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Gold Surges To Nominal Euro & Pound Record– Jim Cramer Critiques Warren Buffett On Anti Gold Bias

Tyler Durden's picture


From GoldCore

Gold Surges to Nominal Euro & Pound Record– Jim Cramer Critiques Warren Buffett on Anti Gold Bias

Gold has risen to new record highs in pounds and euros as concerns about contagion in the eurozone and stagflation in the UK deepen. The euro has fallen sharply in international markets and is down 1.5% against gold so far this morning. European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis as concerns deepen over the sovereign debt crisis spreading to Spain and Italy.

Gold in USD and Berkshire Hathaway A Class Shares in USD – January, 2000 until July 2010 (Daily- Rebased to 1)

Gold has risen to record nominal highs at EUR 1,100/oz, GBP 971/oz and at $1,549/oz is only a few dollars or some 0.5% from the record high close of $1,556.70 seen on April 29th. The very poor U.S. employment numbers Friday suggest that the very tentative U.S. recovery is tottering and a recession looks very likely which is leading to safe haven demand.

Gold has had another period of correction and consolidation and is looking well positioned to eke out further gains as we move into the seasonal strong Autumnal period which begins in August. 

Cross Currency Table

Spain’s 10-year yield spread over Germany widened to a euro-era record of over 300 basis points. Italian and Portuguese bonds are also under pressure with Portuguese 10 year yields surging to 13.4%.

The risk of contagion affecting European and international banks and a new banking crisis rises by the day.

Meanwhile, in the U.S., President Obama is seeking a massive $4 trillion in a deficit reduction package. Failure to do so may lead to a U.S. and global sovereign debt crisis.

Jim Cramer Critiques Warren Buffett Over Anti Gold Bias

Jim Cramer, the host of "Mad Money" has critiqued the Sage of Omaha, Warren Buffett, and his anti gold bias. Buffett has said that gold isn't a sound long term investment because the precious metal has no ‘utility’.

Cramer says that he has heard from people saying they will not invest in gold since it was $700 per ounce because they “missed it” or because “someone like a Warren Buffett has said how valueless or silly it is”.

(GoldCore Editors note: George Soros cryptic comments about gold are similarly used by so called financial experts to dissuade people from owning gold)

“No one goes to Warren Buffett and says how have you done versus gold in the last 10 years. That is verboten. You are not allowed to ask him that.”

Cramer said that this “makes it very difficult to make headway with people” about owning gold.

While Buffett snubs the value of gold, Cramer emphasizes the limited amount of gold bullion available and gold’s rarity (see GoldNomics video), as well as the lack of new gold being mined. Cramer says that there is far less gold than there is Berkshire Hathaway B shares and that Buffett can just print the shares.

“Against all that is a grey beard investor who has already made a lot of money, who frankly could have his money devalued and still have a lot and I feel like  …  you know what Warren  … give other people a chance to make some money here ok.”
“Give other people a chance to protect their assets, give people a chance to buy insurance.”

“I would rather buy the insurance policy of gold than the insurance policy of Geico    … pretty simple.” (to laughter)

“It is such a shame that he (Buffett) does that, I mean all he has to do is say that I don’t really understand it. “

“He did with Tech, like I saw when Intel was the equivalent of $2 and Microsoft was  …  before the big run. I understood … listen he said ‘I don’t understand tech’. That’s fine.”

He should say “I don’t understand gold”. He shouldn’t pick Keynes, who of course got the gold market wrong repeatedly. He should just actually say “I don’t understand it.”

“He would does us all  …  he is doing everyone a disservice by saying that it’s a beauty contest.”


Cramer is a divisive figure and liked and loathed by investors but these are excellent points about Buffett’s and Munger’s anti gold bias – points we have made previously.

Cramer’s assessment of Buffett and his lack of appreciation of gold as financial insurance and bias against gold is an accurate assessment.

Buffett deserves the title ‘Sage of Omaha’ and is to be respected but his failure to appreciate gold’s importance as a diversification in a portfolio and his repeated negativity towards gold (in contrast to his father Howard Buffett), will not be judged kindly in history.

