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Posted by zanek on 02-10-12 12:33 AM:

Warren Buffett: Why stocks beat gold and bonds

http://finance.fortune.cnn.com/2012...tter/?iid=HP_LN

Warren Buffett: Why stocks beat gold and bonds

"FORTUNE -- Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date."

People in the comments on CNN are all making ad homieum attacks on Buffet or saying he's trying to find bag holders for the next stock drop.

What do you all think ?

Posted by cyoungmark on 02-10-12 04:50 AM:

Value Investing has returned more than any other longer term strategy. I think if you know how to invest right, your return will be greater because you will pick the best asset, not the other way around.

Posted by sumfuka on 02-10-12 06:42 AM:

I still prefer gold over stocks. Reason being it is one of the few things that could be manipulated. And you don't have to worry about time decay. Currencies used to be good but in this day and age, who is to say that particular currency won't collapse. Nations are crumbling right before our eyes.

So Buffett can keep compounding on his stocks, and I'll keep compounding on the metals. Everyone wins.

Posted by nutmeg on 02-10-12 12:12 PM:

Buffetts holding period for stocks is "forever"

Now if you want to short a stock, he's the man to see. He's not going to call in your loan.

So WEB sets up a fixed rate of interest on your short position, long term long vs long term short.

Probably looks good on paper for the both of them.

Posted by newwurldmn on 02-10-12 12:16 PM:

Re: Warren Buffett: Why stocks beat gold and bonds

Quote from zanek:

http://finance.fortune.cnn.com/2012...tter/?iid=HP_LN

Warren Buffett: Why stocks beat gold and bonds

"FORTUNE -- Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date."

People in the comments on CNN are all making ad homieum attacks on Buffet or saying he's trying to find bag holders for the next stock drop.

What do you all think ?

I would be listening to him. Remember he was the first person of note to publicly say that the derivatives were a disaster waiting to happen (and that was in 2003).

Posted by piezoe on 02-10-12 03:25 PM:

Quote from sumfuka:

I still prefer gold over stocks. Reason being it is one of the few things that could be manipulated. And you don't have to worry about time decay. Currencies used to be good but in this day and age, who is to say that particular currency won't collapse. Nations are crumbling right before our eyes.

So Buffett can keep compounding on his stocks, and I'll keep compounding on the metals. Everyone wins.

you're deluding yourself. Mr. Buffett is correct. You should read the article again and learn to think in terms of purchasing power. Wall street hype and markets are always reported in nominal dollars, you must think in terms of purchasing power to be able to invest wisely.

For example, when you discount the S&P for inflation you find the that the total return since the mid seventies is, if you omit dividends, roughly that of Treasuries with of course greater risk. However, if you include dividends, you now get a return a little better than inflation. Over longer periods, gold keeps you roughly even with inflation, and bonds lose to inflation.

The key to long term investing is dividends, or value investing as someone else has pointed out. I prefer the dividend route and only consider, for long term investing, stocks in a long term up trend with a history of raising dividends. I will buy nothing but stocks that pay dividends.

Posted by MKTrader on 02-10-12 03:29 PM:

Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from newwurldmn:

I would be listening to him. Remember he was the first person of note to publicly say that the derivatives were a disaster waiting to happen (and that was in 2003).

He also cheerleads every bailout and stimulus package...and personally profits from them. He was once a good value investor. He's a crony capitalist scumbag now.

Oh, and he made a really bad bet on silver in 2005. He literally picked one of the worst (and few) times to invest in PMs during the last decade.

He's the last person to listen to when it comes to PMs or unbiased views on investing and the economy.

Posted by piezoe on 02-10-12 03:43 PM:

Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from MKTrader:

He also cheerleads every bailout and stimulus package...and personally profits from them. He was once a good value investor. He's a crony capitalist scumbag now.

Oh, and he made a really bad bet on silver in 2005. He literally picked one of the worst (and few) times to invest in PMs during the last decade.

He's the last person to listen to when it comes to PMs or unbiased views on investing and the economy.

Capitalism, when perfected, IS crony capitalism. You should admire him for that.

Posted by MKTrader on 02-10-12 03:57 PM:

Re: Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from piezoe:

Capitalism, when perfected, IS crony capitalism. You should admire him for that.

