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ProShares UltraShort Gold Message Board

  • tradestoxx11 tradestoxx11 Feb 25, 2012 6:40 PM Flag

    Buffets view on Gold

    from his shareholder letter this weekend..

    "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 $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?
    Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual
    production of gold command about $160 billion. Buyers – whether jewelry and industrial users,
    frightened individuals, or speculators – must continually absorb this additional supply to merely
    maintain an equilibrium at present prices.
    A century from now the 400 million acres of farmland will have produced staggering amounts of corn,
    wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the
    currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its
    owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The
    170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can
    fondle the cube, but it will not respond.
    Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m
    confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at
    a rate far inferior to that achieved by pile B."

    http://www.berkshirehathaway.com/letters/2011ltr.pdf

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