Warren Buffett: Why stocks beat gold and bonds

[RayBonga]

You may agree or disagree but its always an interesting perspective to take into consideration

Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be about $9.6 trillion. Call this cube pile A.

Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil (XOM) will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

http://finance.fortune.cnn.com/2012/...holder-letter/

[Rochard]

His logic is flawed.

A century from now the land will be useless, and oil will be something kids will study in high school but will fail to understand it's importance in today's society. Corn, wheat, cotton, and other crops will be synthetic and produced in bulk, and the land will be converted in worthless high rise slums. All of the oil companies will have gone bankrupt because no one buys oil or gas - all of our transportation will be powered without oil and without gas.

But the gold will be worth a lot more.

[TheStout]

Yeah,

What an idiot that Buffet is :S

Where is my flying car Back to the Future promised me?

[PR_Glen]

Originally Posted by Rochard

His logic is flawed.

A century from now the land will be useless, and oil will be something kids will study in high school but will fail to understand it's importance in today's society. Corn, wheat, cotton, and other crops will be synthetic and produced in bulk, and the land will be converted in worthless high rise slums. All of the oil companies will have gone bankrupt because no one buys oil or gas - all of our transportation will be powered without oil and without gas.

But the gold will be worth a lot more.

no buffet was talking about investing and using those as examples, you are talking about assumptions and science fiction...

[Houdini]

Buffet has been bashing gold and silver since he sold his huge share of silver and missed out on all the gains over the past 10 years. In 1998, he bought 130 million ounces of silver in the $5 dollar range and sold in the $7's just a year or two later. If he would have held, that $680 million would have been worth $3-4 billion today and over $7 billion last year when silver was up in the high $40's. How many of his stocks have increased 600-700% in 10 years? I doubt many.

Nevertheless, over his span of investing, stocks have beat gold and silver hand over fist.

[alextokyo]

Originally Posted by TheStout

Yeah,

What an idiot that Buffet is :S

Where is my flying car Back to the Future promised me?

Here you go, you little bitch. And I'll take extra cheese on that sausage sandwich.

[DWB]

For investing, how can you dispute him? The guy clearing knows what he is talking about.

[alextokyo]

Originally Posted by Rochard

Corn, wheat, cotton, and other crops will be synthetic and produced in bulk, and the land will be converted in worthless high rise slums.

Donut effect does not = inner city like slums out in the sticks, since most farmland is out in the sticks. That's why they call it farmland. Wal-Marts and retail parks perhaps, but if you're expecting scenes from Blade Runner or New Jack City circa 2032 out in the middle of the Iowa countryside, it's not going to happen cuz.

[alextokyo]

Originally Posted by Rochard

Corn, wheat, cotton, and other crops will be synthetic and produced in bulk

With that in mind, who says it won't also be possible to produce synthetic gold? If you're predicting it can be done with corn, then why not gold? I'm not talking about synthetic gold as zircon is to diamonds, but stuff that is impossible to distinguish from what has been mined out of the ground.

With the way technology is going... correct me if I'm wrong, but all it takes is the ability to get a bunch of atoms lined up right, and we're all fucked. I wonder if it would be possible to literally take atoms from shit and re-arrange them into gold...

[epitome]

Read his biography. In many ways, he became the richest man in the world by using common sense.

His whole strategy, in a nutshell, is to buy stocks where the price is less than assets.

Sounds so simple but everybody likes sexy and is thinking about Facebook while he is thinking about the manufacturer in Portland that is undervalued that nobody has heard of.

[PR_Glen]

Originally Posted by epitome

Read his biography. In many ways, he became the richest man in the world by using common sense.

His whole strategy, in a nutshell, is to buy stocks where the price is less than assets.

Sounds so simple but everybody likes sexy and is thinking about Facebook while he is thinking about the manufacturer in Portland that is undervalued that nobody has heard of.

summed up nicely ;)

[DWB]

Originally Posted by epitome

Read his biography. In many ways, he became the richest man in the world by using common sense.

