30

April

Gold versus Warren Buffett

Published in Economics  Gold  Wealth Management  on 30 April 2009


I have just completed an analysis of the performance of the spot price of gold vs. Berkshire Hathaway. I think you will find the results are a little suprising.

Spot Gold vs. Bershire Hathaway

Interestingly, Buffet himself emphasised the non-productive aspects of gold in a speech at Harvard in 1998:
"It gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility."
Perhaps its utility is in balancing a porfolio Warren? Download the gold-vs-warren-buffett PDF.


4 Comments   Add Comment

OK. Now I get your point. 2.

Wed, 05/06/2009 - 14:04 — Mateusz Labecki (not verified)

OK. Now I get your point. 2. As for the Warren's luck I think his stock picking strategy is quite logical and made under high safety margin conditions and simple rules . And true he makes mistakes. 1. To become really reach you mustn't diversify you portofilio. Anyway we may walk and walk around that issue. I hold myself gold which is about 40% of my portofilio. For most of us index funds and perhaps gold is good wealth storage strategy. Good luck. Mateusz Labecki.

Mateusz, Thank you for your

Wed, 05/06/2009 - 11:08 — Marc Westlake (not verified)

Mateusz,
Thank you for your comments. The point we are making is that Warren Buffett made a clear statement not to buy Gold in 1998 and since then, Berkshire Hathaway has consistently underperformed.

Our argument is that an investor should:
1) diversify their investments and;
2) Not attempt to follow a stock picking, market timing or fund manager strategy since irrespective how good the fund manager has been in the past, and we accept that Warren Buffett has been exceptionally lucky, perhaps eventually, that luck will run out.

PS However I cannot tell if

Mon, 05/04/2009 - 23:10 — Mateusz Labecki (not verified)

PS
However I cannot tell if trend would be more favourable for precious metals because high inflation we can have in the near future. High inflation environment is not best one for stocks.

Warm regards.

I think you could do long

Mon, 05/04/2009 - 23:06 — Mateusz Labecki (not verified)

I think you could do long range comparativie analys BRK vs. GOLD.
I must admit recently, that means last 5 years, gold outperforms S&P500. As you know S&P500 is major BRK benchmark. Since 1965 to 2008 BRK book value outperformed SP500 11% on average annualy.
You can find all figures in BRK annual reports.

Taking 25 past years history into consideration SP500 average per year is 11% and gold 3%.

That means Warren Buffet did better than gold in such long perspective.

What do you think about it ?

RGDS
Mateusz Labecki