Absolutely not. Unless your definition of "capitalism" goes something like this:

"Capitalism, therefore, has come to be viewed as compatible with and indeed even requiring activist government: a government that manipulates investment patterns through fiscal policy, regulates production, supervises competition through licensing and antitrust laws, stimulates exports by use of subsidies, and controls the purchase of imports with tariffs and quotas. The interventionist state, in the evolution of historical capitalism, has come to be considered the prerequisite for the maintenance of the market economy."

http://www.fff.org/freedom/0193b.asp

A decentralized system of free markets would look more like this:

http://books.google.com/books/reade...e=gbs_atb_hover

Posted by piezoe on 02-10-12 04:33 PM:

Re: Re: Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from MKTrader:

Absolutely not. Unless your definition of "capitalism" goes something like this:

"Capitalism, therefore, has come to be viewed as compatible with and indeed even requiring activist government: a government that manipulates investment patterns through fiscal policy, regulates production, supervises competition through licensing and antitrust laws, stimulates exports by use of subsidies, and controls the purchase of imports with tariffs and quotas. The interventionist state, in the evolution of historical capitalism, has come to be considered the prerequisite for the maintenance of the market economy."

http://www.fff.org/freedom/0193b.asp

A decentralized system of free markets would look more like this:

http://books.google.com/books/reade...e=gbs_atb_hover

Yes, that's fairly close to my definition of the reality of U.S. capitalism. Another definition, and my favorite is the first definition in Webster's New World Dictionary, 1956 edition.

I don't confuse "free enterprise" with "capitalism". The capitalists themselves are responsible for the confusion. Equating free enterprise with capitalism is somewhat like equating Business with Ethics.

As a capitalist I love the U.S. version and Crony Capitalism. As a consumer, I hate it. The proper role of government, in my very humble opinion, is to protect free enterprise from us capitalists. In that respect the U.S. has failed mightily.

Posted by failed_trad3r on 02-10-12 04:42 PM:

Re: Re: Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from MKTrader:

Absolutely not. Unless your definition of "capitalism" goes something like this:

"Capitalism, therefore, has come to be viewed as compatible with and indeed even requiring activist government: a government that manipulates investment patterns through fiscal policy, regulates production, supervises competition through licensing and antitrust laws, stimulates exports by use of subsidies, and controls the purchase of imports with tariffs and quotas. The interventionist state, in the evolution of historical capitalism, has come to be considered the prerequisite for the maintenance of the market economy."

http://www.fff.org/freedom/0193b.asp

A decentralized system of free markets would look more like this:

http://books.google.com/books/reade...e=gbs_atb_hover

You're wrong. The government is now run by corporations. This is true capitalism, a true power grab. It's the corporations creating laws to benefit themselves, as to make more profit, that is what capitalism is all about. About creating advantages for your own company, with a single goal in mind, to make more money.

You are looking probably at the ideal state of capitalism ,which can never and will never exist, like the ideal state of communism which is just a mirage. Real communism, real capitalism doesnt work like that

Posted by newwurldmn on 02-10-12 05:12 PM:

Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from MKTrader:

He also cheerleads every bailout and stimulus package...and personally profits from them. He was once a good value investor. He's a crony capitalist scumbag now.

Oh, and he made a really bad bet on silver in 2005. He literally picked one of the worst (and few) times to invest in PMs during the last decade.

He's the last person to listen to when it comes to PMs or unbiased views on investing and the economy.

Yes. He talks his book. Who doesn't.
Yes. He cheer leaded the bailout. Are you sad that we didn't fall into Great Depression 2?
Okay, so he got 1 trade wrong. His track record is 30%/year for 40 years. I'm betting yours isn't.

And to call him a crony, means you don't fully understand what his value to his friends really is. He get's favorable deals because he's built a reputation for being an astute investor and for backing current management. That has economic value.

Posted by beachhouse on 02-10-12 05:39 PM:

Re: Warren Buffett: Why stocks beat gold and bonds

Quote from zanek:

[B

People in the comments on CNN are all making ad homieum attacks on Buffet or saying he's trying to find bag holders for the next stock drop.

What do you all think ? [/B]

I think he is trying to tranfer his bags of bad option trades to others.

He is under water right now, he needs to pump up the stock market.

If he pumps the stock market for his bad option trades, he is just a normal "investor." But coming out repeatedly on TV to pump just makes him look bad. He shouldn't over do it, because we all know he is under water, it exposes his desperation.

If his is Corzine and runs a broker firm, he probably will use customers' money to buy more options. The old man is a harm to himself.

Posted by newwurldmn on 02-10-12 05:41 PM:

Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from beachhouse:

I think he is trying to tranfer his bags of bad option trades to others.

He is under water right now, he needs to pump up the stock market.

If he pumps the stock market for his bad option trades, he is just a normal "investor." But coming out repeatedly on TV to pump just makes him look bad. He shouldn't over do it, because we all know he is under water, it exposes his desperation.

