Buffett And Munger On Why Gold Sucks Compared To Stocks

Warren Buffett and Charlie Munger again attack gold and gold bugs at the 2018 Berkshire Hathaway annual meeting, below an informal excerpt on the topic.

 

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I’d like you to imagine that at that time you’d invested ten thousand dollars and you put that money in an index fund. We didn’t have index funds. But you in effect bought the S&P 500. Now I would like you to think a while and don’t do not change the slide here for a minute. I’d like you to think about how much that ten thousand dollars would now be worth if you just had one basic premise just like buying a farm you buy a hold throughout your lifetime and depend.

And you look to the output of the farm to determine whether you’ve made a wise investment you look to the output of the apartment house to decide whether you made a wise investment if you buy an apartment or small apartment that was to hold for your life. And let’s say instead you decided to put the ten thousand dollars in and hold a piece of American business and never look at another stock quote.

Never listen to another person give me advice or anything of the sort. I want you to think how much money you might have now and now that you’ve got a number in your head and let’s go to the next slide and we’ll get the answer to that 51 million dollars. And you wouldn’t have had to do anything you wouldn’t have to understand accounting you wouldn’t have to look at your quotations every day like I did that first day when I had already lost three dollars and seventy-five cents.

By the time I came home from school all you had to do was to figure out that America was going to do well over time that we would overcome the current difficulties and that if America did well American business would do well. You didn’t have to pick out winning stocks. You didn’t have to pick out a winning time or anything of that sort. You basically just had to make one investment decision in your life. And that wasn’t the only time to do it. I mean I could go back and pick other times that would work out the even greater gains. But as you listen to the questions and answers we give the day just remember that the over overriding question is how is American business going to do over your investing lifetime. I would like to make one other comment because it’s a little bit interesting. Let’s let’s say you taken that 10000 dollars and you listen to the prophets of doom and gloom around you and you’ll get that constantly throughout your life.

And instead you use the ten thousand dollars to buy gold now for your ten dollars you would have been able to buy about 300 ounces of gold. And while the businesses were reinvesting in more plants and new inventions came along you would get down every year and you’re looking your safe deposit box and you’d have your three ounces 100 ounces of gold. And you could look at it and you could fondle it and you could do whatever he wanted to do with it. But it didn’t produce anything. It was never going to produce anything. And what would you have the with you would have 300 ounces of gold just like you had in March of 1942 and it would be worth approximately four hundred thousand dollars.

So if you decided to go with a non-productive asset gold instead of a productive asset which actually was earning more money and reinvesting and paying dividends and maybe purchasing stock or whatever it might be you would now have over 100 times the value of what you would have had with a non-productive setting in other words for every dollar you have made in American business you’d have less than a penny by the gain by buying in a store of value which people tell you to run to every time you get scared by headlines or something.

Or it’s it’s just remarkable to me that we have operated in this country with a great tail wind at our back that you can imagine it’s an investor’s day. I mean you can’t really fail at it unless you buy the wrong stock or just get excited at the wrong time. But if you want a cross-section of America and you put your money and consistently over the years there’s just there’s no comparison against owning something that’s going to produce nothing.

And frankly there’s no comparison. Trying to jump in or out of stocks and pay investment advisor if you’d followed my advice incidentally or this retrospective advice which is always so easy to give in hindsight – and that is because there’s one problem your friendly shock broker would have starved to death. I mean you know you could have gone to the funeral to atone for their fate. But the truth is you would have been better off doing this than a very very very high percentage of investment professionals town or people who have done that or acted.

It’s very hard to move around successfully and beat really what can be done with a very relaxed philosophy and you do not have to be. You do not have to be not to have to know as much about accounting or stock market terminology or whatever else it may be or what the Fed is going to do next time and whether it’s going to raise rates three times or four times or two. And none of that counts at all really in a lifetime of investing. What counts as having a philosophy that you have that you stick with. Do you understand what you’re in and then you forget about doing things that you don’t know how to do.

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