Posts Tagged 'gold'

Warren Buffett on Gold: Useful vs. Useless Investments

Warren Buffett on Gold:
Useful vs. Useless Investments


 

Warren Buffett: Investing

 

Warren Buffett is a man that needs no introduction when it comes to investment success and brilliance for financial portfolio building. There is a very intriguing quote from Warren Buffet stated in March 2011 during an interview with CNBC.

During this interview, Warren Buffett made his usual brilliant and unique remarks on finances and the economy. There is one particular quote on investing in gold that warrants further investigation and discussion.

Here is the exert on what Warren Buffett said on gold investing:
 
 

Warren Buffett: ….Well, I just don’t know. I don’t know whether cotton’s going to go up. I mean, we use a lot of cotton. I’ve watched it go from 80 cents to $1.90. You know, we use a lot of copper and I’ve watched it go from $2 to $4-plus, so I mean there’s all kinds of things in this world that are going to go up and down in price. You know, maybe hamburgers will tomorrow. And— but I— I’m— I don’t know how to judge that.

I do know how to judge to some extent the earning power of some businesses. And the real test of whether you would like it as an investment is whether you would be happy if it never got quoted again, and just in terms of what the asset did for you. But that doesn’t—

I will say this about gold, if you took all of the gold in the world it would roughly make a cube 67 feet on a side. So if you took all the gold in the world, we could have a cube that went down there 67 feet high and that would be the whole thing. Now for that same cube of gold it would be worth at today’s market prices about $7 trillion. That’s probably about a third of the value of all the stocks in the United States.

So you could have a choice of owning a third of all the stocks in the United States or you could have a choice of owning that little block of gold, which can’t do anything but kind of shine there and make you feel like Midas or Croesus or something of the sort.

Now, for $7 trillion, there are roughly a billion of farm— acres of farmland in the United States. They’re valued at about $2 1/2 trillion. It’s about half the continental United States, this farmland. You could have all the farmland in the United States, you could have about seven ExxonMobiles, and you could have $1 trillion of walking around money.

And if you offered me the choice of looking at some 67-foot cube of gold and looking at it all day, you know, I mean touching it and fondling it occasionally, you know, and then saying, you know, `Do something for me,’ and it says, `I don’t do anything. I just stand here and look pretty.’ And the alternative to that was to have all the farmland of the country, everything, cotton, corn, soybeans, seven ExxonMobiles. Just think of that. Add $1 trillion of walking around money.

I, you know, maybe call me crazy but I’ll take the farmland and the ExxonMobiles…..

 
 

Investment Purchase Value

 

As investors, future value is something looked at almost exclusively. Yet, how often does one simply look at the physical item purchased as the sole reason to invest?
 
 

the real test of whether you would like it as an investment is whether you would be happy if it never got quoted again, and just in terms of what the asset did for you
 

The idea of investing in something to never have it gain value is a rather astute perspective. This creates a whole new investment mentality as no longer would pure speculation on future prices be a deciding purchase factor, but actual physical value and usefulness.

If people only invested in usefulness and tangible real value, then prices on such things would rise as a result.

 
 

Useful vs. Useless Investments

 

`Do something for me,’ and it says, `I don’t do anything. I just stand here and look pretty.’
 

It sounds almost humorous to imagine Warren Buffett sitting alone, talking to a huge block of gold and asking it to perform for him. Yet Buffett makes an excellent point on usefulness and uselessness in investing.

Gold is practically a useless, overpriced investment. Other than cultural practices of utilizing gold in jewelry, there is no practical use for it. And jewelry and aesthetics, for the most part, is not considered a need in life, but rather a want.

 
 

Gold Value vs. Gold Usefulness Value

 

Whether gold is or is not overvalued is not the point. The investment point in gold is that it is a highly desired precious metal investment commodity that is sought after by investors globally of all shapes and sizes. However, is gold a useful commodity?

If gold was never revalued or quoted again, would you, an investor, be happy with simply having purchased the gold? This is the real intriguing factor about investments in gold.

In fact, Warren Buffett shows us how intriguing the value of gold prices really are:
 
 

if you took all the gold in the world, we could have a cube that went down there 67 feet high and that would be the whole thing. Now for that same cube of gold it would be worth at today’s market prices about $7 trillion. That’s probably about a third of the value of all the stocks in the United States.