If his is Corzine and runs a broker firm, he probably will use customers' money to buy more options. The old man is a harm to himself.

If i recall he rolled his options down and out. So he's probably up on the new position with losses taken on the old position. Anyway the options are small potatos. Only 10Bn in notional on major indices. He probably has a 100Bn stock portfolio.

Posted by Specterx on 02-10-12 05:53 PM:

Quote from piezoe:

The key to long term investing is dividends, or value investing as someone else has pointed out. I prefer the dividend route and only consider, for long term investing, stocks in a long term up trend with a history of raising dividends. I will buy nothing but stocks that pay dividends.

I don't understand this sort of view. You realize that dividends come out of the market's capitalization, right? It therefore makes no fundamental difference whether you're paid a dividend or not.

If you're paid a dividend and reinvest the proceeds back into the shares, your account value is the same as if the company had simply retained the earnings.

If you sell 5% of your non-dividend-paying shares every year, it's equivalent (not accounting for taxes) to receiving a 5% yearly dividend payout from the company.

Dividends are 1) a means for large shareholders to extract wealth from the business without diluting their ownership interest (not relevant unless you're a billionaire), and 2) a way for mature businesses to dispose of excess funds in the absence of worthwhile investment opportunities. Dividend-paying stocks are not automatically better or worse investments than non-dividend-payers.

Posted by failed_trad3r on 02-10-12 07:02 PM:

Quote from Specterx:

I don't understand this sort of view. You realize that dividends come out of the market's capitalization, right? It therefore makes no fundamental difference whether you're paid a dividend or not.

If you're paid a dividend and reinvest the proceeds back into the shares, your account value is the same as if the company had simply retained the earnings.

If you sell 5% of your non-dividend-paying shares every year, it's equivalent (not accounting for taxes) to receiving a 5% yearly dividend payout from the company.

Dividends are 1) a means for large shareholders to extract wealth from the business without diluting their ownership interest (not relevant unless you're a billionaire), and 2) a way for mature businesses to dispose of excess funds in the absence of worthwhile investment opportunities. Dividend-paying stocks are not automatically better or worse investments than non-dividend-payers.

No. Myth. Market cap is paper money. Dividend is real money.

Posted by newwurldmn on 02-10-12 07:20 PM:

Quote from Specterx:

I don't understand this sort of view. You realize that dividends come out of the market's capitalization, right? It therefore makes no fundamental difference whether you're paid a dividend or not.

If you're paid a dividend and reinvest the proceeds back into the shares, your account value is the same as if the company had simply retained the earnings.

If you sell 5% of your non-dividend-paying shares every year, it's equivalent (not accounting for taxes) to receiving a 5% yearly dividend payout from the company.

Dividends are 1) a means for large shareholders to extract wealth from the business without diluting their ownership interest (not relevant unless you're a billionaire), and 2) a way for mature businesses to dispose of excess funds in the absence of worthwhile investment opportunities. Dividend-paying stocks are not automatically better or worse investments than non-dividend-payers.

The earnings that derive those dividends are generally though to be stable which is good. Also, dividends prevent companies (especially non growing ones) from over investing in pointless projects.

Posted by Specterx on 02-10-12 07:45 PM:

Quote from failed_trad3r:

No. Myth. Market cap is paper money. Dividend is real money.

...and to repeat, in actual practice, dividend payments are not magically taken "off the table" once paid - at least not if you're going for compound returns. You've just received a dividend payment; great, now it can sit in your account as cash earning 0.25%, or you can re-invest it back into stock.

Which leads you to precisely the same place you'd be if you'd never received a dividend in the first place.

Posted by Debaser82 on 02-10-12 08:09 PM:

Gold is up 5000 % since the early 70's.

Posted by Swan Noir on 02-10-12 09:27 PM:

Re: Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

I agree with almost all of your posts and respect that you are consistent with a long term view of the bottom line, piezoe. That is why it is upsetting that a guy with your obvious good sense could possibly be pro crony capitalism?

Of course there is a bit of "crony" edge in every system. But the extent to which this once great nation has sold itself to every special interest is disgusting. Bad enough it has become a whorehouse but at this point it's not even a well run whorehouse.

I do not think you have it right on this one.

Quote from piezoe:

Capitalism, when perfected, IS crony capitalism. You should admire him for that.

__________________
Swan Noir

Posted by bwolinsky on 02-10-12 10:12 PM:

Quote from sumfuka:

I still prefer gold over stocks. Reason being it is one of the few things that could be manipulated. And you don't have to worry about time decay. Currencies used to be good but in this day and age, who is to say that particular currency won't collapse. Nations are crumbling right before our eyes.

