Buffett's Right Hand Man Says Civilized People Don't Buy Gold

[Reub]

This is the quote from Charles Munger:

"Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939," the Berkshire vice chairman said, "but I think civilized people don’t buy gold, they invest in productive businesses."

If I had any Berkshire Hathaway I'd sell it.

http://www.cnbc.com/id/47298734

[AdamA]

This is the quote from Charles Munger:

"Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939..."

Exactly.  Gold is what you want to have in a crisis.  So, although he was probably being sarcastic, he's basically making the case for gold.

[6 Iron]

I just read this, and immediately thought of the barbarians here.

[murphy_p_t]

sour grapes?

[MachineGhost]

This is the quote from Charles Munger:

"Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939," the Berkshire vice chairman said, "but I think civilized people don’t buy gold, they invest in productive businesses."

If I had any Berkshire Hathaway I'd sell it.

http://www.cnbc.com/id/47298734

That only thing these two buffoons are good for is investing in stocks.  Nothing else.  Not political advice.  Not taxation advice.  Not even homely, down-on-the-range advice.  People ought to learn to keep certain people in their respective boxes instead of worship.

MG

[Ad Orientem]

[align=center][/align]

[MediumTex]

I'm sort of baffled by that comment.

Munger and Buffett are two of THE largest precious metals speculators in modern times through their massive silver trade in the late 1990s.

I used to think Charlie Munger was a sharp and ocasionally insightful guy, but much of what has come out of his mouth the last two or three years has just been pure nonsense.

Considering he is in his 80s, maybe he doesn't even realize that today's comments don't make any sense in light of his own past investment decisions.

[Coffee]

I feel dirty.

[murphy_p_t]

I'm sort of baffled by that comment.

Munger and Buffett are two of THE largest precious metals speculators in modern times through their massive silver trade in the late 1990s.

I used to think Charlie Munger was a sharp and ocasionally insightful guy, but much of what has come out of his mouth the last two or three years has just been pure nonsense.

Considering he is in his 80s, maybe he doesn't even realize that today's comments don't make any sense in light of his own past investment decisions.

he's probably smarter than he let's on...by talking up his book (equities)...even though they've vastly underperformed vs gold...

[craigr]

I stopped paying attention to Munger and Buffet many years ago. They are stock bugs and always think (their) stocks are the best buy. Also it's an election year and it's no secret who Buffet supports. Aside from Tex's comments about Berkshire owning a huge position in silver at one time, the reality is you could have held a simple Vanguard fund like Wellington or Wellesley the past 10 years and crushed Berkshire with a fraction of the volatility (and that's with 0% in gold to make Mr. Munger happy).

[smurff]

A horde of thousands of uncivilized and unwashed investors will descend on New York City next week for the annual Hard Assets Investment Conference:

http://www.hardassetsny.com/

They'll talk about precious metals investing, mining stocks, exchange advice, collect brochures, DVDs, and plenty of swag (lots of pens and other trinkets).

It's free (except for the $49 Master Classes), held at the Marriott Marquis on Broadway, May 14-15, and brings lots of great speakers (Rick Rule, Dennis Gartman, Eric Sprott, Pamela Aden, etc. etc.).  I heard a rumor that at least one of the sponsoring companies will be selling bullion coins this year (a first, since I've been attending these conferences). 

YMMV.  I go every year.

[MediumTex]

A horde of thousands of uncivilized and unwashed investors will descend on New York City next week for the annual Hard Assets Investment Conference:

http://www.hardassetsny.com/

They'll talk about precious metals investing, mining stocks, exchange advice, collect brochures, DVDs, and plenty of swag (lots of pens and other trinkets).

It's free (except for the $49 Master Classes), held at the Marriott Marquis on Broadway, May 14-15, and brings lots of great speakers (Rick Rule, Dennis Gartman, Eric Sprott, Pamela Aden, etc. etc.).  I heard a rumor that at least one of the sponsoring companies will be selling bullion coins this year (a first, since I've been attending these conferences). 

YMMV.  I go every year.

Sounds like fun. 

Will you give us a recap after it's over?  Just overall impressions about the mood toward precious metals in general, especially considering that gold has been drifting down for quite a while now, which is sure to motivate a lot of good discussion about where it goes from here.

