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Warren Buffett shuns gold as an investment

Discussion in 'General Investing Discussion' started by Tropo, 3rd May, 2011.

  1. Tropo

    Tropo Well-Known Member

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    The billionaire investor Warren Buffett has said he'd always bet on a good business to deliver better returns than gold over time, even as the precious metal sets fresh records.

    "Gold really doesn't have utility," the 80-year old told shareholders at Berkshire Hathaway's annual general meeting.
    "I'd bet on a good producing business to outperform something that doesn't do anything."
    Gold prices reached new highs 15 times in April as a weaker dollar and fears of inflation encouraged some investors to seek the metal as a store of value.
    The financial crisis has helped propel gold higher as initial worries of deflation gave way to current concerns that very low interest rates in much of the developed world is helping to stoke inflation.
    Gold is already up 10pc this year after climbing for each of the last ten.

    It isn't a rally that Mr Buffett, whose investment skill has turned him into the world's third-richest man, will be joining in.
    Asked about gold at the annual meeting in Omaha, Nebraska, Mr Buffett said "if you take all of the gold in the world and put it into a cube, it would be about 67 feet on a side and you could get a ladder and get up on top of it. You can fondle it, you can polish it, you can stare at it. But it isn't going to do anything."

    Gold's current rally has also found new momentum as the world's central bankers become net buyers for the first time in two decades last year. According to the World Gold Council, central banks bought 87 metric tonnes of gold last year as many developing countries sought some diversification away from the dollar.

    Charlie Munger, Mr Buffett's long-term business partner at Berkshire, said that "there's something peculiar about an asset that will really only go up if the world is going to hell."
    Warren Buffett shuns gold as an investment - Telegraph
     
  2. wdongli

    wdongli Well-Known Member

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    Thank you Tropo. It is a very good article! After reading some thought just pop up out:

    Whom is Warren Buffett? A great value investor with his own rules and guidelines for what should be done and not be done in the circles he chooses. He could not see gold had great discount to its store value in 2000, didn't mean the discount didn't exist then. In most of time what he said has the context he never gives out clearly. In this sense and gold only, George Soros seems much better than Buffett.

    Actually Charley Monger plays very important part as a thinker for the partnership of these two great investors. He once said any sensitive market playing is investment. It might be because Buffett goes very deep into the value and Monger trained as lawyer.

    It is true gold has not too much value of the utilities to our daily life but it has the most important value as value storage. It could not be played as high quality bond with high yield and Buffett mainly like hist stock as this kind of bond. Gold in somewhat tightly links to the market sentiment. Buffett dislikes the fads very much and he could use his ways to get the huge money. So it is understandable for his to beat the gold when he feel gold goes too far.

    So do we need to listen what Buffett said? We have to but we should not accept what he said blindly. To be early bird is always better than the late dogs for any cycles. Gold has its cycle but Buffett really wants to buy and hold forever. He is really great in this kind of investment. It is his circle. We could not hit the cycle with the running smoothly forever since they work differently. If gold is our circle we need to play the gold much better than most of players such as buying the gold as much as possible in 2000.

    Really regret I could not see and think in 2000 as now I could. LOL!

    [​IMG]
     
    Last edited by a moderator: 3rd May, 2011
  3. Tropo

    Tropo Well-Known Member

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    "In this sense and gold only, George Soros seems much better than Buffett"

    Silver's fall of $3.50, or 7.6%, and a 1% drop in gold prices Tuesday came as some major investors have been selling.

    George Soros's big hedge fund, a firm operated by high-profile investor John Burbank and some other leading firms have been selling gold and silver, according to people close to the matter, after furiously accumulating precious metals for much of the past two years...:D
    Steep Drop Tarnishes Big Bets on Silver - WSJ.com
     
  4. wdongli

    wdongli Well-Known Member

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    Their moves were wise since they have got their market profit target. Have to say they are great wise speculators. I also sold six shares for loss today. These shares had been in my hand for about 4 years in average.

