use in case we get another financial crisis someday.
This article touches on all these themes in a reasonable way. We never have to worry about recommending a Jim Rickards article to readers because we know he will make a logical argument based on facts without resorting to hype or scare tactics. Mostly just good common sense. Below some quotes from the article (please click the link above to read the full article).
"Hugo Stinnes is practically unknown today, but this was not always so. In the early 1920s he was the wealthiest man in Germany, at a time when Germany was the third largest economy in the world. He was a prominent industrialist and investor with diverse holdings in Germany and abroad. He was also a close associate of the leading politicians of the time. Chancellors and cabinet ministers of the newly formed Weimar Republic routinely sought his advice on economic and political problems."
"In many ways, Stinnes played a role in Germany similar to the role Warren Buffett plays in the U.S. today – an ultra-wealthy investor whose opinion is eagerly sought on important political matters, who exercises powerful behind-the-scenes influence, and who seems to make all the right moves when it comes to playing markets."
. . . . .
"Stinnes was born in 1870 into a prosperous German family that had interests in coal mining. He worked in mines to obtain a practical working knowledge of the industry and took courses in Berlin at the Academy of Mining. Later he inherited his family’s business and expanded it by buying his own mines."
"He then diversified into shipping, buying cargo lines. Stinnes used his own vessels to transport his coal within Germany along the Rhine River, and from his mines abroad. His vessels also carried lumber and grains. His diversification included ownership of a leading newspaper, which he used to exert political influence. Prior to the Weimar hyperinflation, Stinnes borrowed vast sums of money in Reichsmarks."
"When the hyperinflation hit Stinnes was perfectly positioned. His hard assets in coal, steel, and shipping retained their value. It didn’t matter what happened to the Germany currency, a hard asset is still a hard asset and does not go away even if the currency goes to zero. Stinnes’s international holdings also served him well because they produced profits in hard currencies, not worthless Reichsmarks. Stinnes kept some of these profits offshore in the form of gold held in Swiss vaults so he could escape both hyperinflation and German taxation. Finally he repaid his debts in worthless Reichsmarks, making them disappear."
. . . . .
"Interestingly, we see Warren Buffett using the same techniques today. It appears that Buffett has studied Stinnes carefully and is preparing for the same kind of financial calamity that Stinnes saw coming."
We owe Jim Rickards a word of thanks. He works tirelessly to share his knowledge about these important issues with "we the people". He puts out a ton of free information knowing that many people simply cannot afford access to the quality of information he provides that often is only available to high net worth investors by paying for a newsletter or other subscription service. His excellent books are modestly priced so that anyone can afford them.
This blog is dedicated to "the average person" like myself so this kind of access to quality information is greatly appreciated. Jim certainly wants people to buy his books (which we can certainly recommend), but he provides enough information at no cost to be helpful to anyone who will take some time to listen.
We try to do that here on the blog as well. But we cannot be helpful without experts who share what they know with us. For that we say Thank You!