It is never too late to do the right thing and to ensure his legacy Buffett should acknowledge gold has intrinsic value, has utility as money, as monetary asset, a finite currency and as financial insurance in a portfolio.

Cramer’s interview is a must watch and it can be watched on the GoldCore YouTube Channel 


(Reuters) -- Gold in pounds hits record, debt crisis deepens

(Nine News) -- European Crisis Escalates

(Bloomberg) -- Gold May Advance for a Sixth Day as Growth Concern Fuels Demand for Haven

(Wall Street Journal) -- Heirs Battle US Mint Over Prized Gold Coins

(The Telegraph) -- Italy debt contagion fears hit markets as top EU officials meet

(SilverSeek) -- Could silver one day be worth more than gold?

(ZeroHedge) -- What An American Bank Run Would Look Like

(The Telegraph) -- Italy and Spain must pray for a miracle

(DailyWealth) -- Ireland: One of the Saddest Stories in the World: A Lesson We Can All Learn From


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Mon, 07/11/2011 - 08:27 | 1443111 66Sexy
66Sexy's picture

No debt ceiling hike = 14th amendment. 14th amendment = Federal Reserve debt illegitimized.

 There will be a debt ceiling hike.

Mon, 07/11/2011 - 08:39 | 1443122 SheepDog-One
SheepDog-One's picture

Who is there to believe that we borrowed $2 trillion from someone? So we'll monetize the debt some more and thats supposed to be beneficial...theyre just painted into a corner thats all.

Mon, 07/11/2011 - 11:15 | 1443883 Thisson
Thisson's picture

On my tumblr I link to a Michael Pettis article that includes four solutions to our debt problems.  Reading the article carefully, you'll conclude that the US will eventually devalue it's currency.

The article is linked to as a post today on


Mon, 07/11/2011 - 13:46 | 1444576 dlmaniac
dlmaniac's picture

Warren Buffet makes Crammer look like a genius. LOL

Mon, 07/11/2011 - 08:48 | 1443192 cossack55
cossack55's picture

Let it burn, baby, burn.

Mon, 07/11/2011 - 09:02 | 1443243 Pladizow
Pladizow's picture

If the debt ceiling was represented by a building, it would be 93 stories tall - as this is how many times it has been raised through out history!

Tue, 07/12/2011 - 21:39 | 1450170 MGHJFHD
MGHJFHD's picture

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Mon, 07/11/2011 - 08:28 | 1443112 Caviar Emptor
Caviar Emptor's picture

Today the market is screaming Ponzi off!


Gold continues to decouple from metrics that have dominated the price action in recent months: dollar up, oil down are no longer an issue. I suspect that trend will continue and pick up steam. 

That's because gold is reclaiming its top-of-the-food-chain status in the face of full-on global currency uncertainty that, yes, even reaches the dear old dollar. US sovereign debt issues are now on full display and the politics are getting thick. An imminent rise in the debt ceiling comes at a badly timed juncture that only raises the specter of global competitive devaluations (and inflation). US unemployment has quashed any fears of a rate hike. And dollars may soon be spewing out of the fire hose as the new phase of the crisis unfolds

And there's also the sneaking suspicion of interbank liquidity drying up fast out there as numerous, interdependent global mega banks are falling into the shadowland of counterparty suspicion. Who will be the first domino? Will it be a Spanish bank? An Italian, Belgian or even a UK, French or German bank? Japan is imposing electricity rationing just as China has a failed debt auction. 

Hang on to yer gold. If you don't have any, get it. If you have extra Bennie Bux, convert them. Gold will help navigate the choppy waters of the new unfolding reality which continues to go down the slippery slope anticipated since the crisis began in 2007. 


Mon, 07/11/2011 - 08:29 | 1443119 66Sexy
66Sexy's picture

This may surprise alot of folks, but gold and silver are historically adversarial. Gold is bankers money, silver the peoples money.

We know what happened to Lincoln, Andrew Jackson, Grover CLeveland, JFK.