So Buffett can keep compounding on his stocks, and I'll keep compounding on the metals. Everyone wins.

There is no "compounding" in medals. It is inflation, and will stop, and so will your compounding.

Buffet knows cash flows are more dependable than the prospect of rising prices in commodities. I completely understand where he's coming from, and you do not. Compounding medals will stop.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by bwolinsky on 02-10-12 10:14 PM:

Quote from Debaser82:

Gold is up 5000 % since the early 70's.

And XOM is up tens of thousands of percent since then, so gold has lagged that stock for sure.

Think the split adjusted price from mid seventies of XOM is below $0.15.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by sumfuka on 02-10-12 10:33 PM:

Quote from bwolinsky:

There is no "compounding" in medals. It is inflation, and will stop, and so will your compounding.

Buffet knows cash flows are more dependable than the prospect of rising prices in commodities. I completely understand where he's coming from, and you do not. Compounding medals will stop.

Really??? There's no compounding in metals? I must be doing something very wrong then.

Buffett is 1st and foremost an Insurance Guy. I don't know how long you have been alive. But my experience with insurance people is less than honorable.

Posted by bwolinsky on 02-10-12 10:37 PM:

Quote from sumfuka:

Really??? There's no compounding in metals? I must be doing something very wrong then.

Buffett is 1st and foremost an Insurance Guy. I don't know how long you have been alive. But my experience with insurance people is less than honorable.

You are. Riding the coattails of an inevitable bubble burst that you've just so happened to catch when any time in the last 30 years really wasn't that great of an opportunity and that's the point Buffet will make to you and so will I.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by sumfuka on 02-10-12 10:43 PM:

Quote from piezoe:

you're deluding yourself. Mr. Buffett is correct. You should read the article again and learn to think in terms of purchasing power. Wall street hype and markets are always reported in nominal dollars, you must think in terms of purchasing power to be able to invest wisely.

For example, when you discount the S&P for inflation you find the that the total return since the mid seventies is, if you omit dividends, roughly that of Treasuries with of course greater risk. However, if you include dividends, you now get a return a little better than inflation. Over longer periods, gold keeps you roughly even with inflation, and bonds lose to inflation.

The key to long term investing is dividends, or value investing as someone else has pointed out. I prefer the dividend route and only consider, for long term investing, stocks in a long term up trend with a history of raising dividends. I will buy nothing but stocks that pay dividends.

Fair enough. You make valid points. Just not my cup of tea. I prefer hard assets.

Posted by sumfuka on 02-10-12 10:46 PM:

Quote from bwolinsky:

You are. Riding the coattails of an inevitable bubble burst that you've just so happened to catch when any time in the last 30 years really wasn't that great of an opportunity and that's the point Buffet will make to you and so will I.

What is a bubble?

Posted by denner on 02-10-12 10:53 PM:

Quote from sumfuka:

What is a bubble?

Beau's sense of self importance.

__________________
wealth effect: stock market higher, health care costs higher, unemployment higher, food/energy prices higher, taxes higher, poverty higher, bonuses higher, foreclosures higher, homelessness higher, crime rate higher, bankruptcies higher, unsold cars higher... it's economics 101

Posted by bwolinsky on 02-10-12 11:11 PM:

Quote from denner:

Beau's sense of self importance.

Or missing that Gold's been a terrible investment since 1980 compared to stocks.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by sumfuka on 02-10-12 11:11 PM:

Quote from denner:

Beau's sense of self importance.

Every now and then it's important to have the retarded kids feel special. Boost their ego up and let them be. Hopefully they'll become someone else s problem.

All I said was Buffett might have a bias towards metals, and this nigga gets all emotional like I took a shit on his dinner.

Posted by bwolinsky on 02-10-12 11:21 PM:

Quote from the dumb ass that doesn't know when to sell gold:

Every now and then it's important to have the retarded kids feel special. Boost their ego up and let them be. Hopefully they'll become someone else s problem.

All I said was Buffett might have a bias towards metals, and this nigga gets all emotional like I took a shit on his dinner.

There's no room for ego in trading, which is why I let my systems trade for me.

Your "compounding" comment is dumb luck. Buffet's bias is that they're terrible investments long term, and if that's a bias, we really know who the retarded kid that needs to feel special is.

So what has gold done lately?

Breaching to its all time high, it has set three lower highs in a row and aren't you wondering what to do?