 
 

This pricing may be outdated to march 2011, but the key to analyze this statement is not about the price, but the comparison of value. Owning 1/3rd of stocks in the entire United States of companies producing physical goods or providing real, tangible services holds a value based on usefulness in society. Gold, however, holds very little practical use at its current price.
 
 

for $7 trillion, there are roughly a billion of farm— acres of farmland in the United States. They’re valued at about $2 1/2 trillion. It’s about half the continental United States, this farmland. You could have all the farmland in the United States, you could have about seven ExxonMobiles, and you could have $1 trillion of walking around money.

 
 

So based on a comparison of value of a purchase never being quoted again, Warren Buffett provides an intriguing example of useful investments versus useless investments, tangible or otherwise.

Farmland is a great example to show useful value. Not only is this purchase land, but also investing in people who’s livelihood are in selling something useful and needed to exist: food.

 
 

I don’t know whether cotton’s going to go up. I mean, we use a lot of cotton. I’ve watched it go from 80 cents to $1.90. You know, we use a lot of copper and I’ve watched it go from $2 to $4-plus
 
 

This Warren Buffett quote is an interesting read-between-the-lines investment statement. The gold analogy that follows this statement is about discussing tangible useless investments versus tangible useful investments.

As stated, cotton is useful and in demand. Copper is useful and in demand. So what makes more sense, gold or copper as a commodity investment?

One could argue that speculators would debate both as potentially solid investments. However, in the world of useless versus useful, copper seems a much more useful, day-to-day needed metal. Copper is commercially used around the globe across a huge number of industries.
 
 

Investing in copper is a practical investment.

Investing in gold is a speculation.

Is this what Warren Buffett was trying to say? To stick to practical and useful investments?

Asking would be an ideal way to find out. For now, investors will have to do their own speculation on his advice and their own investing needs.

 
 

copper Learn more on investing in copper bullion:
 
 

How Much does Copper Bullion Sell for: 2012

 
 
 
 

Know someone who may be interested in this article?

Use the social media buttons below to share the knowledge and power of copper pennies.

Banks Change Regulation and the Metals Stock Market Crashes

Banks Change Regulation
 
 
and the Metals Stock
 
 
Market Crashes


“Did the Big Banks Manipulate the Metals Stock Market to Crash?”

Did you know that that a regulation change on commodity swapping on large trader reporting was temporarily abolished only four days before the metals stock market dropped and the commodities market crashed? The proof:
 

On September 16th, 2011 The U.S. Commodities Futures Trading Commission changed the entire regulation system to be effective on September 20th, 2011:
 


“The Commodity Futures Trading Commission’s (Commission’s) Division of Market Oversight (Division) today issued a letter providing temporary relief from the requirements of the Commission’s regulations regarding large trader reporting of physical commodity swaps (§§20.3 and 20.4). Because this is the first time that swaps data is being collected, this temporary relief is intended to provide sufficient time to enable both the industry and the Commission to develop and refine systems and processes that will be able to report these complex transactions.

On July 22, 2011, the Commission published large trader reporting rules for physical commodity swaps and swaptions. The rules require daily reports from clearing organizations, clearing members and swap dealers, and become effective on September 20, 2011. The letter issued today provides temporary relief from reporting, as long as parties are making a good faith attempt to comply with the reporting requirements, until November 21, 2011, for cleared swaps, and January 20, 2012, for uncleared swaps. Upon the conclusion of applicable relief periods, such reporting parties must become fully compliant.”
 

-Source.

 
 

In words that make sense:

 

The big players that own most of the market in commodities are being trusted to operate ethically and correctly on “good faith.” Is not the purpose of The U.S. Commodities Futures Trading Commission (CFTC) to protect the public from fraud and manipulation by these big players through continued regulation and reporting? Let’s read the mission statement of the CFTC:
 
 

“The CFTC’s mission is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives that are subject to the Commodity Exchange Act, and to foster open, competitive, and financially sound markets.”

-Source.


 
 

What happened in the Metals Stock Market:

 




 
 

The stock market drops 6% two days after the regulation change goes into effect. But the real damage was in metals.
 