Theres only 2 reasons to assasinate a president: Money, and money.


Mon, 07/11/2011 - 08:32 | 1443134 SheepDog-One
SheepDog-One's picture

Could be, but silver will hitch a ride all the same, certainly wont go in opposite direction to gold.
They can candy coat as many turds as they like and use whatever sprinkles to dress it up, fact is the good times are over.

Mon, 07/11/2011 - 08:33 | 1443139 Caviar Emptor
Caviar Emptor's picture

It was the 'currency of kings' for good reason. And yes, in a major upheaval gold will outperform

Mon, 07/11/2011 - 08:39 | 1443161 Long-John-Silver
Long-John-Silver's picture

Gold is the currency of Kings.

Silver is the currency of Gentlemen.

Barter is the currency of Peons.

Debt is the chain of slavery.

Mon, 07/11/2011 - 09:29 | 1443345 Thomas
Thomas's picture

All I know is that silver is consumed whereas gold is not. Silver suffers from its hermaphrodicity as an industrial and monetary metal (at times). If the numbers showing that 14 billion ounces of silver bullion in 1900 have now been consumed down to about a billion ounces of bullion are correct, then silver will have more days in the sun. I have days in which my 20% physical gold and overall 55% metal-related investments seem like the results of psychosis and days in which my psychosis wants me to get longer (and more physical). I may be the dupe sitting at the table or one of the visionaries; only time will tell.

Mon, 07/11/2011 - 09:42 | 1443394 kumquatsunite
kumquatsunite's picture

Oh please...silver is not "consumed." Stop pumping...silver is being produced more than ever: see: mines of Mexico and Peru and elsewhere. Also, the silver in All electronics is recycled via the metal recyclers who strip it out of computers, et al. Gold and silver have significant problems: 1. They are enormously boring: put em in the ground, take 'em out. Rinse. Repeat.

My "money" is in those things that spin wonderfully...aka "investments" that create new things for our culture and planet and make our lives better. Gold and silver sit there. And sit there. And sit there. 

Mon, 07/11/2011 - 10:04 | 1443459 Central Bankster
Central Bankster's picture

Keep smoking the hopium buddy, history does not agree with you.

Mon, 07/11/2011 - 10:16 | 1443509 RockyRacoon
RockyRacoon's picture

...the silver in All electronics is recycled...

You keep repeating this, and I've replied to it with references in the past.  It's apparent that you have no facts, just opinions, and they are of the particularly odious type.

Mon, 07/11/2011 - 10:32 | 1443605 Zero Debt
Zero Debt's picture

the silver in all electronics is recycled

Source, please

Mon, 07/11/2011 - 15:20 | 1444963 Urban Redneck
Urban Redneck's picture

"the silver in all electronics is recycled"  --  It isn't.

Macro #s:

Americans put tons of electronics into luxury landfills each year - they don't have the same Rubbish Nazi regimes that Europe does, and they aren't as poor (yet) as the developing world.  Electronics is also only a portion of industrial demand (batteries are more problematic). 



The best technology, with high recovery rates, no chemical inputs, no toxic outputs, and minimal CO2 production- comes from Switzerland- so buy it before it becomes the CHF makes it unaffordable.


(I don't have personal experience with their product, but came across their management team through the EPFL business development community- so I'm doing my part and plugging small local businesses.)

Mon, 07/11/2011 - 11:14 | 1443877 Bay of Pigs
Bay of Pigs's picture

I was wondering which troll would open his mouth and stick his foot in first. 

BTW, gold at a new all time today in USD as well @ $1555.50 (London PM fix). 

Mon, 07/11/2011 - 16:07 | 1445173 LudwigVon
LudwigVon's picture

Of course it sits there. It is money. Do you expect your currency to do jumping jacks as well? IGNORANT.

Mon, 07/11/2011 - 10:10 | 1443479 RockyRacoon
RockyRacoon's picture

Caviar, my man, your writing has improved!  Er, maybe not...