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by sumfuka on 02-10-12 11:48 PM:

Quote from bwolinsky:

There's no room for ego in trading, which is why I let my systems trade for me.

Your "compounding" comment is dumb luck. Buffet's bias is that they're terrible investments long term, and if that's a bias, we really know who the retarded kid that needs to feel special is.

So what has gold done lately?

Breaching to its all time high, it has set three lower highs in a row and aren't we wondering what to do.

You win. Just short gold to 0. And I will buy it to infinity.

Posted by bwolinsky on 02-10-12 11:52 PM:

Quote from sumfuka:

You win. Just short gold to 0. And I will buy it to infinity.

I'm not saying it's zero, but every lower high should have been sold, and if you're looking for a good out you'll see it drop to the 160-155 level on GLD, where you can back in. If you're in the commodity, the studies I've seen on the effects of roll effectively remove any long term profits you might make, so switching out the commodity to gld will really allow your investments to compound since they won't be paying extravagant fees every time the front month ends.

From that perspective the Buffet bias is more about cash flow. He would rather bet money he understands than the off chance that his commodity might get hit with an inflationary price jump.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by tenthousandmen on 02-11-12 01:40 AM:

Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from beachhouse: He shouldn't over do it, because we all know he is under water, it exposes his desperation.

We all know? You mean you've convinced your egotistical jello mush of your brain something that is absurd and false?

I think you should phone Buffett and give him some tips from a real trader, he seems to only like the long cash account stuff... cheers

Posted by KINGOFSHORTS on 02-11-12 09:15 PM:

If you bought Gold in 1980 during the last gold bubble and paid 850 an ounce back then, gold would need to trade at 2320 today for you to break even.

So you would still be underwater.

Buying during bubbles is a fools play.

Posted by bwolinsky on 02-11-12 09:23 PM:

Quote from KINGOFSHORTS:

If you bought Gold in 1980 during the last gold bubble and paid 850 an ounce back then, gold would need to trade at 2320 today for you to break even.

So you would still be underwater.

Buying during bubbles is a fools play.

Very good! The definition of profitability is always relative to the period in question, and if we don't outperform the underlying index per se, the difference I was trying to to highlight is even more exacerbatted by the performance of the index over time as a percentage of profit, than the basic definition of "profit" was according to any definition of time and the value of 1987 before that where gold was priced even more abundantly than its' usefullness as a potential variant to silver or other abundantly consumable use as silver even though we use them as shields to the bright of the sun it's use is limited to the individual who depends on its' ultimate dependence of brightness that must always be valued by its' ability to reflect the dangers of the sun on all of the values it might otherwise be used, therefore. Therefore!.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by Debaser82 on 02-11-12 09:24 PM:

Quote from KINGOFSHORTS:

If you bought Gold in 1980 during the last gold bubble and paid 850 an ounce back then, gold would need to trade at 2320 today for you to break even.

So you would still be underwater.

Buying during bubbles is a foolshttp://www.elitetrader.com/vb/reply.php?s=&action=newreply&postid=3444864# play.

Yeah, imagine being so unlucky putting all your money in gold those 2 weeks in 1980 where gold was above 600 USD an ounce...

Man, I wouldnt want to be that guy man...

Urgh, this is such a worn out argument.

How bout if you bought Citi at 50 $, or Pet.com at 300$....

How are those guys doing?

But yeah thats an unfair comparison right because ofcourse everyone only invests in the index...

Oh and by the way did you know the average life expectancy for companies is 30 years?

So logic would dictate if you put all your money in stocks in 1980 you wouldnt be doing so well today either....

Posted by bwolinsky on 02-11-12 09:38 PM:

Quote from Debaser82:

Yeah, imagine being so unlucky putting all your money in gold those 2 weeks in 1980 where gold was above 600 USD an ounce...

Man, I wouldnt want to be that guy man...

Urgh, this is such a worn out argument.

How bout if you bought Citi at 50 $, or Pet.com at 300$....

How are those guys doing?

But yeah thats an unfair comparison right because ofcourse everyone only invests in the index...

Oh and by the way did you know the average life expectancy for companies is 30 years?

So logic would dictate if you put all your money in stocks in 1980 you wouldnt be doing so well today either....