    The objectives are to get the portfolio rebalanced, lower the cost of the portfolio, and get the tax deduction from the profit I have locked in last October. It is enough for this financial year!

    No losses and keep enough cash reserves in our portfolios are the most important tasks for us. I would buy much tougher in future. I would sell more and buy shares if their discounts are big enough before this financial year.

    Without matter you are value or not value investors, you have to know when to hold and unfold. Buying should be hard in value. Selling should be hare for enoughness. Hope all of us could do much better than this financial year.
     
  5. Tropo

    Tropo Well-Known Member

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    "Have to say they are great wise speculators."
    This guys are traders not speculators.

    "I also sold six shares for loss today. These shares had been in my hand for about 4 years in average."
    And after 4 years you are selling with loss?...so what have you been doing for the last 4 years? :confused:
     
  6. wdongli

    wdongli Well-Known Member

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    They are definitely not the day traders. Speculators or traders or investors are the same if they could get profit for long term. If just for quick gratification and losing the shirt, they would be gamblers without matter what they call themselves or are called as.

    1. I have locked about $180,000 profit in last October from my sales of FMS, AZZ, LEG, IAU, SSN, and so on. 10 baggers have to come with some falling knifes and then I got some losers too. Have to say some have still gone up much higher after I sold such as SSN and IAU.

    2. Then today I sold six losers since they could be used for tax deduction and get more cash reserves for opportunities in future. Actually these 6 fishes didn't become zeros.

    Seriously I struggled to overcome my reluctance to sell them. Today you feel they are hopeless but tomorrow they could be swans in the sky. However the life is cool and we have to get profit every year!

    3. After all of these sales in this financial year, I still get good enough profit and make me be able to buy some great discount of dirty-cheap fishes for 10 baggers in future.

    I have got a lesson. If I want to sell to lock the loss I should sell before the March. Actually if I would have sold in March I could get better results. It always have a issue when you sell!

    4. I still hold BKP, ARX, GCR, RSN, ORO, PDY, AUZ, and other fishes, total 24 fishes which have got profit or break even or a little bit in red, but not let me feel enough or panic. But please don't talk about IMI, which is my shame!

    Some of my fishes have got some 300% return; some got profit and drop down again; some stays where they are. Sometime you think they would be 10 baggers but they turn to be falling knifes. Get the balance and learn how to get the balance is very important.

    5. I am working on for my loss objectives of my portfolio in next financial year! I will work much harder than before to buy extreme low.

    Do feel I would get some 10baggers but who really knows? Opportunities themselves mean some risks. So if you worry too much the risk but forget to get the right risks with the affordable capital, you would go nowhere.

    6. Buying extreme low and sell extreme high needs minds to know value, value discount, market sentiment, and wise speculation on the big market trend.

    We often than not, could not buy the extremely low so we have to sell for stopping loss very often. Looking back and in hindsight, I am happy I could hold PRR, FMS, IAU, and most of my winners for about 4 years in average.

    ***
    Have to say I am not good enough. If I were very good I should not get so many losers in my portfolio in last 4 years.

    Fortunately discount to value and margin of safety are the tools for fools, which, if used with dirty-cheap fishes, could generate a lot of 10 baggers. It lets my portfolio passed the acid test in GFC. I will put more time to learn them.

    Hope we could win more and lose much less in our portfolio! It is about diversification, time average, and portfolio rebalance.
     
    Last edited by a moderator: 5th May, 2011
  7. wdongli

    wdongli Well-Known Member

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    Is Gold a bubble now?

    Not sure but just could not see the phenomenon that the bubbles usually come with. Soros and other wise speculators on economy sold, could not told us gold is the ultimate bubbles since bubbles are mania which needs moms and dads buying.

    I just could not see it happens. What I see is all of moms and dads talk about that gold is bubble. If everyone believe it is bubble and don't join it, it should not be bubble. In this sense gold price may come much higher than anyone's expectation even George Soros.