Mon, 07/11/2011 - 12:16 | 1444203 Hulk
Hulk's picture

He's famous now, expanding his horizons! 

Mon, 07/11/2011 - 08:31 | 1443125 qussl3
qussl3's picture

Is it weird if im rooting for the TPTB to whack gold so i can buy more?

Mon, 07/11/2011 - 09:13 | 1443289 hondaicivic
hondaicivic's picture

Nope. It seems logical for guys like you and me.

Mon, 07/11/2011 - 08:31 | 1443126 Twindrives
Twindrives's picture

Hey Warren, just croak already with your long time bung hole buddy Charlie Munger.

Mon, 07/11/2011 - 09:30 | 1443353 Thomas
Thomas's picture

the technical term is "butt buddy"

Mon, 07/11/2011 - 08:31 | 1443127 Archimedes
Archimedes's picture

I don't know who Felix Zulauf is but he just laid out a pretty accurate scenerio for how this plays out.





Mon, 07/11/2011 - 08:31 | 1443129 THE DORK OF CORK
THE DORK OF CORK's picture

This big rise in Euro gold came one week too late for the Euro systems quarterly revision of Gold which would have helped to increase the Euro base a little......

Do the Euro masters want to create a crsis in the periphery - me thinks yes.

Mon, 07/11/2011 - 08:31 | 1443130 SilverDosed
SilverDosed's picture

If Buffet hates gold so much then it doesnt really make sense that he would have invested so much in silver. Something very fishy here.

Mon, 07/11/2011 - 08:37 | 1443154 AmCockerSpaniel
AmCockerSpaniel's picture

It may be that Buffet does not dislike gold, but just likes silver more (for it's utility).

Mon, 07/11/2011 - 08:38 | 1443158 wombats
wombats's picture

Silver is an industrial commoditity in addition to being a monitary metal.  I suspect he wants it for its use in electronics, biomedical manufacturing.

Mon, 07/11/2011 - 10:20 | 1443523 RockyRacoon
RockyRacoon's picture

Gold would be used by many manufacturers if it were at a price that made it economically feasible.   It is used in many high-value instances in electronics (and is usually touted as such "gold plated contacts", etc.).    If it were as common, and priced, as silver it would be used extensively.

It is incorrect to say that it has no utility, whereas, it would be more accurate to say that it's too costly to use in common applications.

Mon, 07/11/2011 - 11:27 | 1443967 Thisson
Thisson's picture

Gold's utitility is that it works very well as money.

Do you think Warren would admit that money has no utility?  That's absurd.


Mon, 07/11/2011 - 11:27 | 1443970 Thisson
Thisson's picture

Gold's utility is that it works very well as money.

Do you think Warren would admit that money has no utility?  That's absurd.


Mon, 07/11/2011 - 11:28 | 1443972 Thisson
Thisson's picture

Gold's utility is that it works very well as money.

Do you think Warren would admit that money has no utility?  That's absurd.


Mon, 07/11/2011 - 09:43 | 1443396 GoldBricker
GoldBricker's picture

The story I heard is that he bought 120 million ounces in the late 90s, then wrote covered calls against it for years before finally being caught out in a rally and forced to sell (sometime in the mid-2000s). Very profitable business model. At any rate, the story goes that his hoard is in other hands now.

Mon, 07/11/2011 - 10:34 | 1443613 Zero Debt
Zero Debt's picture

gold = insurance

buffet = insurance

gold = competitor

competitor = bad

bad = discredit

Mon, 07/11/2011 - 08:32 | 1443133 Madcow
Madcow's picture

the senior currency strengthens in deflation.  


Mon, 07/11/2011 - 08:34 | 1443141 SheepDog-One
SheepDog-One's picture

Dollar strengthening is Bernank/Wall St's worst nightmare.

Mon, 07/11/2011 - 09:02 | 1443242 mayhem_korner
mayhem_korner's picture

Maybe.  But if the alternative is playing chicken/limbo with the imploding Euro, what choice is there?  Stealth printing is one thing, but swapping out the $100 plates for $10000 would crash the whole complex instantly.

