Warren Buffett 02 (Feb 10 - May 15)

[winston]

As we get older, our thinking is no longer that flexible. Instead of keeping an open mind, we tend to look for examples to support our original thinking on that subject. This is despite mounting evidence that we are wrong. BTW, I'm not refering to some senile dictator. I'm talking about WB here ...


Ben Graham’s Curse on Gold by David Galland

It seems that the mainstream investment community only takes a break from ignoring gold to berate it: one of gold’s most outspoken critics, uber-investor Warren Buffett, did so recently in his latest shareholder letter.

The indictments were familiar; gold is an inanimate object “incapable of producing anything,” so any investor holding it instead of stocks is acting out of irrational fear.

How can it be that Buffett, perhaps the most successful (and definitely the most well-known) investor of our time, believes that gold has no place in an intelligently allocated investment portfolio?

Perhaps it has something to do with his mentor, Benjamin Graham.

http://www.caseyresearch.com/articles/b ... 433ED0212A

[winston]

Does Buffett know that he's wrong ?


BUFFETT VERSUS GOLD: NO CONTEST!

Another year of the gold bull market has passed. And the yellow metal still counts superinvestor Warren Buffett as a detractor. Recently, Buffett reminded folks he doesn't "get" the idea of gold.

Our chart of the week shows Warren might just be jealous. It also shows how listening to him has been a losing deal for the past 10 years. You see, when it comes to "Buffett versus gold," over the past decade, it's no contest.

Today's chart displays the performance of Buffett's legendary holding company, Berkshire Hathaway (black line) versus the performance of gold (gold line) over the past 10 years.

Since the stock market began climbing out of its bear market back in 2002, Buffett's company has gained around 62%. Gold, on the other hand, has gained around 500%.

While we're fans of Warren's wealth-building ability, we're even bigger fans of listening to the message of the market. And for a good long time, it's been saying, "You missed the boat, Warren."

www.dailywealth.com

[winston]

The Best Way to Bet Against the Dollar, Richest Man Explains By Dr. Steve Sjuggerud

When Warren Buffett speaks about the stock market, I listen.

He made his fortune by buying shares of great businesses. And right now, he thinks they're cheap.

But in a rare television appearance yesterday, Buffett explained a simple way Americans can bet against the dollar… that has absolutely nothing to do with stocks.

He called it, "as attractive an investment as you can make." And yet, you don't need a brokerage account or any real prior investing experience to take advantage of this opportunity…

Here's what the greatest investor in history had to say… and why you should seriously consider if this investment is right for you.

Warren Buffett became the world's richest man simply from his investment ideas. Now in his 80s, he's fallen a few slots on the list. He's the world's third-richest man.

And he loves stocks. So I was surprised by the answer he gave on CNBC when asked whether he'd recommend people buy stocks or houses right now…

If I knew where I was going to live for the next five years or 10 years, I'd buy a home and I'd finance it with a 30-year mortgage. It's a terrific deal…

If I had a way of buying a couple hundred thousand single-family homes… I would load up on them. And I would take mortgages out on them at very low rates…

It's a way in effect to [bet against] the dollar.

What did he mean by that?

The Average Joe doesn't associate buying a house with betting against the dollar. But that is exactly what is happening. Think about this with me…

You're borrowing paper dollars and putting them into a real asset… at a dirt-cheap price. Buffett pointed out that, if interest rates go down, you can refinance and get an even lower rate. But if interest rates go up thanks to inflation or money-printing, the bank is stuck holding your low-rate loan.

Buffett loves it… With "a 30-year mortgage… it's a leveraged way of owning a very cheap asset now. That's as attractive an investment as you can make."

As the dollar loses value, the number of dollars it takes to buy a house goes up. So if the value of the dollar goes down, the value of your house goes up, all things being equal.

The government is sacrificing the value of the dollar today to get the economy back in gear. Borrowing dollars for 30 years at less than 4% interest to invest in a cheap, safe asset is a simple and effective way to hedge the dollar's decline.

In his latest letter to shareholders, Buffett admits the timing he gave last year on the housing recovery was wrong…

Last year, I told you that "a housing recovery will probably begin within a year or so." I was dead wrong.

But Buffett is confident. It's a simple case of economics… and biology:

Housing will come back – you can be sure of that… Every day, we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over… Fortunately, demographics and our market system will restore the needed balance…

The world's greatest investor – who made his fortune in stocks – is saying he'd "load up on single-family homes if he could." And he'd do so with a mortgage at a low rate.

You can do the same. You may not have thought of it this way before… but it is an excellent way for non-stock investors to bet against the U.S. dollar.

Today's "terrific deal" will not last forever. So take the advice of the greatest investor in history…

Go buy a house, and get a low-rate mortgage on it. It is "as attractive an investment as you can make."


Source: Daily Wealth

[winston]

Takeaways from the 2011 Berkshire Hathaway Shareholder Letter

You can read Warren Buffett’s latest letter to shareholders of Berkshire Hathaway here [PDF], but in the meantime, I’ve provided are my key takeaways below.

http://www.frankvoisin.com/2012/02/29/t ... er-letter/

[kennynah]

a 100 years from now, i would be long gone...

Takeaways from the 2011 Berkshire Hathaway Shareholder Letter

On the Lunacy of Gold

As you may recall, I do not believe it is rational to purchase gold as an investment. Buffett shares this view and presents a compelling argument in support:

The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.

Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

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 $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?

Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

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 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.

Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A(gold) will compound over the century at a rate far inferior to that achieved by pile B(other than gold).

[winston]

Market is very transparent. Either you are right or you are wrong.

Instead of admitting that he was wrong on gold, he has to spend time writing a very long paragraph on gold.

[Musicwhiz]

Market is very transparent. Either you are right or you are wrong.

Instead of admitting that he was wrong on gold, he has to spend time writing a very long paragraph on gold.

Give the man 10 more years, then we'll see if he's right or wrong.

Of course, I might be biased - I strongly share his view on Gold as being a non-producive asset; and would thus rather own companies.

[winston]

I bought my gold coins around US$330 around 11 years ago.

So WB already had 11 years.

What sort of investment needs 20 years to prove whether you are right or wrong ?

Like I said, market is very transparent. Either you are right or you are wrong.

No need to write long articles or have a lot of justifications

[Musicwhiz]

I bought my gold coins around US$330 around 11 years ago.

So WB already had 11 years.

What sort of investment needs 20 years to prove whether you are right or wrong ?

Like I said, market is very transparent. Either you are right or you are wrong.

No need to write long articles or have a lot of justifications

Interesting fact to consider though - the time period one uses is also important.

Say one bought shares at the peak of the bull market in 2000. 10 years later he would still be suffering a loss.

Whereas if you had bought in 2002, ten years later today you would be up by a significant amount.

[winston]

I think everyone has a talent in a certain area.

WB's talent is to buy great companies at a fair price and and then hold onto them eg. Coke, Disney etc.

His talent is obviously not in Commodities.

So I have no problem if he sticks to his area of competence.

What I find funny ( maybe offensive ? ) is his need to keep on commenting on something outside his area of expertize and trying to justify why it aint so, when the market has said it is so for the past 11 years ...