Why Buffett and Rogers won't buy gold today
Saturday, October 30, 2010
Warren Buffett, the world's most successful investor, doesn't like gold. In a 1998 speech at Harvard, he told the audience, "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."
The problem is, Buffett doesn't understand gold's utility. It is the world's perfect money. While it is not a productive asset, which Buffett prefers, it is a store of value. Also, as money, goods and services should be exchangeable for gold. Instead, we exchange them for paper. Last week, in an interview with Forbes, Buffett added to his bearish gold thesis:
"Look," he says, with his usual confident laugh. "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all – not some, all – of the farmland in the United States. Plus, you could buy 10 ExxonMobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
Again, Buffett doesn't understand gold is money. If gold is the world's currency and we assign a value to all the gold in the world, it should equal all the assets in the world. Because it is money, you can't value it like an oil company or farmland. Gold can't produce value, as Buffett says, because it is value.
When asked what the typical investor should own instead, Buffett answered without hesitation, "equities." While we don't agree with Buffett's long-term view of gold, we do agree equities are attractive today. And we think gold could be due for a correction.
Not even Jim Rogers, probably the biggest gold bull in the world, is buying at these levels. Why? Too many people are bullish. Around 98% of investors are currently bullish on gold. And a comparable number hate the U.S. dollar. Look at this chart of the dollar's value relative to gold. It's at a 20-year low (as far back as I could chart):
We wrote it, did you buy it?
Our third uranium pick [Hathor Exploration] is a potential moonshot.
Hathor's Roughrider deposit, located in Saskatchewan, Canada, is the best uranium discovery in the last 20 years for a junior uranium company. It's in the right, mining-friendly jurisdiction, within a few miles of eight major uranium deposits, including Cameco's McArthur River and Cigar Lake mines.
The company owns 90% of the Midwest Northeast project, which includes Roughrider. In November 2009, it published a resource of 12 million pounds of uranium at about 2.5% uranium. This is a tremendous deposit. – Matt Badiali, August 2010, S&A Resource Report
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Friday, October 29, 2010How to Trade One of China's Greatest Trophy Assets By Larsen Kusick
China's travel sector is guaranteed to see huge growth over the next decade. It's no surprise that China's major airlines, China Eastern and China Southern, are soaring to new highs. But the best play on this mega growth trend is...
Tuesday, October 26, 2010The Halloween Party That Destroyed America's Currency By Jeff Clark
"If we don't find a way to bail the banks out soon, they'll never be able to finance our campaigns. We'll be booted out of office. We'll be stuck standing in line for food stamps like everybody else."
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