Very interesting read for us longs31 Oct 2010 08:24
Warren Buffett: Forget Gold, Buy Stocks
Chris Rowe
If you think the dollar will decline further, it makes sense to buy commodities. But even if there is a global recovery that's faster than we expect (isn't that often the case?), the fact is that many commodities will still outperform, because supply is simply unable to meet the increasing demand for some of the commodities. So which one(s) do you buy?
In a recent interview with Ben Stein, when asked about whether or not gold is a good investment, Warren Buffett said: "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?" He went on to say that he is a buyer of equities, and that's what he would recommend for others -- specifically, investing in companies that pay dividends and are likely to increase them in the future.
Warren Buffett has an outlook of 10+ years down the road. He can be wrong about his call on equities for a few years and still not be Considered "wrong", as long as equities continue higher in the years following a decline. Frankly, I don't even know if I'll be around to enjoy my money in 10 years, so I'm looking at what will be moving over the next few years, and possibly over the next year. We are very focused on investing in the right SECTORS. We don't believe in just blindly investing in "the stock market", even if they pay dividends. So I would take it one step further than that. Buffett says "buy stocks" but I say buy agricultural stocks!
Agricultural prices, over the next several years, are almost certainly going to be in a bull market. It could be caused by food shortages and droughts that will eventually create food shortages. But it could also be caused by a decline in the U.S. dollar, so if you think the Fed’s printing of money is going to cause the value of the U.S. dollar to decline further from here, then you can add that to the reasons commodity prices are going to continue trading higher. Commodities have an inverse relationship to the U.S. dollar. But due to the huge demand for grains and a lack of supply, not to mention the way the global economy and population is poised to grow, I think even a strong dollar would result in limited downwards pressure on the sector. We saw the effect that the 2007 - 2008 food crisis had on grain prices, causing political and social unrest across the globe, rich and poor.
Initial causes of the dramatic price increases began with emerging economies being able to buy more food and change their diet, along with falling world-food stockpiles (a trend that still continues today). Furthering the price spike were droughts i
Sign In
Follow the stocks