Good man, that is the point of this thread that even though Warren Buffet knows that the return from this storm is greater than the most profitable aspect of buy and hold trader is from $600 to maybe $1,800 per share if the value of those stocks didn't exceed the 200% only profitability of the storm then this was indeed a bad bet as attested to the storm by way of a multiple of only 200% the potential profit of 1980 doesn't exceed what you would have proifited in this example of 200% profit if you had brought the calm from the storm 20 years hence than 30 years hence...that profit, even before oil, which was Iraq's regular production export would have been below even the most calmest production hedger's price that never would have brought a profit because $1,800 30 years hence is always less than $100 years hence because the calm of the storm always accounted for inflation and until the inflation of oil was accounted for in the inflation of silver or gold or precious medals it will always be that oil was selling at a higher price than any amount of gold could ever have been valued at the time. If the gold wasn't valued as high as silver but not as high as oil, then its productive end use wasn't nearly as high as any commodity, even one that is consumed every day and even one that is produced with the expectation that all of those without an alternative method of production like electricity won't ever produce a more higher productive value as anything that gold or silver or oil produces without the production of endless energy that is produced by the most theoretical distributions that include cold fusion, and include natural gas energy only price in terms of undervaluation by the market whereas the tools of profitability are consumption than production if we have water, then the production of such is limitless because H2O is entirely limitless and I am one of those that is attracted to such abundance because the theoretical basis is confined to the owners of such resources who have access to this without limit. Indeed, to infinity, cold fusion goes, and if you know someone with that intelligence, you will invest every dollar to its highest end use in such technologies because its highest end use is limitless if you account for the relative abundance of its' existence. Water is limitless, and potential electrochemical energy has produced more of a holy grail than any resource that can produce abundance like trading strategies ever could...

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by lorax2013 on 02-12-12 10:38 PM:

Well, since the Dow is in strong backwardation and gold is in strong forwardation - looks like Buffet and his fanboys are going to make a fortune if this bet is right.

Seriously though, investment managers don't put out stories like this except to shore up a shaky position, book a quick short-term profit, or escape a bad trade. If Buffet was "sure" in his bet then he'd keep his mouth shut and continue piling into the position while making massive profit. Why dilute your trade by telling the world about it? The only amazing thing is that everyone keeps buying into these nonsense press releases.

Posted by Nine_Ender on 02-12-12 11:09 PM:

Quote from sumfuka:

You win. Just short gold to 0. And I will buy it to infinity.

Many Gold bugs invest in it like a religon. It doesn't mean you won't make lots of money but today's market in metals reminds me of the early to mid 1990s. The downside to picking Gold is its not really a fundamental play. If enough people ever bail on the trade it can get ugly very fast. I remember in the early 1990s Gold was supposed to go up forever, everyone wanted to buy a mining stock. In the end, it was better to be picking tech companies. Anyone who sold out of their gold plays and put their money into tech made out like bandits.

Posted by sumfuka on 02-12-12 11:46 PM:

Quote from Nine_Ender:

Many Gold bugs invest in it like a religon. It doesn't mean you won't make lots of money but today's market in metals reminds me of the early to mid 1990s. The downside to picking Gold is its not really a fundamental play. If enough people ever bail on the trade it can get ugly very fast. I remember in the early 1990s Gold was supposed to go up forever, everyone wanted to buy a mining stock. In the end, it was better to be picking tech companies. Anyone who sold out of their gold plays and put their money into tech made out like bandits.

I know what you are saying very well. My business partner was actually one of those few people that bought gold at the 700's in the last spike in the 80's. He literally lost a house in 1 night. Personally I prefer copper, but it seems like all the hot money is going into treasuries and gold. So a peon like me might as well go with the trend. Until it changes of course.

Posted by bwolinsky on 02-13-12 04:13 AM:

Quote from sumfuka:

I know what you are saying very well. My business partner was actually one of those few people that bought gold at the 700's in the last spike in the 80's. He literally lost a house in 1 night. Personally I prefer copper, but it seems like all the hot money is going into treasuries and gold. So a peon like me might as well go with the trend. Until it changes of course.

Like after 3 lower highs you don't trend change down, here?

Come on! After the next higher low there'll be another lower high you can get out on, then it will starting breaching lower so if you don't see that the trend has changed buying and holding futures is a disastrous strategy if it's at the wrong time, like it is now.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by piezoe on 02-13-12 04:17 AM:

Quote from Specterx:

I don't understand this sort of view. You realize that dividends come out of the market's capitalization, right? It therefore makes no fundamental difference whether you're paid a dividend or not.

If you're paid a dividend and reinvest the proceeds back into the shares, your account value is the same as if the company had simply retained the earnings. ...

I think you should invest in non-dividend paying stocks. I, however, will not do that. Theory predicts, reality contradicts.

Posted by sumfuka on 02-13-12 07:37 AM:

Quote from bwolinsky:

Like after 3 lower highs you don't trend change down, here?

