Buffett Gets 'Comeuppance' After Gold Outperforms

By: Mark_OByrne

Bloomberg have covered our recent research concerning Warren Buffett's Berkshire Hathaway poor performance versus gold in recent years. Buffett is the most successful investor in the world but his lack of diversification and almost exclusive focus on equities may bring further pain to his shareholders in the coming years.

Our research shows that not only has gold vastly outperformed the revered Buffet's Berkshire Hathaway shares but investors were also rewarded with considerably less volatility (gold at 16% and Berkshire H shares at 23%) than Berkshire shares and most national indices.

And this is even with Berkshire Hathaway shares having outperformed benchmark indices such as the Nikkei, FTSE and S&P500.

Buffet himself emphasised the non-productive aspects of gold in a speech in 1998: "It gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it."

As Marc points out and financial advisers in the UK and internationally are belatedly discovering - "Perhaps gold's utility is in balancing a porfolio?"

This is why high net worth individuals, institutions and central banks including the People's Bank of China are becoming net buyers of gold again.

BLOOMBERG ARTICLE
By Claudia Carpenter
June 4

Berkshire Hathaway Inc. Chairman Warren Buffett is getting his "comeuppance" after rejecting gold as an investment four years ago, according to Marc Westlake, head of wealth management at Dublin-based bullion brokerage Gold & Silver Investments Ltd.

The chart of the day shows gold more than doubled since May 2005, while Berkshire Hathaway's Class A shares gained 6.8 percent. Buffett said at the company's annual meeting in May 2005 that he wouldn't get rid of assets for "a hunk of metal which had no real utility other than to people that are fleeing the dollar."

"The point is gold has preserved a chunk of wealth that would have been otherwise taken down with other financial instruments," Westlake said by phone from Cork, Ireland, on June 1. 2Maybe what were seeing is Warren Buffett's comeuppance."

Buffett didn't respond to a request for comment left with his assistant, Carrie Kizer.

Gold has climbed 9.4 percent this year as investors sought a haven from declines in the stock market and, more recently, the dollar. The Standard & Poor's 500 Index of shares has climbed 2.6 percent this year.

Buffett transformed Berkshire Hathaway over four decades from a once-failing textile manufacturer into a $139 billion investment and holding company. While gold has doubled since 1988, shareholders in the company have seen the value of their investment surge almost 25-fold.

http://blog.goldassets.co.uk/2009/06/04/buffett-gets-comeuppance/

Bullion Services Team

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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