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Warren Buffett: Why stocks beat gold and bonds

finance.fortune.cnn.com

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Re: Warren Buffett: Why stocks beat gold and bonds

#61

Post by ta12121 »

gjm11 wrote: post #35
shingen wrote: post #29

Earlier quoted context omitted.

Unfortunately it is worth noting that FDR instigated the greatest private wealth seizure in the history of the planet when he stole all of America's privately held gold with force. If you've got a government that is willing to plunder like that, there's no great way to keep your wealth safe except to get yourself and your wealth out of the country.

> stole all of America's privately held gold Except for the bit where he, y'know, paid for it at the then-prevailing rate. (Which was defined by law, since at that point the US dollar was still on the gold standard.)

Yes, and then immediately after taking the gold he changed the standard, so if you wanted to buy your original gold back you would have to pay more money. What happened was robbery.

Re: Warren Buffett: Why stocks beat gold and bonds

#62

Post by brown9-2 »

andjones wrote: post #45
shingen wrote: post #9

He'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 per ounce 1968 $39.31 2012 $1,750.00 (current price give or take) http://www.nma.org/pdf/gold/his_gold_prices.pdf Berkshire Hathaway one share 1968 $36.00 2012 $118,000.00 (current price give or take) http://allfinancialmatters.com/2008/04/02/a-look-at-berkshir... Which would you rather invest in?

Comparing the price-change in gold to the price-change in just one stock is cherry-picking the data, no matter how correct your main argument is.

Re: Warren Buffett: Why stocks beat gold and bonds

#63

Post by smokeyj »

gjm11 wrote: post #35
shingen wrote: post #29

Earlier quoted context omitted.

Unfortunately it is worth noting that FDR instigated the greatest private wealth seizure in the history of the planet when he stole all of America's privately held gold with force. If you've got a government that is willing to plunder like that, there's no great way to keep your wealth safe except to get yourself and your wealth out of the country.

> stole all of America's privately held gold Except for the bit where he, y'know, paid for it at the then-prevailing rate. (Which was defined by law, since at that point the US dollar was still on the gold standard.)

Except they paid market rate knowing full well what would happen to the buying power of dollars relative to gold. I like how people are willing to redefine theft to support their notions of benevolent government. You guys are a riot.

Re: Warren Buffett: Why stocks beat gold and bonds

#64

Post by smokeyj »

Cushman wrote: post #41

Imagine if gold were a company. Friend: "Hey man, you gotta get in on this— this stock has gone up 30% in the last year! Nowhere to go but up!" You: "Wow, that's amazing! What does it do?" Friend: "Um... it doesn't corrode?"

Imagine if the USD were a company.

Friend: "Hey man, you gotta get in on this— this stock has gone down 30% in the last year! Nowhere to go but down!"

Re: Warren Buffett: Why stocks beat gold and bonds

#65

Post by beagle3 »

gjm11 wrote: post #35
shingen wrote: post #29

Earlier quoted context omitted.

Unfortunately it is worth noting that FDR instigated the greatest private wealth seizure in the history of the planet when he stole all of America's privately held gold with force. If you've got a government that is willing to plunder like that, there's no great way to keep your wealth safe except to get yourself and your wealth out of the country.

> stole all of America's privately held gold Except for the bit where he, y'know, paid for it at the then-prevailing rate. (Which was defined by law, since at that point the US dollar was still on the gold standard.)

.... only to devalue the dollar by 50% or so as soon as it was believed there was not a lot of gold left in private hands.

While "stealing the gold" is not technically correct, eliminating 50% of the value of everyone's saving IS, and the confiscation of gold was done to eliminate the best (and popular) store of value.

Of course, it was all legal -- but when the government makes the laws, that statement is completely moot.

Re: Warren Buffett: Why stocks beat gold and bonds

#66

Post by brown9-2 »

shingen wrote: post #9

He'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).

Am I correct in interpreting this to mean that you believe that inflation has been 100% over the past 12 years (that what you could have gotten for $13 in 1999 would only get you half the same basket of goods today)?

Re: Warren Buffett: Why stocks beat gold and bonds

#67

Post by jpdoctor »

hodder wrote: post #59
jpdoctor wrote: post #51

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?

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?

Do you honestly believe he is not talking his book?

Re: Warren Buffett: Why stocks beat gold and bonds

#68

Post by gibybo »

shingen wrote: post #52
gibybo wrote: post #43

Earlier quoted context omitted.

>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 somet…

The Dow doesn't get to drop GM after it goes bankrupt and then not count its losses. The decline of GM hurt the Dow index just as much as it would have hurt anyone else that bought and sold GM stock when the Dow index added/dropped it.

It also represents an average of the market, so the fact that it was hard to mirror it exactly is not particularly relevant. Mirroring it approximately, or buying any other large basket of stocks, would have led to roughly the same result.

While it's true that an investment in Gold was better than an investment in USD, it wasn't better than common stock equities. You said the only way to capture a return better than Gold was to buy a particular stock at IPO, but that's just factually incorrect.

Re: Warren Buffett: Why stocks beat gold and bonds

#69

Post by arjunnarayan »

dmm wrote: post #17
mikeash wrote: post #10

Earlier quoted context omitted.

An unstable government could just as easily seize your gold. What investor cares about millennia? Centuries is already too much, unless you're vastly more concerned about your great great great grandchildren than most people. 100 years is probably the absolute largest possible upper limit for a real investor to care about, and typically it's much less still.

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.

If we've come to the point where you're fleeing the country from Nazis with only what you can carry in your hand, the only thing that's going to be sustainable is investment in _yourself_ through massive education. That way you're up and working and earning from the moment you're safely away.

Re: Warren Buffett: Why stocks beat gold and bonds

#70

Post by brown9-2 »

jrockway wrote: post #55
tnuc wrote: post #49

Warren 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.

But is that utility that you mention the reason why people bury it again and pay people to stand around guarding it?

Gold may have some utility and practical applications but that does not seem to account for all of it's perceived value.

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