Come on! After the next higher low there'll be another lower high you can get out on, then it will starting breaching lower so if you don't see that the trend has changed buying and holding futures is a disastrous strategy if it's at the wrong time, like it is now.

Thanks for the advice dude. I mean it. Now get off my nuts. You can stick to your algorithm thing or whatever it is you do. And I'll do my trading. I apologize if I hurt your feelings earlier, no disrespect!

Posted by tenthousandmen on 02-13-12 12:23 PM:

Quote from Specterx:

I don't understand this sort of view. You realize that dividends come out of the market's capitalization, right? It therefore makes no fundamental difference whether you're paid a dividend or not.

If you're paid a dividend and reinvest the proceeds back into the shares, your account value is the same as if the company had simply retained the earnings.

If you sell 5% of your non-dividend-paying shares every year, it's equivalent (not accounting for taxes) to receiving a 5% yearly dividend payout from the company.

Dividends are 1) a means for large shareholders to extract wealth from the business without diluting their ownership interest (not relevant unless you're a billionaire), and 2) a way for mature businesses to dispose of excess funds in the absence of worthwhile investment opportunities. Dividend-paying stocks are not automatically better or worse investments than non-dividend-payers.

To add to the others, dividends fend off short sellers too because shorts have to pay your dividend.

Posted by RewriteQuran on 02-13-12 03:53 PM:

Sitting on pile of $20 billion cash.
"Do as I say. Not as I do."

__________________
https://en.wikipedia.org/wiki/Communal_Award

Posted by piezoe on 02-13-12 04:19 PM:

Re: Re: Re: Re: Re: Warren Buffett: Why stocks beat gold and bonds

Quote from Swan Noir:

I agree with almost all of your posts and respect that you are consistent with a long term view of the bottom line, piezoe. That is why it is upsetting that a guy with your obvious good sense could possibly be pro crony capitalism?

Of course there is a bit of "crony" edge in every system. But the extent to which this once great nation has sold itself to every special interest is disgusting. Bad enough it has become a whorehouse but at this point it's not even a well run whorehouse.

I do not think you have it right on this one.

We are on the same page. I now realize I misled you when I wrote:

As a capitalist I love the U.S. version and Crony Capitalism. As a consumer, I hate it. The proper role of government, in my very humble opinion, is to protect free enterprise from us capitalists. In that respect the U.S. has failed mightily.

I was intending to refer to a generic capitalist in the figurative sense, not myself personally, though I am capitalist in philosophy.

From my view point I do understand the crony capitalist and that form of capitalism. It is their job after all to accumulate capital and the crony capitalists will use pretty much any means they can get away with to do so. But personally I think the smartest capitalists are those who recognize that capitalists and capitalism profit best in the long run when everyone does well, including their customers. I am an advocate for restrained capitalism where capital and the means of production are in private hands; not wherever possible, but rather wherever a serious conflict of interest is not created and wherever having capital in private hands increases, not decreases, competition. I like the kind of capitalism where the government plays the role of referee and protects free enterprise from the otherwise would be crony capitalists.

I am not an advocate of crony capitalism, and I agree wholeheartedly with your point that: "the extent to which this once great nation has sold itself to every special interest is disgusting. "

Posted by rew on 02-16-12 11:02 PM:

Quote from Debaser82:

Gold is up 5000 % since the early 70's.

If you read the article you can see that Buffet concedes that -- but the S&P 500 is up even more.

So far the best thing I ever did financially was buy some gold in the $320 - $400 range and just sit on it. Yes, gold is an unproductive asset. It's not farmland and it's not a dividend paying stock. So what? Gold is just money. Nobody claims that it's anything more than that, although there are others who claim that it's less. When I see my own country as well as Japan and nearly every European country running astounding, mind bending deficits I think gold is still a good thing to own.

If the world's governments ever start managing their fiat currencies responsibly I'll be happy to move into other assets.

Posted by Swan Noir on 02-16-12 11:11 PM:

Very realistic way to view gold. Not the best thing since sliced bread but surely a valuable asset when the presses are printing three shifts and weekends worldwide. Let us not forget that the ECB did exactly what they insisted they would not do -- they blew out their balance sheet in December to the tune of 600 Billion plus to lend to the banks.

Quote from rew:

If you read the article you can see that Buffet concedes that -- but the S&P 500 is up even more.

So far the best thing I ever did financially was buy some gold in the $320 - $400 range and just sit on it. Yes, gold is an unproductive asset. It's not farmland and it's not a dividend paying stock. So what? Gold is just money. Nobody claims that it's anything more than that, although there are others who claim that it's less. When I see my own country as well as Japan and nearly every European country running astounding, mind bending deficits I think gold is still a good thing to own.