His whole strategy, in a nutshell, is to buy stocks where the price is less than assets.

Sounds so simple but everybody likes sexy and is thinking about Facebook while he is thinking about the manufacturer in Portland that is undervalued that nobody has heard of.

GFY needs a LIKE button. Great post.

[raymor]

Originally Posted by Rochard

His logic is flawed.

A century from now the land will be useless, and oil will be something kids will study in high school but will fail to understand it's importance in today's society. Corn, wheat, cotton, and other crops will be synthetic and produced in bulk, and the land will be converted in worthless high rise slums. All of the oil companies will have gone bankrupt because no one buys oil or gas - all of our transportation will be powered without oil and without gas.

But the gold will be worth a lot more.

Let's assume that's true. Owning stock means owning a piece of the company. For $9.6 trillion, you could own all of the synthetic food companies, all of the alternative energy companies, 48 senators, and a lot of other companies. Would you rather own all of that, or a pile of metal? Stocks (companies) do well because they produce things - food, fiber, phones, everything is made by a company. Gold just sits there. It doesn't produce anything.

[porno jew]

gold only rises when the economy goes into the shitter. that says as much as you have to say about goldbugs. they thrive of suffering.

[porno jew]

he is right. those investments are productive and benefit humanity while gold isn't. simple really.

[Hentaikid]

We can make gold, transmutation happens in nuclear reactors, but it's a lot cheaper to just dig some more out of the ground

[DaddyHalbucks]

Buffett is correct.

Gold is a hedge --not an investment.

Investments kick off cash.

[ilnjscb]

People have killed, fucked, tortured, created, tried, made war and died for gold for five thousand years. People have sold millions of children for gold. Kings have been assassinated for gold. Nations have risen and fallen because of gold. Human history since the iron age has revolved around gold.

No matter what we do, gold is central to civilization.

Shares and speculation on shares is a new market, and the two concepts are totally different. Companies and farms produce because of human labor. Without human labor they are valueless. They can lose their value even with labor. They depend on civilization for their valuation. Gold is the foundation of organized trade. Organized trade is the foundation for civilization. You can't eat gold but you can't eat land either. Try subsistence farming with no help and no seed, no animals and no expertise. XOM? Only has worth while nations exist and honor their agreements with faith and force. A blip, like standard oil or the IndyMac bank. XOM is a bunch of handshakes, motivated by desire for gold.

Warren Buffet is a genius, but so is Bill Gates. You can be a genius and be wrong, or not understand a specific market.

[u-Bob]

Originally Posted by DaddyHalbucks

Buffett is correct.

Gold is a hedge --not an investment.

Investments kick off cash.

true, you don't buy gold to make money, you use gold as a store of value and a medium of exchange. Comparing gold to farmland is comparing apples and oranges. If you want to compare gold to something else, you need to compare it to another medium of exchange like the USD or the Euro.

In regards to stocks beating gold and bonds, Buffett's saying nothing new. We'll be seeing a serious rise in stock prices. So there's money to be made in short term. Even some of the perma-bears are going bullish on stocks. Wenzel at EPJ called it months ago.

Just be careful. The boom's purely based on new money (thank the Bernank for that). Add the fact that a lot of the excess reserves at the Fed have started leaking out into the economy since August last year and you know the fun won't last for long.

[u-Bob]

Here's Wenzel on Buffett: http://www.economicpolicyjournal.com...old-hater.html

[bronco67]

After the apocalypse comes, gold will be just as useless as Exxon stock. Buy rice and ammo.

[V_RocKs]

Originally Posted by Houdini

Buffet has been bashing gold and silver since he sold his huge share of silver and missed out on all the gains over the past 10 years. In 1998, he bought 130 million ounces of silver in the $5 dollar range and sold in the $7's just a year or two later. If he would have held, that $680 million would have been worth $3-4 billion today and over $7 billion last year when silver was up in the high $40's. How many of his stocks have increased 600-700% in 10 years? I doubt many.