    In IT booming time, all of the IT genius said W. Buffett was out of date. In this gold bubble all say it is true bubble. The media never warned the market and appreciated Buffett didn't join the party. Now the media became very clever and told us Soros sold the gold. No they never be clever they just could not forget their lost shirts in the GFC.

    One of my best friends called me and warned me that resource boom is at the end; once China tips off all would follow to run off in Australia; but he lost the shirts in IT bust and GFC and this financial year, he still could not get any profit. He followed the medias and then he could not buy low and sell high. Who care about gold drop down if he could have had gut to buy gold at $250 if he could sell above $800!

    Let the crowd cry for the bubble and let you busy to buy discount to value and sell for enough! Do hope the storm could be much much more furious and then I could buy the dirty cheap!

    Star gives brightest at its end, right? I could not see any mania without the participation of moms and dads. Would the market herd be wise in this new credit bubbles?

    ***
    But it’s a funny kind of a bubble. It’s the only one I’ve encountered where so few people seem to own the asset in question, the gold.

    During the dot-com bubble, you met lots of people with tech stocks. Taxi drivers told you what dot-coms they owned. During the housing bubble you met normal, ordinary people who were trading up to expensive homes using adjustable-rate mortgages, buying new condos off plan to flip, and cashing out their fictional “equity” through a refinance mortgage.

    But who actually owns gold? I keep hearing about the gold bubble, but every time I ask people if they own any themselves, they say, “no, no, of course not, it’s a bubble.” But did you hear anyone said it was bubble at the peak of IT booming. It was new age they told me!

    Some bubble. They just said so!

    ***
    Gold has been called as bubble for long time actually it happened when it was $500.00 only.

    If anyone compares the bull market in gold with the last two undisputed “bubbles,” namely tech stocks and housing.

    The picture is pretty remarkable.

    If gold is a “bubble,” it doesn’t look like it’s peaked yet. Indeed it looks like it might be just about to enter its big, blow-off phase.

    That’s when you make the real coin. In this case, gold coin if it happens.

    ***
    Will this happen? It’s anyone’s guess. But there are reasons to think it might. Gold enjoys some of the key characteristics you need for a bubble, including a “this time it’s different” storyline.

    Central banks around the world are printing more dollars, euros, pounds and yen. Gold may simply be a less awful currency than all the others. Banks can’t print any more of it, so its price should probably rise while other currencies fall.

    And then there’s China. As it rises to global superpower status, the country will need to diversify its currency reserves. Right now the Chinese are way too dependent on dollars. They have a tiny amount of gold. If they shift even a bit more, the price will go stratospheric.

    ***
    But there are problems with gold that make it very hard to buy with confidence. Gold is volatile. Nobody knows what it’s worth. I keep asking gold bugs for a sensible valuation, and they can’t tell me. And you can forget all the superstition.

    Despite what the true believers say, gold is no more “true” money or “real” money than anything else. As it generates no income, the gold market is effectively a Ponzi scheme. Your returns come entirely from the next buyer in line.

    ***
    If you want to bet on a mania, you have any number of options.

    One is to buy in stages — Time average in case

    If you want to buy $10,000 worth of gold, and you are terrified you’ll take the move the day before it peaks, then just buy in $1,000 lots over time.

    This seems a particularly good idea at the moment, because gold has risen a long way lately. The dollar may be overdue for a sharp bounce.

    Second is to buy gold mining stocks.


    So far they’ve been left behind by the rise in the metal. Many big gold mining stocks, in particular, are cheap in relation to gold.

    ***
    Playing the bubbles could be very risky but if you could get something extremely low with the gold, you could play the bubbles with little risks.

    Such as I have played golden dirty cheap fishes, some wan and some lost. But if balanced and diversified with other fishes in other sectors, you could get profit with the margin of safety.