If the world's governments ever start managing their fiat currencies responsibly I'll be happy to move into other assets.

__________________
Swan Noir

Posted by sumfuka on 02-17-12 08:09 AM:

Quote from rew:

If you read the article you can see that Buffet concedes that -- but the S&P 500 is up even more.

So far the best thing I ever did financially was buy some gold in the $320 - $400 range and just sit on it. Yes, gold is an unproductive asset. It's not farmland and it's not a dividend paying stock. So what? Gold is just money. Nobody claims that it's anything more than that, although there are others who claim that it's less. When I see my own country as well as Japan and nearly every European country running astounding, mind bending deficits I think gold is still a good thing to own.

If the world's governments ever start managing their fiat currencies responsibly I'll be happy to move into other assets.

Good Call dude. What made you bought it though? Sandbox part II?

Posted by rew on 02-17-12 07:01 PM:

Quote from sumfuka:

Good Call dude. What made you bought it though? Sandbox part II?

I have no idea what "Sandbox part II" means.

I bought gold because it was cheap, the deficits were already about $400 billion a year, and I figured that with the ongoing wars and the baby boomers retiring the deficits would only go up. I didn't have the prescience to predict the housing bust, which of course had the effect of making the deficits even higher.

Posted by sumfuka on 02-18-12 12:33 AM:

Quote from rew:

I have no idea what "Sandbox part II" means.

I bought gold because it was cheap, the deficits were already about $400 billion a year, and I figured that with the ongoing wars and the baby boomers retiring the deficits would only go up. I didn't have the prescience to predict the housing bust, which of course had the effect of making the deficits even higher.

Oh I meant, Bush preparing for Iraq War number 2. Your attention to detail is pretty good. When I bought gold a little while after 9/11, I only did it because I was scared. Scared of what... I still don't know. But I never thought of the deficit numbers.

Posted by trefoil on 02-18-12 01:03 AM:

Stocks = human effort and innovation, which is why over time they will return more than anything else. But just as with anything else human, it will come with a huge risk as well, one that has to be carefully managed.
Bonds = income. Period.
Gold = security.

I bought gold way back also, back when the CEO of Newmont used to complain that no gold company could make money with gold less than 350 an ounce. I bought back at a time that when I told a work friend he looked at me like I had just landed from Mars.
But I have no illusions about the long term return of gold vs stocks. Stocks will win, easily, over anything else you put up against it. Gold will protect you against inflation, bonds will give you income. Stocks are the only thing that will allow you to keep up with the advancing standard of living that the most advanced economies in the world take for granted.

Posted by denner on 02-18-12 01:19 AM:

The debate is sort of meaningless since we are told "stocks" beat gold, but "which" stocks? Tell the numerous people who bought once flourishing stocks, only to find 20-30 years later the companies were worthless. The survivorship bias is overwhelming when we want to compare some arbitrary stocks to precious metals.

Further, it's important to define some sort of time horizon. Given enough time, I'm sure a "group" of stocks is a better bet than gold, but what about from 2002 thru the present. Ten years is quite a bit of time and last I checked many of the indicies have been chopping sideways for the better part of a decade. Meanwhile, precious metals have handily outperformed this "group of stocks".

As is usually the case with Warren's public proclamations, there is a fair bit of propoganda attached to anything he has to say. It's become crystal clear that he morphed from a respected market "oracle" into a political mouthpiece.

Posted by Trader666 on 02-18-12 02:13 PM:

Debate? Did you read the whole article at the link?

More practically, Buffett's called The Intelligent Investor: The Definitive Book on Value Investing. �by far the best book on investing ever written.� It's $13.55 at Amazon.

Quote from denner:

The debate is sort of meaningless since we are told "stocks" beat gold, but "which" stocks?

Posted by Swan Noir on 02-18-12 02:51 PM:

I believe that virtually all the evidence supports the proposition that well chosen equities will outperform both bonds and gold over the long haul. I also believe that we are at an extraordinary point in the cycle and the only "way out" for the those in power is to kick the debt can down the road (and then kick it again and again) as far as the eye can see by debasing currencies until they are no longer reliable stores of value.

While others will see more choices, for me there are only three that are viable: Bet on history and hold equity, bet on inflation coming before depression and hold precious metals or other hard assets or be nimble and liquid and use futures to bet that I can out trade whatever the future brings.

I'll take door number three.

__________________
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