Nevertheless, over his span of investing, stocks have beat gold and silver hand over fist.

He doesn't make his money on stocks increasing in price... He makes it on the dividends they pay him... Warren doesn't buy and sell stocks... He buys and holds stocks.

[PR_Glen]

Originally Posted by ilnjscb

People have killed, fucked, tortured, created, tried, made war and died for gold for five thousand years. People have sold millions of children for gold. Kings have been assassinated for gold. Nations have risen and fallen because of gold. Human history since the iron age has revolved around gold.

No matter what we do, gold is central to civilization.

Shares and speculation on shares is a new market, and the two concepts are totally different. Companies and farms produce because of human labor. Without human labor they are valueless. They can lose their value even with labor. They depend on civilization for their valuation. Gold is the foundation of organized trade. Organized trade is the foundation for civilization. You can't eat gold but you can't eat land either. Try subsistence farming with no help and no seed, no animals and no expertise. XOM? Only has worth while nations exist and honor their agreements with faith and force. A blip, like standard oil or the IndyMac bank. XOM is a bunch of handshakes, motivated by desire for gold.

Warren Buffet is a genius, but so is Bill Gates. You can be a genius and be wrong, or not understand a specific market.

yeah he's wrong, he doesn't know how to make money at all.. his opinion means nothing compared to the countless fearbies spouting off about how gold will make them millionaires in the future via internet spamming and countless blogs and websites stating such.

If it was so profitable and such a guaranteed investment why do people feel the need to push it on everyone like it's the only way to go? Ohh right, invested interest...

[Rochard]

Don't take me too seriously, I'm just playing around here....

Originally Posted by PR_Glen

no buffet was talking about investing and using those as examples, you are talking about assumptions and science fiction...

Are you honestly telling me that in one hundred years from now we'll still be driving gas powered cars?

Originally Posted by alextokyo

Donut effect does not = inner city like slums out in the sticks, since most farmland is out in the sticks. That's why they call it farmland. Wal-Marts and retail parks perhaps, but if you're expecting scenes from Blade Runner or New Jack City circa 2032 out in the middle of the Iowa countryside, it's not going to happen cuz.

You have to look at the bigger picture. Food production has increased dramatically in the past forty years because we've become better at production. We can produce a lot more with a lot less space. At the same time, take a look at world population - that's going to be come a huge issue in the near future. I'm not saying the Iowa country side will be urban in the next fifteen years, but in the next one hundred years I can imagine seeing our countryside being turned into urban environments.

Originally Posted by alextokyo

With that in mind, who says it won't also be possible to produce synthetic gold? If you're predicting it can be done with corn, then why not gold? I'm not talking about synthetic gold as zircon is to diamonds, but stuff that is impossible to distinguish from what has been mined out of the ground.

With the way technology is going... correct me if I'm wrong, but all it takes is the ability to get a bunch of atoms lined up right, and we're all fucked. I wonder if it would be possible to literally take atoms from shit and re-arrange them into gold...

We can already make diamonds, so in the near future we'll be able to make gold. However, the fake diamonds aren't worth nearly as much so I'm guessing the fake gold will be worthless too.

Originally Posted by raymor

Let's assume that's true. Owning stock means owning a piece of the company. For $9.6 trillion, you could own all of the synthetic food companies, all of the alternative energy companies, 48 senators, and a lot of other companies. Would you rather own all of that, or a pile of metal? Stocks (companies) do well because they produce things - food, fiber, phones, everything is made by a company. Gold just sits there. It doesn't produce anything.

He's not taking about owning stock in synthetic food companies, he's talking about oil companies. Unless Chevron and other oil companies change their business model from oil to something else, they'll go out of business. One hundred years from now we won't be driving around in gas powered cars and won't have this huge need for oil.

[u-Bob]

Originally Posted by PR_Glen

yeah he's wrong, he doesn't know how to make money at all.. his opinion means nothing compared to the countless fearbies spouting off about how gold will make them millionaires in the future via internet spamming and countless blogs and websites stating such.

