Buffett and gold

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lilemme
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Buffett and gold

Post by lilemme »

I'm wondering what the Bogleheads think about gold/silver in the current environment. I know Warren Buffett has historically looked very unfavorably on the metals, but Berkshire purchased shares in Barrick Gold recently (https://moneyweek.com/investments/commo ... ing-stocks). Of course they may be buying more since the end of Q2, we don't know. I realize that's not the same thing as buying gold bars, but presumably is some form of a bet on the future price of gold. There's speculation that this move by Berkshire will motivate many others to buy gold or mining stocks.

Add to this the low returns on treasuries and inflation risk and maybe it seems reasonable to but some precious metal? Was Bogle himself ever know to buy or consider precious metals?
000
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Re: Buffett and gold

Post by 000 »

Buffet buys gold miner
A timely and equanimous article on gold
Gold continues to soar!

Bogle mostly opposed investing in Gold, but on at least one occasion suggested a 5% allocation for an endowment.
Boglegrappler
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Re: Buffett and gold

Post by Boglegrappler »

Read pages 17-19 to get a bird's eye view of Buffett's view on gold and other categories of investment. He's been consistent over the years.


https://www.berkshirehathaway.com/letters/2011ltr.pdf
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arcticpineapplecorp.
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Re: Buffett and gold

Post by arcticpineapplecorp. »

Ted or Todd may have bought that in the part of the portfolio that they're managing.

don't know if bogle bought gold, except for the wedding ring for himself and his wife. His position was:
Number one, the main thing to remember about gold is that it has no underlying rate of return. Bonds have an underlying rate of return—the yield, or the coupon if you will, when you buy it. Stocks have an underlying rate of return—it’s the dividend yield plus the subsequent earning growth. So they have support there, and they’re in most circumstances largely investment and only to a lesser extent speculation. Investment being those underlying characteristics.

Gold has no underlying investment return. Therefore it is a 100% rank speculation. There’s no question about that. No one could argue that point. Whether gold is a good speculation or a bad speculation, honestly, I don’t know. I get a little nervous when things start going off the wall.

I can remember very clearly when in 1980 when the Today Show would start and somebody—probably not Dave Garraway, but whoever was the host—said, “Well folks, you won’t believe it! Gold hit another high yesterday!” And of course it has never gotten back to that level since.

On the other hand, with the world monetary system in disarray, I would not tell an investor not to own any gold holdings. I’d say own it in the cheapest possible way and to no more than 5% of your portfolio. I don’t do that myself, but I don’t think it’s a ridiculous decision for an investor to make.

https://www.forbes.com/sites/chrisbarth ... a0bbbe543f
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nisiprius
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Re: Buffett and gold

Post by nisiprius »

If I recall correctly, as 000 mentioned, Bogle did include 5% gold in a portfolio he created as an endowment fund for Blair Academy, a private prep school where he had been a scholarship student.
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000
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Re: Buffett and gold

Post by 000 »

From Bogle himself @1:57

I will note that zero or negative yield bonds are still guaranteed by the issuer to (partially) return capital in nominal (or CPI) terms, unlike Gold.
columbia
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Re: Buffett and gold

Post by columbia »

000 wrote: Fri Aug 21, 2020 8:32 pm From Bogle himself @1:57

I will note that zero or negative yield bonds are still guaranteed by the issuer to (partially) return capital in nominal (or CPI) terms, unlike Gold.
I'm not a gold owner, but touting that someone (or thing) will return your principal x months/years after you paid them to borrow it from you, isn't exactly a selling point for negative yielding bonds.
000
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Re: Buffett and gold

Post by 000 »

columbia wrote: Fri Aug 21, 2020 9:03 pm
000 wrote: Fri Aug 21, 2020 8:32 pm From Bogle himself @1:57

I will note that zero or negative yield bonds are still guaranteed by the issuer to (partially) return capital in nominal (or CPI) terms, unlike Gold.
I'm not a gold owner, but touting that someone (or thing) will return your principal x months/years after you paid them to borrow it, isn't exactly a selling point for negative yielding bonds.
Absolutely. I agree, and hold no bonds.

But some are so volatility adverse that they may still want a 0% "guaranteed" return.
Robot Monster
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Re: Buffett and gold

Post by Robot Monster »

000 wrote: Fri Aug 21, 2020 9:04 pm
columbia wrote: Fri Aug 21, 2020 9:03 pm
000 wrote: Fri Aug 21, 2020 8:32 pm From Bogle himself @1:57

I will note that zero or negative yield bonds are still guaranteed by the issuer to (partially) return capital in nominal (or CPI) terms, unlike Gold.
I'm not a gold owner, but touting that someone (or thing) will return your principal x months/years after you paid them to borrow it, isn't exactly a selling point for negative yielding bonds.
Absolutely. I agree, and hold no bonds.

But some are so volatility adverse that they may still want a 0% "guaranteed" return.
It's not necessarily about being volatility adverse.

TIPS are less risky than gold because of the guaranteed return. If someone's philosophy is to take as little risk as needed to meet their financial goals, and they can achieve their goals with less risky TIPS, then TIPS logically makes sense for them.