 

Gold

 



 
 

Gold drops 11% over the course of four days. This is a hit of $200 per troy ounce. Gold, as a high desired precious metal in difficult economic times, should go up in a bad economy, not down. So what happened? Was the “Twisting” policy enacted by the Federal Reserve and Treasury cause for the U.S. dollar to become so stable that gold plummets in price? This would imply that the rest of the world was selling off gold too in favor of the U.S. dollar. Unfortunately, we are left to speculate on what actually happened until we can look back with all the appropriate numbers at a later date. Hindsight is 20 20 vision. We will know eventually what really happened.

 
 

Silver

 



 
 

 

Silver drops 25% in two days. 25% in two days! This is a hit of $10 per troy ounce. But take a step back for a moment to analyze this situation:

Regulations go away so we, the people, don’t know what the big players are doing as soon as they do it, causing a delay from when they act, us reacting.

Silver starts getting sold off, presumably by the big players, to start a trend of silver dropping in price from being sold off.

Silver was expected to be a huge power precious metal and rise in price dramatically. So why did the price drop? And why did regulations change right before the price dropped?

 
 

Copper

 



 
 

Copper drops from nearly $3.75 per pound (hitting a high of $4.50 not too long ago) to just over $3.00 per pound. this is a 20% loss.
 
 

But to sell something, it has to be bought.

So who is buying it up?

Without regulations, we do not know. Speculation would suggest the big players forced the price down, and then are the ones buying it up at a cheaper price.
 
 

How do big players profit from this?

 

On a downward trend cycle, they sell at the higher point of the downward trend. Then the smaller players continue to sell, thinking this is the right move, bringing the price lower. The big players then wait for the price to reach a point where they profit by buying it up. The big players then start buying, causing the smaller players to see this and think it is the right move to buy, so they buy too. This then drives the price up. The result: The big players sold first at the higher price, and bought first at the lower price, profiting from the difference, or spread, of the two figures.

This price drop is incredible and highly suspect of potential manipulation, which is not being regulated by the very group that is supposed to regulate to stop manipulation. The findings are disturbing. Regulations forcing these large traders to report their numbers do not take effect again until “November 21, 2011, for cleared swaps, and January 20, 2012, for uncleared swaps.”

Without proper regulating, we the people cannot properly audit this form of manipulation, which is known to exist. Though one could argue that though this manipulating of the market is known, but not understood by the general public. If it was understood, would it be acceptable practices by the general public? Is this form of manipulation fraudulent or just good business sense? The problem is that no one talks about it in a manner in which the general public, who are not economists, to know and properly understand it.
 
 

Conclusions & Speculations

 

The facts we know are that the big players who have the ability to do this kind of manipulation are JP Morgan Chase Bank, CitiBank, Bank of America, Goldman Sachs Bank, and the Money Changers that control these banks and the international banking money system. So the big players are the major banks that own the majority of the derivatives of risk in the market and also are known to control the Federal Reserve? This should not come as a surprise.

At this point you should take away only what you feel is appropriate to take away. No conspiracy theories have been presented; Only facts and speculations. You are encouraged to draw your own conclusions, do your own research, and, above all else, demand the truth from the Government Regulation Agencies that are here to protect you. Take a stand. You are not alone if you do not like this manipulated system. Why let the big powers manipulate prices downward so they can buy it all up cheap and then force prices upwards? Capitalize on commodities by securing your wealth in commodities.

 

Wheat Cents Unsearched

Wheat Cents Unsearched

Search through unsearched wheat cents to find rare coins. Test your luck with our wheat pennies sourced across the entire country today!

Read More: Unsearched Wheat Cents

Copper Nickel Investing

copper nickels investing

Low-risk investing is wise for any long-term investor looking to have gains while preserving wealth. Nickels offer a great solution for low-risk tangible investing.

Read more: Copper Nickel Investing

.999 COPPER BAR / .999 SCRAP INVESTING

pure copper scrap .999 copper bars

Industrial-grade pure copper provides traditional short-term, physical assets copper holdings. Invest in .999 pure copper bars or .999 copper scrap for commodity diversification.

Read More: Copper Bar Investing | .999 Copper Scrap


copper pennies
American Numismatic Association

Coin Collecting Enterprises BBB Business Review