    Is gold about to go vertical? Brett Arends' ROI - MarketWatch
     
    Last edited by a moderator: 5th May, 2011
  8. Tropo

    Tropo Well-Known Member

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    "I have got a lesson. If I want to sell to lock the loss I should sell before the March. Actually if I would have sold in March I could get better results. It always have a issue when you sell!"

    Because you do not have rules and system in place I am not surprised that you have got problem with selling.
    Successful traders ALWAYS selling when stop loss is hit, no matter if this happened in March or July etc...

    "We often than not, could not buy the extremely low so we have to sell for stopping loss very often."

    In theory :rolleyes: the best time to buy is when share price is $0.00
    Too many players are obsessed with buying low and selling at the top. That is a reason why they are losing more than they are winning.
    There is nothing wrong with buying high and selling higher.

    "Hope we could win more and lose much less in our portfolio! It is about diversification, time average, and portfolio rebalance."

    Nobody is able to win all the time and losses are part of this business, but if your win/loss ratio is positive (say 3:1), you are doing reasonably well.
    Diversification has nothing to do with buying different stock symbols in different sectors (general misconception).
    Having a different asset class is correct diversification.
    Trading as such is based on probabilities, so you cannot expect 10 buggers gain every time you enter the trade, so more realistic approach is needed.
    General rule - always sell losers as soon as possible and keep the winners.
    :cool:
     
  9. wdongli

    wdongli Well-Known Member

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    Haha Tropo, we all are different even when we see the same thing at the same position, which are perfect fine.

    There are a lot of problems in my mind but we could be smarter idiots in the market. Our minds could not jump and then the profit for long term is a tasks which need we work on our mind every day.

    Dirty-cheap fishes have worked for me since 2004, GFC, V-shape recovery, and so far. At very beginning I just got 30% and sold to see the profit train left the station without me. Later I tried to learn how to buy and hold with a lot of mistakes but increased the profit to 200% but still saw a lot of profit trains left without me. Since GFC I knew margin of safety much better, and then I have got some 10 baggers. One 10-baggers means you could sustain 10 complete losses of 10 buying, which is highly unlikely. However I have struggled to turn a $60,000 portfolio to a one with $350,000 capital.

    Every way could lead us to Rome or hell. I don't really trust any mechanical system in the market. Market playing is a art as the war and game. Market players need some system but have to follow the rules and principles creatively and have multiple systems in hand for different environment. No any single system could work under all of conditions.

    Let's all work smartly and wisely with the profit in hand always even it is impossible sometimes but not losing the shirts are must!
     
  10. Tropo

    Tropo Well-Known Member

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    Amazing....If you know that traders need/have different systems and correct risk/money management rules in place, why do you have a problem?:eek:
     
  11. wdongli

    wdongli Well-Known Member

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    We could not be problem-free. We want to get the opportunities in future but opportunities never stay by themselves and have to come with some risks. We could say we have great risk/money management rules, which could be true, but there are black swans and future have a lot of uncertainties. You could calculate your probabilities, for example, 85% chance to win but when the another 25% is actualized in the market you would lose.

    Generally say no problems to my portfolio since I work very hard to avoid the loss of my portfolio as a whole. However I do have problems to get some of dirty-cheap fishes which refuse to follow my calculation of the probabilities. Then I get my problems, that is, how could I buy the dirty-cheap fishes with the least risk to lose money in this world.

    I wonder I would not get this object in my life, getting all of the dirty-cheap fishes and they would give me 10 baggers only. It is impossible even I dream it every night! However we live in the market reality. I am happy I could be a little bit smarter than those who lost their shirts but also the valuable lessons.

    Anyway, all of us need some lucks. What if you are great but something just like to make trouble to you and you could not play what you love, know in the best, and good personality? What if Tantanic didn't be hurt by the iceberg? Who could be 100% sure the iceberg would have not in its way?

    In retrospection, all were so clear and understandable but before GFC who dared to challenge the decoupling theme of Australian economies and market? What I have done since 2004, my evaluation, is not too bad and could be much better if I keep my mind updating and not terribly unlucky!

