A recent business insider article calls ‘Gold bugs’ thin skinned misanthropes because Warren Buffett “..devotes a few paragraphs to gold and the fools who worship it” in his upcoming annual letter!! Regular followers of this blog know that I had turned cautious on Gold around $1700’s and bearish in September 2011 – just establishing I’m no gold bug.
In my May 2010 post, I had highlighted how such fancy theories can be quite flawed and prevent you from arriving at the best investment decisions. Now to Mr Buffett’s renewed Vitiriol against gold:
1) The cube of gold will produce nothing in the next hundred years
My answer: No one makes investment decision for next hundred years
2) The cube of gold will not pay you interest or dividends, and it won’t grow earnings.
My answer: So will be the case with a boat load of stocks. The S&P has gone no where in the last 13 years.
3) You can fondle the cube of gold, but it won’t respond.
My answer: Yes, witty. Hence I’ll try to be funny too. Mr Buffett should know what to fondle. If you own lots of gold you do not need to fondle, ‘they’ will fondle you 😀
The reason for Mr Buffett’s bashing? Well, whatever I say would purely be a guess but I would let the performance of Gold speak for itself:
Gold’s return for the last 10yrs – 488.19%
BRK’s return for the last 10 yrs – 67.77%
Gold continues to wallop the performance of Berkshire Hathway by a GIGANTIC 420% over his preferred time frame of 10 years.
And if you had listened to Mr Buffett’s Annual letter of last year, you are in the elite company of those who missed the best performing asset class of 2011 – long dated bonds that returned almost 30%.
Here are the words of another billionaire who is in the same business. “At the end of the day, your job is to buy what goes up and to sell what goes down. So really who gives a damn about PE’s?” – Paul Tudor Jones