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Welcome to the "Wolf Creek Pass" School of Monetary Policy

I don’t know if you folks remember that hit ditty: a humorous tune about two truckers attempting to manhandle an out-of-control 1948 Peterbilt down the “other side” of Wolf Creek Pass – a death-taunting section of U.S. Highway 160 where the elevation drops a hefty 5,000 feet in a relatively short distance.

The song’s two characters – a truck driver named Earl and his brother, who’s his partner as well as the song’s narrator – are taking a flatbed load of chickens on a speedy trip down this winding, two-lane Colorado highway. After the narrator gives Earl the above-mentioned warning, the ancient semi’s brakes fail.

From there on down, the narrator tells us that the brothers’ trip “just wasn’t real pretty.” The truck careened around hairpins and switchbacks, and then raced at an uncontrolled 110 mph toward a tunnel with “clearance to the 12-foot line” – with chicken crates sadly “stacked to 13-9.”

The drivers and the runaway Peterbilt “went down and around and around and down ’til we run outta ground at the edge of town… and bashed into the side of the feed store – in downtown Pagosa Springs.”

Believe it or not, I started thinking about this funny old country tune the other night – right after I’d read a piece about QE3 and the U.S. Federal Reserve.

As zany as it first sounds, the parallels are striking.

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    What Was the Real Motive Behind Warren Buffett's Goldman Deal?

    Legendary investor Warren Buffett is set to become one Goldman Sachs Group Inc.'s (NYSE: GS) largest investors without shelling out one penny.

    Impressive as that is, what's even more striking is how the guru investor brokered the Goldman deal to his distinct advantage.

    The savvy CEO of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) amended terms of warrants--a type of security that gives the holder the right to purchase securities from an issuer at a certain price within a certain time frame-issued to Berkshire during the 2008 financial meltdown.

    At the time, Buffett's investment in Goldman was gutsy. It was viewed as a vote of confidence in the bank as the country faced economic crisis.

    The warrants originally gave Berkshire the right to buy $5 billion worth of Goldman common shares at $115 each any time before Oct. 1. Thanks to the new $1.5 billion deal inked Tuesday, Buffett's company will receive 9.2 million shares.

    According to data from Bloomberg News, that makes Berkshire the ninth-largest shareholder in Goldman.

    The Oracle of Omaha said in a press release, "We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago. I have been privileged to have known and admired Goldman's executive leadership team since my first meeting with Sidney Weinberg in 1940."

    Berkshire's windfall from the investment surpasses $3 billion, making it one of Buffett's most profitable wagers in recent history.

    Goldman also benefits. The investment bank avoids a flood of sell-side shares that would have been dilutive. It also gets to include the revered name of Warren Buffett to its shareholder roster.

    "We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs," Goldman's CEO Lloyd Blankfein said in a statement.

    To continue reading, please click here…


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