Posted on 08/21/2020 11:47:44 AM PDT by NRx
Buried in an otherwise mind-numbingly boring regulatory filing released recently was a seemingly innocuous line item that most people would not give a second thought. Sometime in the second quarter, Berkshire Hathaway invested a comparatively tiny 0.3% of their total portfolio into just a single new company. No big deal, right?
But it wasn’t just any company. After spending decades as perhaps the most respected and widely-cited critic of gold as an investment, Warren Buffett bought 21 million shares of Barrick Gold — one of the largest gold mining companies in the world. It was so out of character that the financial world immediately did a huge double-take. The headline from Bloomberg pretty much speaks for itself:
"Berkshire Makes a Bet on Gold Market That Buffett Once Mocked"
As one might expect, investors on both extremes of the gold-appreciating spectrum are furiously debating what this all means. Buffett’s closest gold-averse followers are circling the wagons and dealing with a lot of cognitive dissonance, while gold bugs are enjoying dishing out some playful jabs after years of being on the receiving end. Lost in the middle is a vast sea of normal investors watching the news and searching for actionable information.
This article is for that last group just wanting to know the truth about gold and what it can (and can’t) do for their own portfolios.
For some reason gold often becomes a strangely emotionally-charged topic, and frankly both the gold lovers and haters spread lots of objectively false and misleading information in support of their preferred positions. Unfortunately those flawed arguments are sticky, and gold is so commonly misunderstood that even smart, educated, and otherwise level-headed investors have no idea what they’re talking about. So in honor of the shiny metal again making headlines, I thought I’d consolidate some of the most common questions about gold to help sort the truth from the fiction.
[Read the rest at the linked website.]
1 Oz gold, 300 to 350 loaves of bread.
(Good bread, not fluffy white bread—14 oz/400 gram loaf)
Can’t eat gold, but you can eat the bread it buys.
https://www.coins-auctioned.com/learn/news/history-of-gold-ounce-price-comparison-to-a-loaf-of-bread
I guess it’s not surprising that he finally came around. The Federal Reserve has been printing money at an astonishing rate since the pandemic started.
My guess is that Berkshire is looking for a safe place to park cash with hope for potential gains. As for Barrick’s relatively weak performance recently against the rising bullion price, this is likely due to other, transitory factors that Berkshire expects to reverse. Since no board seat seems to be in the offing for Berkshire, this is likely more a toe in the water bet than an all-in, long term investment.
bump
I did this FR post on 8/18/20 when the Buffett/GOLD subject came up. I’ll do it one more time for reference as to what he is really doing...Bob
From Buffett’s standpoint, Barrick pays a pretty good dividend plus has increased in value. A good stock for Buffett to add to his portfolio. (Which in reality is only about 0.3% of the entire B-H portfolio).
The big deal here is that Barrick is probably going to be the miner who will develop the Pebble Mine in Alaska. Pebble is the largest undeveloped Copper, Gold, Silver (and some Rare Earths too) in the world. And unlike lots of mines around the world, there is little concern for the eventual developer that some foreign country’s dictator will take it over after development.
Northern Dynasty (NAK) has spent years proving that this is a huge deposit and they just received the FEIS (Final Environmental Impact Study) from the COE. Completely favorable and contrary to the Greenies, there are no Salmon anywhere near this proposed mine. Alaska traded forested “State” land for this bare, dirt area that the Fed’s owned. Specifically for mineral mining.
Within the next two weeks, the ROD (Record of Decision) will be filed and the Fed’s will then turn it over to Alaska for their approvals. Alaska really wants this mine. Jobs, income, development for the local tribes.
Note that Trump had the Governor of Alaska down for a chat a few weeks ago.
And that’s why Buffett bought a huge chunk of Barrick. It’s an incredible opportunity for years and years of very profitable mining. And that’s the rest of the story.
Muchas Gracias!
Buying a gold mining company is a whole lot different from buying gold bars. The value of a mining company can be quite different than the value of the product they mine. It’s certainly quite possible that the company was simply undervalued in Buffet’s opinion.
Warren has realized Trump is bankrupting the Fed. He likely has inside info that Trump is going to cut the Fed out and roll out a new Treasury dollar backed by gold. Second term is going to be interesting.
The government can devalue paper money, say, by 50%. They can’t say that the one ounce gold piece you own now weighs only 1/2 ounce.
As one wag told the anti-gold bugs who claimed that gold was a religion, “This ‘religion’ has not one temple, is ‘worshiped’ all over the world - and doesn’t have one hypocrite in the congregation”. Well put, IMO.
Back in the Carter years there was a conspiracy theory that claimed the Feds had printed different-colored money in preparation for a devaluation. Turned out they were stockpiling paper money outside of the cities in case of a nuclear attack.
I suspect something of that sort will arise again, i.e.the New Dollar is now pegged at twice the Euro, etc.
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