Warren Buffet and gold (berkshire hathaway)

In a recent interview (as well as during numerous talks with shareholders), veteran and venerable investor Warren Buffet is adamant gold has no place in a sensible mix of investments in anyone’s portfolio thus adding his voice to the likes of Willem Buiter and all Western central bankers.

What would be good is if Mr. Buffet could explain the performance of his investments over the past ten years in relation to the performance of gold bullion as an investment and as outlined in the below chart.

Above is a chart of Mr. Buffet’s investment company share price valued in gold over the past fifteen years.

Ooops!

People truly will not understand a problem if their livelihood depends on them not understanding it. Either that, or Mr. Buffet has an agenda. How else could someone be consistently wrong over a period of ten years and still think that nothing has changed in the global economy?

Gold may not be an ideal investment at all times. But clearly, gold has served a real purpose in the recent past and Mr. Buffet has either failed to notice or he must have an agenda.

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4 Responses to “Warren Buffet and gold (berkshire hathaway)”

  1. Jerad Says:

    Buffett does not say gold has no place in anyone’s portfolio. He does say that it has no place in his portfolio. Why?? Because he does not believe that he can make money via speculation. If you prefer to speculate and believe that gold prices will go up then it is a fine investment.

    Because gold produces nothing (i.e. has no earnings), you cannot discount those earnings and derive an intrinsic value. You simply have to buy it in the hopes that when you want to sell it someone else is willing to pay you more than you paid.

    Buffett recently said in an interview that the value of all the gold in the world is about $7 trillion. This is the equivalent of all the farm ground in the U.S. (about $2 1/2 trillion), seven Exxon Mobiles and about $1 trillion of walking around money. He goes on to say you can call him crazy but he will take the Farm Land and Exxon mobiles.

    I guess you can call me crazy too. Just give me the income producing assets and you can keep your yellow metal.

    • guidoamm Says:

      Hello Jerad,

      Gold can only be understood if you have a grasp of what a monetary system is, how it works and what the ramifications of the choice of a system over another are.

      Income is only as good as the currency it is earned in. If you look around this blog, you will find I make a good case for the diminishing marginal efficiency of debt based fiat currencies so that for as long as your earnings are earned during an inflationary period, then fine. But when the efficiency of the currency is spent, then your earnings will bring you nothing. These are the times gold and/or silver will compensate you for currency loss.

      With regards to all the gold in the world being worth $7Trillion, you omit to catch on to the most important aspect of this amount of gold. That is that all the gold ever mined is still around and being used. Buffet may think gold produces no income but the sheer fact that the stuff is still around since the dawn of mankind is in fact indicative of what gold and silver do which is they protect wealth when governments are hell bent on appropriating it or destroying it.

      Companies come and go. I like farm land much more than I do companies in deflationary times.

      With regards to intrinsic value. As I said. The stuff is still around since the dawn of man just because it has intrinsic value. Conversely, a company’s balance sheet could be but a bag of accounting tricks…

      Finally, with regards to the charge that gold is only worth what someone is willing to pay you for it, that is exactly true. As indeed it is true for anything you buy or sell. Incidentally, this is exactly the reason our governments allow the banks to disregard mark-to-market accounting rules because if they were to divest the assets that are bankrupting them at the price that you or me would want to pay, the major banks would vaporize instantly.

  2. guidoamm Says:

    Correct. Buffet’s portfolio is the ultimate inflation play as I pointed out some years back and in fact, it has performed splendidly from 1980 till about 2000…. but things have changed…

  3. Patrick Donnelly Says:

    He is a tool of the kleptocracy. Having an in onto the banking cartel, means that as money supply expands those close to it profit no matter what they buy. His picks merely reflect that.

    Interlocking boards means that they all rise with the inflation of money. Their competitors dwindle as their access to credit can be problematic.

    The endgame is at hand, hence his performance is related to fiat currency. They too, will fail, unless, like the Au$, they are closely backed by real wealth in the form of commodities, especially precious metals?

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