Wednesday, June 13, 2012

Is Gold Worth Its Weight as an Investment?

I lifted this Warren Buffet quote from an insightful article on gold as an investment by my friend and financial advisor, Brent Everett, Chief Investment Officer for Talis Advisors. Read the full article here.
Today, the world's gold stock is about 170,000 metric tons. If it were all melded together, it would form a cube of about 68 feet per side (fitting within a baseball infield). At $1,750 per ounce, it would be worth $9.6 trillion. With the same amount of money, you could buy all US cropland (400 million acres with output of $200 billion annually) plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually), and still have about $1 trillion in cash.

 A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
Source: Warren Buffett, "Why Stocks Beat Gold and Bonds," Fortune, February 9, 2012.

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