Warren Buffett On Gold

So what else would we all expect Buffet to say? I mean, he IS a stock guy, right? He is famous for saying that he invests in the things that he knows. This is why he never invested in tech stocks even though HUGE amounts of money have been made with them. Like other money managers, Buffet is well aware of the fact that PMs do not generate revenue for money managers. Somehow, I do not think that Buffet's returns for the past 11 years have been anywhere near what gold and silver have provided to those of us who hold them. Not that this is always the case, by any means, but to rule PMs out of a long-term portfolio borders on being very foolish indeed. Just my $0.02 worth and I am no Warren Buffet!

Well, I've said this before, but if you bought silver and in the 70s, 80s or 90s it really was a lousy investment since the price stayed flat for all those years (except for a quick spike up and back down in 1980). You would have been better off keeping your money in a savings account and making 4% interest per year.

Everything changed in the last few years, of course. The question is whether the last 30 years were the aberration and now things are running the way they should, or whether the last 30 years were normal and this dramatic rise over the last few years is the aberration. A lot of people here believe the former. Buffet apparently believes the latter. I'd say both viewpoints have equal claims to being true, although the latter belief does have the weight of history on its side.

I sincerely doubt that gold and silver will ever drop all the way back down to the levels they were at in the 70s-90s. At the same time, though, I also have trouble believing that we will see a continual rise in values over the next 20-30 years, which is really what you need for a true investment. Personally, I think the price is going to keep rising for awhile and at some point it will reach a new plateau where it will remain for the next 20-30 years (at least). It might even peak and then slowly go back down over a period of years. That might be good for a short term investment strategy, but still not what you want in a long term investment.

Right now, I'm buying PM as a hedge against inflation and to prepare for the [hopefully] remote possibility the economy tanks and the dollar becomes worthless. Mostly, though, I'm buying it to have something shiny to look at and to hand down to my son someday. If it happens to be worth 500% what I paid for it in 20-30 years, terrific. But I'm not counting on that happening.

Have said this occasionally on other threads:

A professional investment advisor said to me that it is prudent to invest up to 5% of your total wealth in PM's, coins, stamps or artworks, that the investor personally understands.

Interesting, because that is 5% of the total wealth of the investor that he cannot make a fee on.

If your total wealth is $1 million (house paid off, superannuation, shares, bonds, cash deposits, total value of the business you own), the 5% would be part of this. That is $50,000.

Maybe a few, but I don't think many would have assets in the bullion / coin category that would measure up to that much.

That's a lot to dispose of when you kick the bucket.

A little more from Mr. Buffett -

And as I've already said, it's possible to go further than this too. Everyone who buys gold is essentially a speculator. For the only possible route to profit is by guessing (you might have very good information, might even be correct, but it is still a guess) on what people of the future believe the value of gold is.

It holds little actual value beyond some industrial and decorative utility, both of which is "limited and incapable of soaking up new production." Therefore, any investor holding gold instead of stocks is acting out of irrational fear.

Wouldn't surprise me! Yes of course it isn't $$$!

Gold simply put is a currency without a gov't. Its used as currency because its scarce, homogenous and portable.

Equity in a corporation is not a currency and same operates through the good graces of the sovereign.

They are apples and oranges.

The boom in the equity markets over the last half century was due largely to America's number one position in the industrial revolution, the tech run of the 1990s, and housing from 2002 to 2007. 8% average annual return over the last 75 years. Impressive to be sure.

Now we've pumped the markets back up with 0% interest rates, liquidity in unprecedented proportions, revised accounting policies, and trillions in debt. All of that spells good news for PMs but bad news for our country in the long run. No wonder Warren's trashing gold. He's mad!