Mon, 07/11/2011 - 08:32 | 1443136 Beastmanager
Beastmanager's picture

Those are unequivocal signs of a short term top, I have sold my last gold and silver futures just a few moments ago. I just keep the physical gold. I expect a big correction in July/August.

Mon, 07/11/2011 - 08:36 | 1443149 wombats
wombats's picture

It is very hard to criticize Buffet's investing decisions.  The results speak for themselves.  However, lets be thankful that he doesn't want gold.  Just imagine what he could do to the price of gold if he truely wanted to hoard it.  I cannot afford shares of Berkshire, but I for one will continue buying gold, silver while I still can.

Mon, 07/11/2011 - 08:38 | 1443159 f16hoser
f16hoser's picture

If Buffet is slamming Gold you can bet your ass he's covertly buying Gold Bullion. That's how billionaires do things. QUIETLY!!!!

Mon, 07/11/2011 - 09:47 | 1443414 GoldBricker
GoldBricker's picture

Countries do that too. Sell off publicly, accumulate quietly. You don't want to have everyone front-running you, for one thing. Shoot, why not announce that you're actually selling and push down the market a bit before you scoop it up (like Soros).

The Chinese and Russians are the masters. They buy up the production of their domestic mines, so the metal never registers on market radar.

Mon, 07/11/2011 - 08:38 | 1443160 gwar5
gwar5's picture

Warren Buffet has a self-serving bias towards currency. He couldn't get out of his positions denominated in fiat currency if he wanted to. He's trapped. And if media darling, Buffet, started buying gold right now it would start a stampede. 

Buffet's father was a congressman who was an avid gold-bakced currency supporter. Tragically, Warren was dropped on his head as a child and lost his integrity gene.


"I warn you that politicians of both parties will oppose the restoration of gold, although they may outwardly seemingly favor it, unless you are willing to surrender your children and your country to galloping inflation, war and slavery then this cause demands your support. For if human liberty is to survive in America, we must win the battle to restore honest money. There is no more important challenge facing us than this issue — the restoration of your freedom to secure gold in exchange for the fruits of your labors."  --- Howard Buffet, in speech to congress, 1940's




Mon, 07/11/2011 - 10:38 | 1443637 Zero Debt
Zero Debt's picture


Mon, 07/11/2011 - 14:58 | 1444865 XitSam
XitSam's picture


Mon, 07/11/2011 - 08:40 | 1443162 monopoly
monopoly's picture

GM all. Well, is this really any surprise to long term ZH folks here? Not much to say. This puzzle is taking shape and looking just about right. Glad they are moving into American confetti, wow, that is smart. We are in line with the rest, just in the back, and will take time to get to the front of the line.

What a day for gold to hit an all time high. Anyone see the "brillant ones" lately.

Mon, 07/11/2011 - 08:41 | 1443166 SheepDog-One
SheepDog-One's picture

No one except us dorks follows currencies, the important thing and what keeps the sheeple placated is their 401K's, stocks.

Mon, 07/11/2011 - 08:43 | 1443171 monopoly
monopoly's picture

good point sheepDog, I guess it is game over when they all get religion and advise, currencies?, Hmmm, maybe I should pay attention. Until then, buy LULU.

Mon, 07/11/2011 - 08:45 | 1443178 SheepDog-One
SheepDog-One's picture

Long live yoga tights!

Mon, 07/11/2011 - 08:41 | 1443167 monopoly
monopoly's picture

Buffet has lost it a while back. Time for him to move into assisted living where the caregivers can take care of him and remind him when it is meal time. What a waste he is.

Mon, 07/11/2011 - 08:51 | 1443196 Caviar Emptor
Caviar Emptor's picture

Don't you get it? Buffet is anti-gold because...he's pro-Ponzi. 

That's the long and short of it. 

To the core of his crusty being he has a visceral hatred of anything that could take your money away from where he could partake of it. Same with all his buddies in both business and politics. 

Gold puts your money out of his reach. Damn you!

