The fact that Warren is on the hook for several billion dollars of S&P puts is mentioned nowhere in the article.
When O When are reporters going to understand conflict-of-interest?
Warren Buffett: Why stocks beat gold and bonds
51–60 of 208 posts
Re: Warren Buffett: Why stocks beat gold and bonds
#52He's wrong. Stocks do not beat gold once inflation outpaces the rate of average market returns, which is exactly where we're at now. Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock, Apple at the absolute bottom, or buy Dell the day it IPO'd or other similar freak scenarios, and then hold all the way through, and then sell at the absolut…
>Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock $1 in gold 90 years ago: $87 today (by your number anyway) $1 in a basket of stocks that were traded to match the DOW starting 90 years ago: $174 today (from the article's numbers) Keep in mind this includes the recent 5 year period where gold has shot up and stocks have performed miserab…
The problem is you could have actually owned gold for 90 years. Average Joe could have bought gold and held it.
You could not have owned the Dow index for 90 years and then left that to your children or grandchildren.
Would you like to still be holding Polaroid or Kodak? Or perhaps just bought and held the classic Dow index perpetual GM? You would have gotten wiped out in the Dow shuffling. The Dow gets to drop something like GM at its convenience, but if you had bought its stocks in a basket format (not an ETF), you'd literally be holding worthless old GM shares, and a lot of other worthless shares that they don't currently count in today's Dow numbers.
The Dow calculation is a theoretical, not an actual. 90 years ago only a very savvy investor could have owned a basket of stocks to mirror and index exactly and constantly traded in and out of the market. In 1920, an exceedingly small % of people owned or had access to equity markets.
Buffet using even 1965 as the reference point is disingenuous because of those reasons. His scenario is not a normal one: he used his father's brokerage firm to commit his first market transactions back in his early days. How many Dow tracking ETFs existed in 1965? How many people owned stocks in 1965? Today you can open an account at Scottrade or wherever, and pay a mere $7 transaction fee to buy stocks.
Re: Warren Buffett: Why stocks beat gold and bonds
#53He's wrong. Stocks do not beat gold once inflation outpaces the rate of average market returns, which is exactly where we're at now. Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock, Apple at the absolute bottom, or buy Dell the day it IPO'd or other similar freak scenarios, and then hold all the way through, and then sell at the absolut…
"In reality, the Dow is not at 13,000 today as we knew 13k to be back in 1998/99 during the huge stock market bubble. Inflation has eroded that nominal value by at least half. The Dow is more likely at 5,000 to 6,500 depending on what you believe real inflation has been over the past 14 years (not the Fed's bogus CPI numbers)." ... "Nearly all of his big market gains peg to one period of time, the 1970s, when stocks…
Many economists believe that the CPI actually overstates inflation, in the long run, for a variety of reasons - quips about how "you can't eat an iPad" notwithstanding.
Re: Warren Buffett: Why stocks beat gold and bonds
#54He's wrong. Stocks do not beat gold once inflation outpaces the rate of average market returns, which is exactly where we're at now. Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock, Apple at the absolute bottom, or buy Dell the day it IPO'd or other similar freak scenarios, and then hold all the way through, and then sell at the absolut…
There are very few things you could leave for your grandchildren that will retain their value
How about well-educated and well-raised parents for said grandchildren?
Re: Warren Buffett: Why stocks beat gold and bonds
#55Warren Buffet once wrote about gold... 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. Anyone watching from Mars would be scratching their head.
Gold has utility: it easily forms a plating on other metals, and conducts electricity even when continuously exposed to air. This is not true of many other metals, hence the popularity of gold-plated electronic interconnects.
Re: Warren Buffett: Why stocks beat gold and bonds
#56He omits the only valid reason any non-speculator would own gold - it holds it's value through times of political turmoil - holds it's value over millenia rather than decades or centuries. A coup d'etat may result in seizure of private companies, rendering your stock worthless, but not touching the value of gold. It would be speculating to put all your assets into gold, but a small amount is like an insurance policy.…
In any serious failure of government, the value of bullets far outweighs the value of gold.
When the revolution comes, I'm going to hide somewhere and wait for everyone to run out of bullets.
Re: Warren Buffett: Why stocks beat gold and bonds
#57He's wrong. Stocks do not beat gold once inflation outpaces the rate of average market returns, which is exactly where we're at now. Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock, Apple at the absolute bottom, or buy Dell the day it IPO'd or other similar freak scenarios, and then hold all the way through, and then sell at the absolut…
Why are you being downvoted? Your comment is spot-on. Look at the market performance of 2011 and you will see why: Stocks: +0.93% US Treasury Bonds (Long Term): +33% Gold: +10% He's exactly right about Buffet. Buffet makes all his money because Berkshire Hathaway collects all of these insurance premiums and he can use the cash flow float to make a few extra points of interest (above inflation). Do this with enough $b…
Single-year performance is a terrible measure of the value of an investment.
Re: Warren Buffett: Why stocks beat gold and bonds
#58Earlier quoted context omitted.
I think he was talking about a small amount of gold. Twenty-thousand dollars worth could fit in your hand and easily be smuggled in clothes, luggage, etc. That's pretty handy if you had the flee the country from nazis(or whatever) that have stolen all of your other assets. Admittedly that's a pretty unlikely scenario.
It's even more unlikely because you then have to find a buyer that's willing to pay market price for the gold wherever you end up at. You'll be reduced to selling it for whatever people are willing to pay.
In the past it's been mainly useful if you can flee from a region in turmoil to one with more stable conditions. For example, my grandfather fled Turkey for Greece in the late 1910s (http://en.wikipedia.org/wiki/Greek_genocide), taking some gold with him that he was then able to sell in Greece, using the money to help resettle.
Re: Warren Buffett: Why stocks beat gold and bonds
#59The fact that Warren is on the hook for several billion dollars of S&P puts is mentioned nowhere in the article. When O When are reporters going to understand conflict-of-interest?
Do you honestly believe that Warren is trying to deceive you into investing in productive assets rather than a shiny metal because he wants to manipulate the market?
Re: Warren Buffett: Why stocks beat gold and bonds
#60He's wrong. Stocks do not beat gold once inflation outpaces the rate of average market returns, which is exactly where we're at now. Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock, Apple at the absolute bottom, or buy Dell the day it IPO'd or other similar freak scenarios, and then hold all the way through, and then sell at the absolut…
And if you'd bought gold at its peak in 1980 you'd still be down money, even 3 decades later. Adjusted for inflation gold has gone up by a factor of about 4, but almost all of that has been within the last 10 years. Anyone who thinks that gold is a dandy long-term investment is just as deluded as all of the fools who thought "this time it's different" about the last speculative real-estate bubble. Edit: to put a fine…
You reveal a huge bias by the fact that you selectively pick only an extreme event that spans about 0.001% of 30 years as a prime example.
The wild peak of gold in 1980 lasted for days, on a temporary burst higher. The average price of gold in 1980 was $615 or so. Your scenario requires that buyers of gold do not cost average over time, but rather that they only buy at very specific points in time and only sell at very specific points in time.
You could have just as easily purchased gold at $55 in 1972. Or $125 in 1977. Or in 1985 at $300. Or at $266 in 2001.
You make my point about gold: it's a wealth protector, not a vehicle for seeking big real returns. If you had bought gold in 1850 and passed it down the generations, that wealth would have been completely protected from the fiat disaster of the green back the past 90 years. You would not have grown the wealth in some spectacular fashion, because that is not what gold does.