Warren Buffett: Serious Investors Are Not Interested In Owning Gold

Do you think that gold can be considered a viable investment alternative to paper currencies? Yeah, we're not enthused about gold. People historically have felt that was the first refuge from a currency that was going to decline in value. But, you know, so is a barrel of oil, so is an acre of land, so is a piece of Coca-Cola, so sees candy. If the dollar goes down 50 percent, we will be selling sees candy for double the present price. We'll be getting the same real price for sees candy. People will work the same number of minutes or hours per week in order to buy a pound or a two-pound box of the candy. So we would much prefer some asset that is going to be useful, whether the currency is worth what it is today or 10 percent of what it is today, or whether people are using seashells in order to transact business, because people will go on eating and they'll go on drinking and doing various things, and their preferences will translate in real dollars into more or less the same economics for us. And we would not trade the ownership of those kind of assets for a hunk of yellow metal, which has very little real utility, except for people who are looking to flee from the dollar and, in our view, really haven't thought through the consequences of what fleeing would — where they should flee. Charlie? Yeah, if you have the opportunities in Berkshire Hathaway, averaged out gold is a dumb investment. My dad was a huge gold enthusiast, so I sat around the dinner table — my two sisters are here, they will testify to it — we sat around listening to the virtues of gold, and that was in, we'll say, 1940, and gold at that time was $35 an ounce, and we would have had some storage and insurance costs, and, you know, here it is 65 years later, World Wars, nuclear bombs, all kinds of things, and the compound rate from $35 to a little over $400, less those expenses, is not something that causes me to salivate. Number 14? What I'd like to ask about, I guess, is one quibble and then a question. The question being about financial education or the study of financial history that might help people in handling these markets or in just dealing with investing at or near the apex of Western civilization. When you mentioned your dad's lectures about buy gold back in the 1930s and then saying, well, 60 years later it hasn't done very well, gold was pretty much pegged at a set price back in the 30s for years, and they didn't really let it loose until 1971, and then it caught up, and then it's kind of bounced around. If you looked at gold, maybe now, in derivatives and real estate bubbles and lots of other things, maybe gold wouldn't be such a bad investment looked at in current terms. So my question would be, do you consider that you have some sort of an obligation or duty as financial exemplars to maybe pay a little attention to that classical kind of gold is the benchmark or the bedrock of a financial system to some extent, and that it might be nice to talk about it in at least your annual letter to your stockholders about how people might protect themselves in what's a fairly bubblous kind of environment from really the decline in purchasing power or problems caused by the financial domination that we have today? Thanks. Yeah, I would say that gold would be weighed out on my list as a store of value. I mean, I would much prefer owning 100 acres of land near here in Nebraska or an apartment house or an index fund. Gold, we'll say, was freed up 30-odd years ago, but it adjusted to a market that still, if you go back to 1900, you know, we were talking $20 gold. Well, you take 20 to 400 in 100 years, the Dow went from 60 to 12 or 13,000 and then 12,000 or whatever it might have been in that same period and paid you dividends during the time you owned it. It was 66, I think, at the start of the century, and I forget when it ended, but it's 11 or 12,000. And like I say, it was paying you something every quarter during that period, and if you owned gold, you paid $20 in 1900 or thereabouts, and then you, we'll say, you had $400 a hundred years later, and in the meantime, you paid insurance and perhaps some storage cost. It really is not a store of value, and it's, I'm not arguing for paper money, but if you're worried about paper money, and I think, you know, it makes a lot of sense to worry about paper money over long periods of time, but it's just about, you know, it's just about the last thing I would want to own under those circumstances. You know, it has, a farm has utility, an apartment house has utility, a business, you know, will produce earnings, and some businesses will produce them in real terms as they go along, and I'd rather have the ability to sell people a pound of candy 20 years from now, and if they're dealing in seashells, I'll get an appropriate number of seashells instead of paper money for it, but I just don't, I don't see, I don't see gold as a store of value, and it's, the truth is, it hasn't worked very well, but forget about whether it's worked well the last hundred years, or the last 50 years, or the last 10 years, I see no reason, you know, why it would, why it would work well in the future. I forget whether we're turning out about three or four thousand tons of gold a year, and you know, we take it out of the ground in South Africa, and we put it in the ground at Fort Knox or someplace, you know, or the New York Fed, I mean, and it doesn't do much along the way for anybody. So I, I don't know, Charlie, how do you feel about gold? Well, I think gold was a, and similar items, that was a great thing to have if you were a well-to-do Jewish family in Vienna in 1935, because you had hazards where that gold had enormous utility to you, but for Berkshire Hathaway sitting here in 2005, it just doesn't interest us at all. Since 1999, the Berkshire Hathaway stock has really not gone up appreciably, whereas gold has gone up multiple times. I don't own your stock, for the glamour, I want to earn money. What happened? Well, I would say this, that when we, when we took over Berkshire, gold was at $20, and Berkshire was at $15, so gold is now at $1,600, and Berkshire's at $120,000, so you can pick different starting periods. Obviously, if you pick anything that's gone up a lot in the last, you know, month or year, I mean, it will beat 90% of, or 95% of other investments, but the one thing I would bet my life on, essentially, is over a 50-year period, not only will Berkshire do considerably better than gold, but common stocks as a group will do better than gold, and probably farmland will do better than gold. I mean, if you own an ounce of gold now, and you, you know, you caress it for the next 100 years, you'll have an ounce of gold 100 years from now. If you own 100 acres of farmland, you'll also have 100 acres of farmland 100 years from now, and you'll have taken the crops for 100 years and sold them, and presumably bought more farmland with the process. It's very hard for an unproductive investment to beat productive investments over any long period of time, and I recognize that it's very interesting. I can say bonds are no good, and Bernanke still smiles at me, you know, and I can, or I can say some stock is no good, and people, but if you say anything negative about gold, I mean, it arouses passions with people, which is kind of fascinating, because usually if you thought through something intellectually, it shouldn't really make much difference what people say. It should be the, well, you know, the question is whether your facts are right, and your reasoning is right, but when you run into people that are really excited about gold, and I came from a family where my dad loved gold, and he was tolerant. He could take a discussion of it. I find many people have trouble with it. Charlie? Well, I have never had the slightest interest in owning gold. It's a much better life to work with businesses and people engaged in business. I can't imagine a worse crowd to deal with than a bunch of gold bugs.