If it was so profitable and such a guaranteed investment why do people feel the need to push it on everyone like it's the only way to go? Ohh right, invested interest...

Glen,

I don't think ilnjscb said Buffett doesn't know how to make money. No one's questioning the fact that Buffett managed to become incredibly rich. However, to think that Buffett's automatically right about everything related to investing, finances, gold, stocks etc, is a logical fallacy (ad hominem argument). Whether something's true or false does not depend on who said it.

Regarding gold: Personally, I've been buying gold for years. I'm not doing this to make money. I know there's plenty of people who see buying gold as an investment, as something you buy for x amount of dollars and then sell for y amount of dollars and make y-x amount of profit. If making a profit is your goal then yes there are ways to make more money than by buying and selling gold. When I buy gold, I do it to protect my earnings. I use it as a 'store of value'. I'm not buying gold to become a billionaire, I'm buying gold to protect the money I've already earned. Do I think gold will go up? Yes I do. Do I 'need' gold to go up? No, I don't.

[PR_Glen]

Originally Posted by Rochard

Don't take me too seriously, I'm just playing around here....

Are you honestly telling me that in one hundred years from now we'll still be driving gas powered cars?

What use to anyone is predicting a markets future 100 years from now? None of us will be alive by then so talking about investments down that far is like talking about temperatures fluctuations on pluto, does not concern us...

and for the record, gas cars will still be around in our lifetimes, electric cars are no where near being efficient for north american driving standards nor are they cost effective. ;)

[PR_Glen]

Originally Posted by u-Bob

Glen,

I don't think ilnjscb said Buffett doesn't know how to make money. No one's questioning the fact that Buffett managed to become incredibly rich. However, to think that Buffett's automatically right about everything related to investing, finances, gold, stocks etc, is a logical fallacy (ad hominem argument). Whether something's true or false does not depend on who said it.

Regarding gold: Personally, I've been buying gold for years. I'm not doing this to make money. I know there's plenty of people who see buying gold as an investment, as something you buy for x amount of dollars and then sell for y amount of dollars and make y-x amount of profit. If making a profit is your goal then yes there are ways to make more money than by buying and selling gold. When I buy gold, I do it to protect my earnings. I use it as a 'store of value'. I'm not buying gold to become a billionaire, I'm buying gold to protect the money I've already earned. Do I think gold will go up? Yes I do. Do I 'need' gold to go up? No, I don't.

i know, i just like to make extremes to exaggerate a point sometimes ;)

and I never thought investing in gold is stupid by any means, it just makes me angry when gold bugs will profess complete market collapses to spread fear and capitalize more on their gold investments because of it.

[onwebcam]

The reason stocks are doing better than gold is Buffett and his cronies have been driving down the price of gold and silver with government funds and artificially inflating the price of stocks with government funds. The Working Group.

[ilnjscb]

Originally Posted by PR_Glen

i know, i just like to make extremes to exaggerate a point sometimes ;)

and I never thought investing in gold is stupid by any means, it just makes me angry when gold bugs will profess complete market collapses to spread fear and capitalize more on their gold investments because of it.

Just for the record I'm totally not a gold bug. I am saying you cannot compare equities (WB's path to wealth) and gold. Because of our market we look at it that way, but that is a very narrow way to look at it. Warren Buffet is a genius who built it all on his own, and a good guy it seems like. I would never denigrate him. Edison was wrong (DC v AC) and I credit him with our modern age. Jefferson was wrong (didn't believe rocks fell from the sky) and he was the architect of a great nation. Even geniuses of the highest order sometime make errors of perspective.

Gold is not an equity and should not be seen in the same class, is my point.

[Coup]

Originally Posted by porno jew

he is right. those investments are productive and benefit humanity while gold isn't. simple really.

right wingers AKA gold-grovelers don't give a shit about that wishy washy bullshit though. it's "fuck you, got mine" and that's it.