Warren Buffett

I've bashed Warren Buffett a lot in the past for his fundamental outlook, government policy manipulation, portfolio performance that mimics the S&P but worse, and complete ignorance of HFT, Algorithmic trading, and everything that defines the "new normal" in the stock market.  What can you say, its hard to teach an old dog new tricks sometimes.

However, I stumbled across something I agree with him on, even if only partially.  People ask Warren Buffett  why he doesn't invest in gold, and his answer is simple: gold has no intrinsic value as a useful material, he prefers to invest in assets that are productive and commodities that have use.  I agree with this statement.  Would you be able to do more with, all of the gold in the world, or an equivalent dollar value worth of farmland or even something like timber?  Certainly no one would be able to be too productive with the gold.  You could make a ton of jewelry.... possibly alloy the gold and make some electrical components... but even then it's used in very small quantities and is in relatively low demand for that particular purpose.  Gold is not useful, and in real bull markets it certainly under-performs equities. It's only real asset is that it is limited in supply, its a time tested store of value, and people trust in its value.  Therefore it is a clear favorite for money looking for safety.  Personally, I would much prefer to own something of high industrial value and limited supply over gold, regardless of its time tested value.  It is for this reason I think the real value is in silver, who's mining supply could be entirely depleted in 50 years.  It also has irreplaceable electrical and thermal properties, and is used in large quantities for industrial purposes.

Does this mean i'm a gold bear?  Not necessarily.  People use it as a safe haven and as a hedge against inflation. In current market conditions the prospects for something that meets that criteria bodes quite well (likely better than equities).  Also, the increasing support in other countries (and even this one to some extent) to allow for the optional use of a gold backed currency is certainly bullish.  You also can't ignore the overwhelming support for gold among fund managers that were profitable during the 08 collapse.

So Warren Buffet, we found something in common, even if we may have some disagreement on future direction of pricing.