When it comes to stock investments I give Warren Buffet his due, but he should keep his comments about the gold market to himself.
Posted by Adam King on March 23, 2011
Buffet paints misleading picture of the gold market.
March 23, 2011 – When it comes to stock investments I give Warren Buffet his due, but he should keep his comments about the gold market to himself. It may not be intentional, but his remarks in the latest CNBC interview gave the average individual investor the wrong impression about gold investment.
Buffet invests only in assets that produce the most income for the lowest entry price. In today’s market such assets are likely to be paying high dividends with toxic loans. Risk is mitigated by cheap prices for the underlying shares, but it is not negligible. Buffet, however, has billions to spread around and he has proven quite adept at picking more winners than losers.
Buffet’s strategy isn’t well suited to the gold market. The only way he could have the liquidity he requires to keep his money where it can get the highest returns would be in short positions. That is what he is talking about when labels gold investment as speculation. Most people equate speculation with risk, and because Buffet doesn’t differentiate between short and long positions, it is bound to make them wary.
Retail investors live in a different world than the big players, such as Buffet. They are looking for a safe place to put their money that has decent prospects for growing their wealth. That’s a far cry from investing for maximum income, but even for that purpose gold and silver leave Berkshire Hathaway shares in their tracks.
For example, compare the income generated by a yearly investment of $1,000 over the past ten years. Taking the annual returns as cash from Hathaway shares would have given you $5,700, while gold would have netted $10,900. If you had reinvested your earnings, your wealth would have grown only about $7,500 from the shares while the value of your gold increased by $18,700.
Without question, for the average individual, the gold market is the place to be.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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