(I'm using TIPS as the example because its inflation protecting characteristic makes it the ugly cousin of beautiful, shining, sexy gold.)
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JoMoney
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Re: Buffett and gold

Post by JoMoney »

Buffett's advice for non professional "average" investors hasn't changed.
He didn't change his mind on the passive portfolio he elected for his wife's bequest.
If you're an active investor, as Buffett himself and his successor BRK investment team are, then you probably shouldn't be looking for others on 'advice' about how to do that. Active investing is a competitive game, and "talking your book" works against you (unless your actively trying to dump it to someone else).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
atdharris
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Re: Buffett and gold

Post by atdharris »

People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
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JoMoney
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Re: Buffett and gold

Post by JoMoney »

atdharris wrote: Sat Aug 22, 2020 10:03 am People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
:thumbsup
He didn't even buy 'gold', he bought stock in "Barrick", a gold mining company with ticker symbol "GOLD", and a relatively trivial amount from a portfolio perspective. The attempts by others to try and make a meaningful story/strategy around that is silly.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
JBTX
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Re: Buffett and gold

Post by JBTX »

Arguably he bought a company that produces a consumer product and generates income. No different than Coke.
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Forester
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Re: Buffett and gold

Post by Forester »

JoMoney wrote: Sat Aug 22, 2020 10:08 am
atdharris wrote: Sat Aug 22, 2020 10:03 am People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
:thumbsup
He didn't even buy 'gold', he bought stock in "Barrick", a gold mining company with ticker symbol "GOLD", and a relatively trivial amount from a portfolio perspective. The attempts by others to try and make a meaningful story/strategy around that is silly.
Of course he bought gold, Barrick sits on 71million ounces.
Robot Monster
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Re: Buffett and gold

Post by Robot Monster »

JoMoney wrote: Sat Aug 22, 2020 10:08 am
atdharris wrote: Sat Aug 22, 2020 10:03 am People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
:thumbsup
He didn't even buy 'gold', he bought stock in "Barrick", a gold mining company with ticker symbol "GOLD", and a relatively trivial amount from a portfolio perspective. The attempts by others to try and make a meaningful story/strategy around that is silly.
Imagine if you found out someone who spent years decrying pornography, one day straight up bought an adult film company. That's kinda what Buffett has done, I think you have to admit. :wink:
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SlowMovingInvestor
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Re: Buffett and gold

Post by SlowMovingInvestor »

Forester wrote: Sat Aug 22, 2020 12:23 pm
JoMoney wrote: Sat Aug 22, 2020 10:08 am
atdharris wrote: Sat Aug 22, 2020 10:03 am People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
:thumbsup
He didn't even buy 'gold', he bought stock in "Barrick", a gold mining company with ticker symbol "GOLD", and a relatively trivial amount from a portfolio perspective. The attempts by others to try and make a meaningful story/strategy around that is silly.
Of course he bought gold, Barrick sits on 71million ounces.
My impression was that Gold Miner's stocks often diverse from gold prices significantly ? Is that correct ?
Robot Monster
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Re: Buffett and gold

Post by Robot Monster »

SlowMovingInvestor wrote: Sat Aug 22, 2020 12:59 pm
Forester wrote: Sat Aug 22, 2020 12:23 pm
JoMoney wrote: Sat Aug 22, 2020 10:08 am
atdharris wrote: Sat Aug 22, 2020 10:03 am People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
:thumbsup
He didn't even buy 'gold', he bought stock in "Barrick", a gold mining company with ticker symbol "GOLD", and a relatively trivial amount from a portfolio perspective. The attempts by others to try and make a meaningful story/strategy around that is silly.
Of course he bought gold, Barrick sits on 71million ounces.
My impression was that Gold Miner's stocks often diverse from gold prices significantly ? Is that correct ?
Do you mean, "My impression is that gold miners' stocks often deviate from gold prices significantly?" If so, the simple answer can be found doing a comparison between the RING ETF and the GLD ETF.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
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SlowMovingInvestor
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Re: Buffett and gold

Post by SlowMovingInvestor »

Robot Monster wrote: Sat Aug 22, 2020 1:07 pm
SlowMovingInvestor wrote: Sat Aug 22, 2020 12:59 pm
My impression was that Gold Miner's stocks often diverse from gold prices significantly ? Is that correct ?
Do you mean, "My impression is that gold miners' stocks often deviate from gold prices significantly?" If so, the simple answer can be found doing a comparison between the RING ETF and the GLD ETF.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
I meant diverge :)

Thanks for the chart, seems like a fair amount of correlation between gold price and gold miner stocks.
susze
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Re: Buffett and gold

Post by susze »

JoMoney wrote: Sat Aug 22, 2020 10:08 am
atdharris wrote: Sat Aug 22, 2020 10:03 am People seem to be making a lot more about this gold purchase than warranted. It makes up 0.25% of Berkshire's portfolio and it was likely made by Todd or Ted, not Buffett.
:thumbsup
He didn't even buy 'gold', he bought stock in "Barrick", a gold mining company with ticker symbol "GOLD", and a relatively trivial amount from a portfolio perspective. The attempts by others to try and make a meaningful story/strategy around that is silly.
Correct! It appears it is 0.28% of his portfolio. Yes it only shows 2Q but until we know more this is almost a rounding error for him
inbox788
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Re: Buffett and gold

Post by inbox788 »

Market timing when ‘clocks have no hands’ — Warren Buffett’s warning is as relevant now as it was in 2000
https://www.marketwatch.com/story/marke ... 2020-08-23

If you're preparing for the impeding crash, gold makes sense, but Apple stock may not. I hadn't realized Apple valuation has reached 10X revenue. I can't imagine Buffet not moving out at these valuation levels.

As far as correlation between gold, I always assumed there was some going on at some times, but not always. Sometimes it was gold prices, while other times, it's more mining industry or company specific. Similar to oil prices, refineries and oil companies. I think the companies act more like leveraged products, for better and worse. Compare ProShares Ultra Gold ETF that targets 2X gold price.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
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