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Berkshire Hathaway Inc. Message Board

  • cdanajackson cdanajackson Oct 18, 2013 1:12 AM Flag

    Gold versus Berkshire-Hathaway shares versus income

    I find it curious that Buffet doesn't like gold as an investment because it is non-income producing. Well, the same is true for Berkshire-Hathaway shares - they don't produce any income.

    I'm not suggestion one buy gold either way, I just find his comment rather curious.

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    • Whats more curious, in my opinion, is how he bashes gold in his 2011 annual shareholder letter, but in the 1997 annual letter he discusses buying over 100 million ounces of silver because "Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand" (As a side note I love how he always ropes in Charlie when a point is debatable.)

      So under the right conditions Buffett will buy commodities as an investment, but apparently only when supply and demand conditions suggest that the market price is deeply undervalued, and not as a growth investment or inflation hedge.

    • Are you kidding me? Let's try to give you a concrete example to demonstrate what should be obvious. Let's arbitrarily take the last two year period and call it Tale of 3 Investors. All three invest $100,000 2 years ago as follows:

      Investor 1: Gold. -19%. 0 Dividends. Current value: $8,100.
      Investor 2: Phillip Morris (PM) Stock: $8,000 Dividends. Current Value: $126,000.
      Investor 3: Berkshire Hathaway (BRK-B) Stock: 0 Dividends. Current Value: $152,000.

      Investor 3 is signing the blues. Where are my dividends. A genius financial planner gets involved as follows:

      Investor 3 Modified: BRK-B Stock. $26,000 Dividends. Current Value: $126,000.

      Investor 3 realizes the same current value as the highly appreciated PM stock (that's a whopping gain!), and gets 3.25 times the whopping 4% dividend return of PM or a 13% annual dividend return.

      If you can't figure out how this works in Investor 3 Modified, see a financial planner. You have no business investing anyone's money including your own.

    • 2012 Earnings per share in gold

      2012 Gold closed at 1664 and we earned 8977 or 5.4 oz of gold.
      2007 Gold closed at 836.5 and we earned 8548 or 10.2 oz of gold.---Last good year before crash.
      2002 Gold ------------343 and ------------2795 or 8.15 oz of gold.
      1997 Gold-------------287 and----earned 882 or 3 oz of gold.
      1992 Gold-------------333 and----earned 355 or 1.07 oz of gold
      1987 Gold------------486 and--earned--205 or .42 oz of gold-- Closing price of BRK in 1987 was about 2700/sh

      I've been posting BRK' earnings per share in terms of gold for some time over on the BRKA message board.

    • Berkshire Hathaway is a company that does actually produce income. Gold is an inanimate object, you really can't compare the two. A Gold mining company would be comparable though.

      Sentiment: Hold

      • 1 Reply to cubbies622
      • Actually, I should have been a bit more clear on what I meant by income. I was referring to dividends.

        In other words, stocks that pay dividends are producing income, as soon as you get the dividend check in your hot little hand. So, in this sense, Berkshire-Hathaway shares like gold doesn't produce any income. At this point, Berkshire-Hathaway is all about price appreciation.

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