Mon, 07/11/2011 - 08:47 | 1443185 Caviar Emptor
Caviar Emptor's picture

This is a public service announcement: Buy Gold


A very remarkable thing has happened under the radar: since the crisis began for real in 2008, more average Joes/Janes bought gold than at any time since the gold standard existed in the United States. (!)

It was a side-effect of greater financial transparency, the public's riveted attention since the spooky days of the housing crash and the Wall Street crash in 2008, incessant trawling for scrap gold out there on the streets and in malls and on TV, tireless marketing of gold investments on the internet and media.......AND open discussion forums about gold and the issues surrounding gold right here on ZH! (and other well-known sites)

ZH has done a public service by helping countless citizens protect themselves from the poisonous side-effects of Ponzi economics. 

Mon, 07/11/2011 - 08:53 | 1443209 Slap That Taco
Slap That Taco's picture

Here's a better one:






Mon, 07/11/2011 - 08:49 | 1443197 Peter Pan
Peter Pan's picture

There is no doubt that between the USA, China and Europe, there is little love between them. However, if one goes down the others will follow. Therefore, at some point they may well agree to at least stem the rise of gold through whatever means possible until they figure out (unsuccessfully) how to prop up the fiat facade for the sake of keeping power, position and wealth in the hands of their elite. The bankers and their friends love shaking the gold bugs' tree even though they themselves are sinking.

Mon, 07/11/2011 - 08:49 | 1443198 johngaltfla
johngaltfla's picture

A changeup in the flight to safety in no particular order:





Someone is about to default big time and I don't think it's Greece....

Mon, 07/11/2011 - 08:49 | 1443199 Slap That Taco
Slap That Taco's picture

Cramer bullish on gold?

OH NO!!!!!!

Mon, 07/11/2011 - 08:53 | 1443208 Caviar Emptor
Caviar Emptor's picture

I rarely (if ever) credit the dude, but since he got burned in 2008 he has repeatedly recommended a small allocation to gold (I have always said everyone should own a little gold in their portfolio)


He's part of the public service announcements that have put more gold protection in people's pockets

Mon, 07/11/2011 - 09:20 | 1443308 Beastmanager
Beastmanager's picture

Exactly what I thought, sell sell sell!

Mon, 07/11/2011 - 08:51 | 1443204 SwingForce
SwingForce's picture

So now the top in gold is in too?

Mon, 07/11/2011 - 08:57 | 1443225 Slap That Taco
Slap That Taco's picture

LOL.  I don't know, but if the BOOYAH crowd is in, well, hopefully they don't know what a Krugerrand is.

Mon, 07/11/2011 - 09:26 | 1443340 Beastmanager
Beastmanager's picture

Obvious signs of a short term top, in my view. Also the fact that if you say so you get junked is a validation ;-)

Mon, 07/11/2011 - 10:48 | 1443691 oddjob
oddjob's picture

no, just 30 day fatherless trolls that just hatched. Don't worry the mother troll will be back to regurgitate some tasty grubs for you.

Mon, 07/11/2011 - 08:56 | 1443220 Yen Cross
Yen Cross's picture

 Jim Cramer is an { ARCHIMEDES STATUE} with A fist up it's  ASS...

Mon, 07/11/2011 - 08:57 | 1443224 Sudden Debt
Sudden Debt's picture

Jim Cramer Critiques...

So Curly is blaming the old fart for being wrong...

It's official... the world has gone to the shitters...


Mon, 07/11/2011 - 09:01 | 1443238 Yen Cross
Yen Cross's picture

 +1 Sudden Debt.. You know you have my respect.. That ass clown could find a silver lining in a TOILET.. Not to mention he is a WAFFLE HEAD!!!

Mon, 07/11/2011 - 08:59 | 1443232 Translational Lift
Translational Lift's picture

Oh great....a shylock dissing an octo-obamma-apologist.......neither should be listened to.  They are both talking their own book!!

Mon, 07/11/2011 - 09:09 | 1443270 Slap That Taco
Slap That Taco's picture

CNBC is my favorite sit-com, has been for many years. 