[clacy]

I'm so sick of smug billionaires Buffett and Munger talking down the the unwashed masses.  If you look at BRK chart relative to gold, it's easy to see that these guys have an agenda. 

Now if he made the case that BRK (or stocks generally) were cheap relative to gold, so now would be a good time to take profits in metals and buy stocks, I could appreciate that.

ALL central banks, as well as the vast majority of investment banks and endowments have a certain portion of their assets in precious metals.

[smurff]

Will you give us a recap after it's over?  Just overall impressions about the mood toward precious metals in general, especially considering that gold has been drifting down for quite a while now, which is sure to motivate a lot of good discussion about where it goes from here.

Of course! 

I thought it might be interesting to wear chaps to the conference but decided against it:  I might wake up that morning, forget about decorum and put them on backwards, like a character on a very funny reality program set in Dallas did last year.

But if I do see anyone wearing chaps at the conference, I'll be sure to let you guys know.

[smurff]

ALL central banks, as well as the vast majority of investment banks and endowments have a certain portion of their assets in precious metals.

As do many common, everyday billionaires--they just don't like to talk about it, for security reasons.

We're of course, talking on this forum about precious metals as a direct bullion "investment" asset.  When you consider all the gold jewelry, award medallions, Pre-Columbian sculptures, rare coins, and other fun assets, I suspect the number of billionaires with substantial precious metal holdings is closer to 100%.

[MediumTex]

I thought it might be interesting to wear chaps to the conference but decided against it:  I might wake up that morning, forget about decorum and put them on backwards, like a character on a very funny reality program set in Dallas did last year.

But if I do see anyone wearing chaps at the conference, I'll be sure to let you guys know.

If you decide to wear them, just make sure to put some pants on underneath.

[smurff]

Yes, pants under the chaps will keep me warm.  (It's still cold here in NYC.)

[hoost]

Just came across a great article in response to this topic:

http://dailycapitalist.com/2012/05/08/g ... nvestment/

[Ad Orientem]

Just came across a great article in response to this topic:

http://dailycapitalist.com/2012/05/08/g ... nvestment/

That gets my vote for the best linked article posted in the last week.

[Alanw]

Just came across a great article in response to this topic:

http://dailycapitalist.com/2012/05/08/g ... nvestment/

That gets my vote for the best linked article posted in the last week.

Ditto.  What a great read.  And now we know why we hold gold in our portfolios.

[Reub]

How about the fact that gold competes with Berkshire Hathaway and most other funds for investment dollars and therefore costs Buffett and Munger some profits? Could this be the underlying reason for their disdain for this most precious of metals?

[hoost]

How about the fact that gold competes with Berkshire Hathaway and most other funds for investment dollars and therefore costs Buffett and Munger some profits? Could this be the underlying reason for their disdain for this most precious of metals?

I don't think so.  I've read all of Buffett's shareholder letters and I think he truly believes gold is not an investment.  The way Buffett defines an investment is that it must generate income, either in the form of interested, dividends, rent, etc.  I believe Benjamin Graham (his mentor) defined it the same way.

His view is that a productive business with a lot of economic goodwill (strong brand, patent protection, etc.) is much better to hold during inflation.  I think he looks at gold in isolation and sees the wild fluctuations in price and that deters him.  I can understand all of the arguments against holding gold as an investment, but I think as part of a balanced portfolio such as the PP it can be very beneficial to hold.

[MediumTex]

His view is that a productive business with a lot of economic goodwill (strong brand, patent protection, etc.) is much better to hold during inflation.  I think he looks at gold in isolation and sees the wild fluctuations in price and that deters him.

And yet Buffett's 1990s silver trade was one of the largest precious metals speculative plays in history.

He just sounds like a hypocrite to me.

What he should say is "I happen to be one of the largest precious metals speculators in all of history, but I just don't happen to like the current risk/reward situation in the precious metals space right now."  That would be the truth.

[murphy_p_t]

anyway to know if they are trying to accumulate a large position for themselves (without millions of investors vying for the same metal)?

[MediumTex]

anyway to know if they are trying to accumulate a large position for themselves (without millions of investors vying for the same metal)?

That would surprise me.  Presumably it would show up in BRK's SEC filings at some point.