Tuesday, February 28, 2012

On Buffet and Gold

Warren Buffet and the the website Stuff are at it again. Putting out uninformed views about gold.

Wait on, I hear you say, such an arrogant view for one who hasn't made billions in their career or isn't a 'real' writer.

True enough, but remember, even the greats among us can be misguided or wrong. Even the best scientists, with the best data, have made asses of themselves with unfortunate theories.

Anyway, can we ever be sure of our motives or even the motives of businessmen and business writers. Each of us has an axe to grind and maybe a nest to feather. It's beholden to ourselves to ensure we analyse information in an impartial manner as possible. And be humble enough to change our views.

Both the article in Stuff and Warren Buffet's recent statements are very well answered in this article from QB Asset Management.

Here's an excerpt in summary from the QB article:

"We believe true savers across the world not beholden to Western financial assets understand or will soon understand the difference between relative nominal returns and absolute real returns. They do (or will) not care about the views of very successful leveraged money changers. Yes, an inert rock today will be an inert rock tomorrow. But it will be an even scarcer inert rock tomorrow relative to the fiat currency in which it is priced (same for fine art). Levered productive assets will lose their value against both unlevered scarce inert rocks and unlevered inelastic commodities. The only things they will outperform in a period of great monetary inflation are bonds and cash (both also levered)."

Gold in New Zealand dollars: $2104.80 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $42.17 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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