Saturday, April 30, 2011

Buffett Disses Gold

WSJ reports Warren Buffett's comments on gold, as he answers questions at Berkshire's shareholder meeting:
Question about why Buffett doesn’t own more gold or other commodities that have soared in value recently. He says he wants to own assets that are valued based on what it can produce, not on assets where rising prices “create their own excitement….Over time, that has not been the way to get rich.”
In 1930, when Buffett was born, the price of gold was $20.65. Today, it is $1,565.70.

WSJ goes on:
Buffett harps on and on about gold. He says it has no utility, and about how silly people are who are getting in now -- when gold prices are near nominal highs. "There’s no question that rising prices...can start affecting behavior," Buffett said. "People like to get in on things that are rising in prices. Over time, it has not been the way to get rich."

He's listing all the things he'd rather have than all the gold in the world, because all you can do with gold is admire it or, as he says, "fondle it."

Munger repeats what he's said previously that gold investors are preying on fears. Gold is considered a safe haven investment, because investors tend to flock to buying gold assets when they're freaked out about the health of other assets and the economy.
Keep in mind this is said by a guy who has been obsessed with acuiring paper dollars his entire life. Paper dollars are nothing but a medium of exchange that can be printed up by the Federal Reserve at will at any time. But Buffett seeks dollars becasue they are a medium of exchange. Gold can also be a medium of exchange, but a medium of exchnage that can not be printed up at will by the government.

Buffett's comments on gold show an amazing lack of understandingt of basic economics, namely the role a medium of exchange plays in a society and the difference between a medium of exchange that has emerged in the market and one forced on a country by its government.

In 2004 (when gold was around $400 an ounce), an NYC cabbie, who was driving me, dissed gold the way Buffett has. What I told him applies as much to Buffett, I wrote it up in a post called, Me and My Cabbie.


  1. LINK to Justin Smyth's fine work:

    Listen to whoever you want, the facts are the facts and when Uncle Buck (the USD) dies who gives a flip about paper.

    Year Berkshire Hathaway Gold Relative Results
    2001 -6.2 1.4 -7.6
    2002 10 24 -14
    2003 21 21.7 -0.7
    2004 10.5 5 5.5
    2005 6.4 17.1 -10.7
    2006 18.4 23.9 -5.5
    2007 11 31.6 -20.6
    2008 -9.6 3.4 -13
    2009 19.8 27.6 -7.8
    2010 13 27.7 -14.7

    Average 9.43 18.34 -8.91

  2. Ah, but Buffet has learned over the years that being first in line to get those newly printed dollars is a far better deal then Gold. By the time you and I get those same dollars, they are worth a little less and Buffet will have had them invested for months or years. On the flip side anyone that listen's to Buffet for what to invest in is a fool. Buffet has a history of saying one thing while doing the exact opposite. The man is very shrewd and has been playing the game for a long, long time.

  3. Buffett gets a direct line to the white house and Treasury. They assure him they're going to bail out the banks. So Buffett stands up and very publicly invests 5 billion in Goldman preferred shares and options to invest 5 billion more at $113. "WOW, damn, BUUUFFEETT believes in GS!!!" The mainstream press cooed.

    My comment: "Hey Buffet - you're no goddamn genius! Anyone with political power can make money off the backs of their subjects."

    Why this man is lauded the way he is, to this day, amongst the press/public defies comprehension.