Five Reasons to Ignore Warren Buffett on Gold (and Silver)

It was reported today that Warren Buffet once again poo-pooed gold in his statement to shareholders.  In case you are tempted to listen to him, here are five reasons why you need to ignore old Uncle Warren.:

First, you are never too old or too rich to stop “talking your book,” which is industry jargon for talking up investments you own, while trying to belittle investments you don’t. Basic sales pumping that lots of people do.

Second, you are also never too old to say one thing and do another. This is the opposite of the first observation but also a trick deployed by hedge fund managers. For example, George Soros has been known to say negative things about gold while he was privately adding to his gold stock positions. Sometimes, you just don’t want to tip your hand.

Third, remember that Buffett did own nearly 130 million ounces of silver about 15 years ago. So once upon a time, Buffett understood the value of at least one of the metals. He sold early,  however, arguably because he was accused of trying to corner or otherwise “screw up” the silver market. I wonder if this somehow colors his view towards the metals overall. Who knows.

Fourth, Warren Buffett actually owns some businesses outright, as opposed to simply having all of his wealth on paper (even as he sells paper equities to others). This matters because most middle class people cannot actually buy huge tracts of farm land, oil wells, or productive businesses or other real assets. But they can own gold and silver, which are the poor man’s real assets in many ways, unencumbered by bank debts or some sort of broker intermediary.

Fifth, I thought that Warren’s friends at the Federal Reserve want you to buy real assets like gold and silver? I thought that’s what the zero percent interest rates and the war on savers is all about? I thought this was taking a page from the 1930s playbook in terms of purposeful currency debasement to generate inflation? But I guess people like Warren Buffett want to play this game of perception management, where the bankers and other people who run the world need to pretend that they aren’t in fact just diluting the value of fiat currencies. Some people seem to think that every good thing in their world depends upon having other people believe fantasies about “growth,” instead of admitting the role good old-fashioned money-printing plays in pumping up asset values.

Plus, remember, many would say that without government bailouts, a lot of Berkshire Hathaway’s investments wouldn’t be worth much. And so, billionaire or not, Mr. Buffett may be about as reliable as any other government official when it comes to admitting the truth about monetary policy and the precious metals.