It is time for the yearly happening of Warren Buffett speaking to the shareholders of Berkshire Hathaway. The Fortune had already a preview with several of Buffets wise words.
Like all investors that talk about investing in the long run he definitely thinks it is not good to invest in bonds (Bianco reacted on that: Buffett forgets that the buyers of bonds are not investors but forced buyers like the FED, the central banks of China and Japan. So bonds are not an investment but still can give good returns). Buffett thinks the yields have become too low because of manipulation of central banks and so you don’t get a fair compensation for inflation and inflation risks. Bonds should be sold with a warning just like cigarettes: it will damage your financial health.
Also gold was bashed by Buffett. All the gold in the world fits in a cube of 68 feet and has a value of about $ 10 trillion. For that money you can buy all the crop land in the US and 16 Exxons and you still will have $ 1 trillion left for doing nice things. That is all producing income what is not the case with gold [comment: the difference can be quite small because gold normally is not taxed and income is].
At the moment the gold mines make now every year $160 billion new gold and that is c. 1.5% new inventory have to be bought by new fearfuls. Take care when they diminish in numbers.
[My comment: that 1,5% is more than the growth of the world population and less than the growth of the middle class in the coming decade(s), so for the time being the demand for gold could be high enough, certainly when the Asian central banks want in earnest a decent percentage of their reserves be invested in gold].
Buffett says that the only buyers are now investors thinking the price will rise further, this means in a Minsky cycle that gold is in the bubble phase. According to Buffettt that can last for some more time, but then the gold price will decline (and a lot).
Buffett advices to buy equities, they are much safer for the long run than gold or bonds at zero % yield. As has been often the case in the past 50+ years Buffett could be right.
The chart of Data Stream shows the total return of an investment in equities (S&P500) versus gold and at the right hand the total return of government bonds (10 year US Treasuries) indexed at 100 in 1980.
You see huge runs up and down. Initially gold was the bad investment, but this century Gold lets equities and bonds bite in the dust. It deserved a prominent place in an investment portfolio. When the central banks continue to print money at a huge scale than the gold price has to go up further especially versus bonds.
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