November 18, 2009
While one of the world’s best investors, John Paulson, is making a big bet on gold, another — Warren Buffett — is looking elsewhere. David Pett of Canada’s Financial Post notes that Berkshire Hathaway’s latest holdings disclosure “indicates that the world’s greatest investor isn’t loading up on gold or precious metals. Indeed, he lists no mining companies among his holdings.”
The lack of gold in Berkshire’s portfolio is notable, Pett says, because Buffett has said he expects to see major inflation in the coming years, and gold is often thought of as a good inflation hedge. But instead of gold-related investments, Buffett has been buying shares in firms like Exxon Mobil, Burlington Northern Santa Fe Corp., Wal-Mart, and Nestle S.A., and continues to hold major stakes in American Express and Coca-Cola.
“Buffett appears to have his own strategy for dealing with inflation,” Pett concludes. “His theory seems to be that the best protection against inflation comes by investing in companies that have the ability to pass on price increases. A company can have pricing power if it controls a scarce resource (Exxon and Burlington Northern) or if it owns a favored brand (Nestle and Coca-Cola) or because it’s the biggest and most effective competitor in its field (Wal-mart). All those companies occupy large places in Berkshire’s investment portfolio.”
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what goes up…always comes down????
It doesn’t make sense to own gold, instead owning large MNCs makes a lot of sense. If gold is at $1000 you can buy 1000 $1 items. If after inflation gold hits $2000 you can still only buy 1000 $1 items, which now cost $2 each.
However, if you buy companies that can pass along their increased costs to the consumers you’re in the same situation; but if these companies do business in countries not using the US Dollar, then you gain from the inflation in the US.
Seems like after inflation, If I didn’t have gold, I could only buy 500 $1 items.
Does anyone remember the Hunt brothers of the 70′s? They pushed the price over $21 an ounce before it crashed.
Sorry… the price of SILVER.
Don’t forget about the almighty barter system !! The way the world is spinning all nations in the same twirl these days. It seems we’re all headed for a real one Nation under the Stars ! Pardon the reality.