You have probably heard the news.
Warren Buffet bought gold, or rather something very similar to gold, for the first time in his history.
Warren Buffett traded Goldman Sachs for gold in Berkshire Hathaway’s newly revealed portfolioAirlines weren’t the only stocks Warren Buffett soured on during the pandemic. In addition to selling all his airline holdings including Delta and Southwest, which Buffett announced in May, the Berkshire Hathaway investor also dumped his bank stocks, closing his position in Goldman Sachs completely.
Indeed, Buffett did far more selling than buying between April and June, as Berkshire’s quarterly shareholder filing, released Friday afternoon, made clear. As the coronavirus crisis escalated, the celebrated investor added just a single new stock to his Berkshire Hathaway portfolio: Barrick Gold, a Canada-based mining company whose stock price loosely trades in tandem with the price of gold—which has surged this year (up nearly 30%) as investors have sought safe havens. Barrick itself has outperformed the precious metal, with its shares up 45% so far in 2020. Buffett’s Barrick stock is currently worth about $565 million.
So he basically slashed his financial sectors exposure, to gain exposure to gold. Owning a gold mining company actually gives you exposure to price fluctuations of the underlying commodity, having the advantage, following the Omaha gospel, of providing a flow of dividends. Something similar to buying a refinery to get exposure to oil price appreciation.
Actually Buffet has always been really adverse to commodity investment, as he always thought a real enterprise, with the associated flow of money, constitutes an investment. So getting long commodity is not an investment.
From 2011 Berkshire Hathaway shareholders newsletter:
https://www.berkshirehathaway.com/letters/2011ltr.pdfJust to put things in the right perspective the investment is not great, in Berkshire Hathaway parameters: they had received over 3.7 Billion $ just in dividends from their top 10 companies (dividends from Apple and Wells Fargo topped more than 700 millions from each firm), compared to a GOLD investment of 563 USD million.
But we Have to remember Buffet is used to invest (and disinvest) in chunks. So we might see other investments in the coming quarters.
If you want to understand why Buffet decided to dump the industry the closest to the US Fiat shitcoin, while buying the industry closest to the real Store of Value, look at the following two graph:
| | | |
| This graph should ring a few bells | SPX in Gold Tems | SPX deflated for the loss of value in USD |
Well, I think it’ easy to recognise the first Graph on the left: it’s the SPX, the king, the biggest of all the indexes, the symbol for the US power.
On the other column instead there is the... SPX. Of course this time the unit of measure is different, and it is in the Gold value, the performance is less than astonishing.
In the third Column we see the SPX deflated for CPI, hence to tae into account the loss of purchasing power of the dollar in the last 20 Years, not negligible fact, as it is well above 40%.
In other terms:
SPX | 20y Yield | Annual Yield |
Nominal | 125% | 4.15% |
Gold-Deflated | -68% | -5.6% |
CPI-Deflated | 49% | 2.03% |
This is a smoking gun evidence on the fact the market is going up only because we shortened the meter used to measure it (the USD shitcoin), when it went nowhere when it was measured against the ultimate hard money: the gold.
I reiterate: Warren Buffet, for his own investment rules, couldn't buy gold directly, but bought the stock exposing his portfolio to Gold the most.
What it strikes to me is the timing.
In a few days we had three incredible news:
Having all these facts is a short span of time really make me think bitcoin is going trough a new evolutionary step in his history, a #Phase5, as PlanB use to call it.