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Saturday, April 30, 2011

Gold beats Warren Buffet, hands down!

Mr. Buffet is a very successful financier (apparently by knowing who's gonna get fresh money from Fed's press). However, I can't not help but despise him as a total pinhead when it gets to economics. Lately he had taken on gold and said "People like to get in on things that are rising in prices. Over time, it has not been the way to get rich."

Well, I guess I can see where his frustration is coming from. Between 2001 and 2010 gold and silver investments have proved to be a way better strategy than investing with Berkshire Hathaway.

Averaging over 10 years (the source is right here and totally worth your time)

Berkshire Gold Relative
9.43 18.34 -8.91
Berkshire Silver Relative
9.43 24.52 --15.0

NB: below 10% return over 10 years period not even better than inflation over the same period of time (about 26% according even to ever lying official CPI stats).

I guess Mr. Buffet is right after all - moving your savings into gold and silver isn't a way to get rich. It is just the way not to get poor by being robber through constant devaluation of paper currencies (i.e. USD).

3 comments:

  1. The higher the risk, the higher potential for greater returns. When you buy gold coins and gold bullion for investment, you get security instead of create additional income.

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  2. That's true. However, when your "security" pays higher return than securities in the paper market (e.g. because of currency debasement, etc.) you are obtaining higher purchase power for every unit of fiat currency moved to a sound money.

    In general I agree with out point, however the numbers above is calculated in relative terms (e.g. without cost basis) and gold/silver 2-3 times higher relative returns. I'll let you do the rest of the math here ;)

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  3. There is always a risk in investing money. In gold and silver there is a little risk. You are right that moving your savings into gold and silver isn't a way to get rich. It is just the way not to get poor by being robber through constant devaluation of paper currencies.

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