Finance and Stuff

Thoughts on finance and other stuff by Johan Lindén

Tag: warren buffet

Buffett Doesn’t Like Gold

Warren Buffett, the world’s most famous and richest investor, wrote the following in his annual letter to his stockholder:

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce — gold’s price as I write this — its value would be about $9.6 trillion. Call this cube pile A.

“Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?”

Steve Beck’s has some interesting points in his answer to this in an article at Marketwatch.com.

“To explore this question, simply exchange gold for cash in this comparison. Would it be wise to own a huge $9.6 trillion pile of cash over $9.6 trillion in diversified corporate value? The answer is the same, no. The wise investor would select the diversification and compounding of corporate productivity every time. What can cash do for you other than sit there, produce nothing and deflate at an historic rate of approximately 3% a year.

Should you then draw a conclusion that cash does not belong in your portfolio? Obviously not. Even Buffett himself would acknowledge that cash, stocks and bonds are fundamental building blocks of a portfolio. Cash is useful on several levels including liquidity, security, fixed value, and simplicity, to name a few. Therefore, although you may not want your entire portfolio to consist of one asset class, you may in fact want some of that asset class represented in a globally diversified account.”

Read the whole story here: http://www.marketwatch.com/story/buffett-rebuffs-gold-but-inflation-says-buy-2012-02-29

Related articles:
Gold Weekly Buy Signal
Gold Sentiment Among Market Analysts
Platinum and Silver vs. Gold
Should I Buy gold?

Warren Buffet Wants Increased Taxes

Warren Buffet is calling for higher taxes for the really wealthy to pay off the US deficit. 

warren buffet on higher taxesBillionaire Warren Buffet wrote the opinion editorial in today’s New York Times and calls for higher taxes for everyone earning more than 1 million a year, and even higher taxes for the few thousands of people who earn more than 10 million a year.

He says he has been talking with his mega-rich friends and that they have the same opinion. Well, I am not surprised. Many of these billionaires are contributing a lot to charity, and Buffet is one of the biggest in the world. It is not hard to understand that they want to contribute even more now when they see that the country that brought them their fortunes are nearing a collapse.

Buffet also says that:

“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”

This editorial got me thinking. Coming from the highest taxed country in the world — Sweden — I am against high taxes, but when a country is in great debt and that country need income to repay its financiers, you need a plan.

So why not let the people who have the best ability to pay and, most likely, have been the ones that benefited most from the economic growth help paying a bigger part of the bill.

I am against taxes, but when a country has a big deficit it means the taxes have been too low! Reduce government spending and lower taxes will follow.

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