    LOL!
     
  12. Tropo

    Tropo Well-Known Member

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    "However I do have problems to get some of dirty-cheap fishes which refuse to follow my calculation of the probabilities.
    Then I get my problems, that is, how could I buy the dirty-cheap fishes with the least risk to lose money in this world."


    Hahaha....I see....It seems to me that your junk (dirty fish), do not know that you bought them? Maybe you should tell them who the boss is....
    I wonder why you are freezing your money with a hopeless stock.
    As I said, in theory the lowest risk is at $ 0.00, but again...even if you buy low how long you are prepared to wait for the result?
    When your shares do nothing, you are practically losing money. You may be better off if you put the same amount of money into the bank.

    "I wonder I would not get this object in my life, getting all of the dirty-cheap fishes and they would give me 10 baggers only.
    It is impossible even I dream it every night! However we live in the market reality.
    I am happy I could be a little bit smarter than those who lost their shirts but also the valuable lessons."


    I would say that your objectives are rather overstretched.
    If your junk is giving you a headache, why don't you sell it and start proper trading? :confused:
    Unfortunately market is not even aware of your existence, so maybe there is time to change your strategy?

    "In retrospection, all were so clear and understandable but before GFC who dared to challenge the decoupling theme of Australian economies and market?
    What I have done since 2004, my evaluation, is not too bad and could be much better if I keep my mind updating and not terribly unlucky!"


    If you take a look back at events, everything is simple and easy, but it's crucial that you review how your trades went.
    Luck (four letter word), has nothing to do with long term success, even if you get lucky few times.
    I would say that in your case more down to Earth approach to be considered.
    Anyway ... happy punting.
     
  13. wdongli

    wdongli Well-Known Member

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    Haha tropo, hope your systems and my junks bring a lot of profit for us. I really like to double my portfolio again by hitting at the right junks at right time for big enough profit. My junks make my portfolio very health actually it has made more than doubled of my capital size. What's your system give to you? I believe it would be greater! Good luck!
     
  14. Tropo

    Tropo Well-Known Member

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    Let me know when you quadruple your capital, so I may become a...fisherman.:p
    Happy hunting.
     
  15. wdongli

    wdongli Well-Known Member

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    If everything as my plan(only if), 2-4 of my fishes(will be 30 in total next financial year) should be 5-10 times of their current price. Like BKP(I bought at $0.005 and took SPP for 1.8million of its shares) which I turned it up and down, and right and left ever week, some of them have quite big potential to get some great explosive powder to shoot them into the sky. What if BKP just has oil; oro just has REE; Arh just gets the capital to get the IO out of ground; Pdy just is used by the Chinese players to extend the IO supply to reduce the monopoly of big three; Cig just gets oil big enough;... I don't know but I did buy them at their lowest price or not too far from their lowest price.

    Dirty cheap fishes are the market deserted orphans and if any news are excellent, they would shoot up. Actually some of the dirty-cheap fishes have given me more than 20 baggers such as PRR, which I bought at $0.01 and sold at $0.235. It is very tough to hold the shooting up fishes, which is very elusive and sticky, and you could not be 100% sure they would not drop down again. It is art I do feel and could not talk as absolute right or wrong. Sometimes a few of them could shoot up together without any warning signs. The keys to play dirty-cheap fishes are to buy at lowest price and 2 of 10 would be falling knife statistically. So once you are hurt by the falling knifes you have to sell some winners to cover the losses; if no falling knifes you have to hold the winners to the level they could shoot up!

    Of course, it is not easy to buy lowest and we would make a lot of mistakes to buy for this lowest price. Actually I spent nearly four years to learn it before I dared to do so. I hope all of us could get our swans and fishes fly in the sky but get them when they drop down or want to have breaks in the wrong place for them! All of us have the tasks to decide when to hold or unfold.
     
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