Warren Buffett: Why stocks beat gold and bonds

bwolinsky · Feb 12, 2012

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.

piezoe · Feb 12, 2012

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.

sumfuka · Feb 13, 2012

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!

tenthousandmen · Feb 13, 2012

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.

RewriteQuran · Feb 13, 2012

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

piezoe · Feb 13, 2012

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. "

rew · Feb 16, 2012

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.

Swan Noir · Feb 16, 2012

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.

sumfuka · Feb 17, 2012

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?

rew · Feb 17, 2012

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.