I still maintain that a market disintegration, combined with a complete restructuring of how market news is reported, will be the greatest buy signal of our lifetime.



Mon, 07/11/2011 - 09:04 | 1443251 colonial
colonial's picture

didn't read the comments above, so this may be repititious...

GOLD IS A COMMODITY.  There is a difference between owning equity shares in gold miners, or gold mutual funds, and owning gold directly or in the futures markets. 

Mon, 07/11/2011 - 09:13 | 1443286 Slap That Taco
Slap That Taco's picture

Oh of course, I don't think anyone here doubts that.

Take it a step further-you should own a "coin collection" for your entire life, and give it to your kids.

Mon, 07/11/2011 - 13:23 | 1444455 Thisson
Thisson's picture

Gold is money.  Money is a commodity.  There, I fixed that for you.

Mon, 07/11/2011 - 09:08 | 1443262 Loose-Tools
Loose-Tools's picture

Speaking of Crammer, he's on Squawk Crock right now.  Time for another Flash Crash?

Mon, 07/11/2011 - 09:16 | 1443300 oddjob
oddjob's picture

Any chance of a Gold vs. Gartman chart?

Mon, 07/11/2011 - 09:22 | 1443315 Yen Cross
Yen Cross's picture

 Gartmans Middle name is " Houdini"...

Mon, 07/11/2011 - 09:24 | 1443322 Stuck on Zero
Stuck on Zero's picture

"But, but, but gold doesn't pay dividends," quoth the sage from Omaha.

"Better no dividends than negative dividends," Tyler.

Mon, 07/11/2011 - 10:49 | 1443695 Zero Debt
Zero Debt's picture

Gold pays no dividend/coupons because it has no counterparty risk.

Mon, 07/11/2011 - 13:32 | 1444502 Thisson
Thisson's picture

This concept is false.  There is no causal link.

Further, gold can pay synthetic dividends: you can lease it out; you can use it for fractional reserve banking; or you can write covered calls against it.

Gold pays no "dividends" because it is not a productive asset: it is money!

Mon, 07/11/2011 - 13:36 | 1444523 Temporalist
Temporalist's picture

It appears Zero Debt was proving that point but good thing you spelled it our for people that don't get it.

Fiat needs to pay interest because otherwise people wouldn't care about it.  Gold's dividend is that it holds value over time unlike fiat that is continuously debased.

Sun, 07/24/2011 - 01:43 | 1486445 Zero Debt
Zero Debt's picture

I stand by the statement: gold is non-yielding because it has no counterparty risk.

We may agree on one thing: if a medium of barter pays a dividend/yield/coupon it is not "sound" money, but rather a derivative of money, or a credit if you will. But you don't get something for nothing:

Nice idea, but if you lease "it" out (gold, silver, shares, a house, a car, etc), you take on counterparty risk. Who are you leasing to? For what duration? On what terms? There are market lease rates for gold, silver and so on. We can go on and say, palladium has a dividend because I can lease it out, sure I can, but how do you reconcile for the fact that you may not get it back with saying that there is no counterparty risk, well, it can't be. There are no risk free rates.

Possibly, but if you use it as a fractional reserve asset, it is not unencumbered. There is someone else who has a claim on it. And by that time, it is not truly "your" asset. There was an article on ZH a while ago with a presentation of the "implied yield" of gold, as it can be posted as collateral. This is the closest we can get to a "dividend" of gold, but ultimately gold is non-yielding as such collateralization implies that the gold is encumbered by someone else's claim to it. You may not obtain this implied yield unless you take on whatever risks that such collateralization implies. I suppose this risk has a fancy name as well.

The axiom Gold + other asset (in this case selling a call option) = synthetic dividend does not invalidate that gold has no yield. The premium of the written option is not a yield of the asset and as a seller of a derivative you take on multiple types of risk (the Greeks). Holding the underlying asset, e.g. Au, alters the payoff curve but once we go into the options space then anything is possible.

Mon, 07/11/2011 - 09:29 | 1443350 riley martini
riley martini's picture

  Buffet deserves the title Fascist of Omaha for his record of bribery and theft of the  American people .Bribing   those in office that control the printer would allow any fascist to infect good companies and leech off the labor and management . Behind every Buffet deal is a dirty politician . Fascist theif vs Capitalist risk investor .

Mon, 07/11/2011 - 09:34 | 1443367 Yen Cross
Yen Cross's picture

  Buffett did a good job fetching the "Reading Railroad" with monopoly money...

Mon, 07/11/2011 - 10:55 | 1443730 oddjob
oddjob's picture

half funded by the 'community chest' and other half by pedro the coke dealer.

Mon, 07/11/2011 - 09:32 | 1443361 bania
bania's picture

Uncle Warren meets the Borg-Like, 67 Foot Cube of Gold.

Mon, 07/11/2011 - 09:37 | 1443380 Yen Cross
Yen Cross's picture

 LOL good one. He holds the "ALL SPARK"... "ENERGON CUBE"...

Mon, 07/11/2011 - 10:00 | 1443445 bill1102inf
bill1102inf's picture

Armed with a list of folks that own physical PM's, I decided to use my unsecured credit to buy Guns, Ammo, Food, and Fuel.  So, If nothing happens, my Guns, Ammo and Fuel will ALWAYS be worth what I paid today, (I can eat the food), and if we go apocolypto I can acquire as much PM's as I choose, when I choose, where I choose and how I choose. 

Mon, 07/11/2011 - 10:10 | 1443486 Central Bankster
Central Bankster's picture

Try coming in my front door with that theory buddy, I will put you down.

Mon, 07/11/2011 - 10:30 | 1443589 snowball777
snowball777's picture

Because nobody else is doing exactly what you are? LOL

Mon, 07/11/2011 - 12:45 | 1444286 Jack Kreuz
Jack Kreuz's picture

Gold has no utility for Buffett, but it has utility for other people, and that's why its value is 1500 per oz.

Mon, 07/11/2011 - 13:33 | 1444507 Thisson
Thisson's picture

Gold also has constant marginal utility.

Mon, 07/11/2011 - 13:32 | 1444503 Temporalist
Temporalist's picture

Buffett just hates his papa probably and because papa liked gold and silver he cannot.


Everyone is not able to own several companies like W.B. but they all can own a currency outside of the global financial ponzi.

Mon, 07/11/2011 - 17:08 | 1445419 Nnthnt1
Nnthnt1's picture

A negative Gold bias is healthy and this argument is weak.

Technology stock 'outperformed' Buffett as well if you take the right time frame 90's-00

This is weak journalism but don't get me wrong, right now 30% of my portfolio is physical gold

Mon, 07/11/2011 - 17:16 | 1445443 Nnthnt1
Nnthnt1's picture

It's not just Buffett, it's the school of value investing.

They are completely right, in the long term you have to have a negative gold bias on average.

The rolling lowest Price/Book decile of the S&P500 outperforms the highest with 10% over the last century. Returns are 22+% for the lowest, 5% for the highest (growth stock).

Make an adjustment for ('real', 'uncensored') inflation on let's say 8% and gold is underperforming stocks except when buying moron highest deciles growth stock. Since S&P500 is market cap-weighted dominated by growth stock, people don't see how fast non-moron stocks go up because they look at the S&P. Read an empirical finance book on value investing

Mon, 07/11/2011 - 17:22 | 1445466 Nnthnt1
Nnthnt1's picture

The comments on this graph speak for themselves. I don't see any valid arguments made.

Remember this post is not Tyler, this is probably a sponsor in ZH's new business model of letting sponsors write 'content'.

Zerohedge talks shit about the 'mainstream' media, they used to be right about that. But at least mainstream newspapers show the difference of ads / real content.

Time for ZH to get back to the roots and stop fooling people with showing graphs of the biggest bull run of gold in the last 40 years.

PS: Like I said, I do own a lot of gold, it's not gold as a play which is wrong. This article is just bad.

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