Premium ContentMouse over Home then click on Premium Content for information.An article by Warren Buffett in Fortune magazine touched off criticism by calling gold a "valueless asset" and saying its price rise over the past decade is an investment "bubble" that will inevitably pop.
"And then the old proverb is confirmed once again: What the wise man does in the beginning, the fool does in the end," he wrote.
The article, adapted from the letter that Buffett will send to shareholders of Omaha-based Berkshire Hathaway Inc. on Saturday, elaborates on Buffett's long-held belief that it's best to own something that will produce wealth.
If you had $10 trillion, he wrote, you could buy all the gold in the world, or else buy all U.S. farmland and 16 corporations the size of Exxon Mobil, with $1 trillion left over. Over 100 years, he reasoned, the farmland and the corporations will produce trillions of dollars in profits and still have value, while the gold will be worth only what someone else is willing to pay.
Responded the BullionValue website: "Warren Buffett says he doesn't like gold because it doesn't do anything or go anywhere. But that is precisely the reason for Buying Gold."
According to the Daily Telegraph in London, a private British bank named Coutts said its clients include the Queen of England, who counts gold as a "key asset in investment portfolios."
"I think it is fair to say that the Queen of England knows her history," wrote Eric Harding in the International Business Times, under the headline "When the World's Wealthiest Man Says a Really Silly Thing,"
Bill Harcourt wrote for Australia's Canberra Times that the Berkshire CEO is wrong in saying gold investors are motivated only by fear.
"Gold may be unproductive, but what about the trillions in paper money in U.S. dollars and euros being printed, hopefully, to revive the economies of the U.S. and Europe?" Harcourt wrote. "Warren, the printing presses can churn out paper money faster than miners can produce gold.
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"We old gold bugs believe gold could be an alternative currency that disciplines government expenditure. Having a few gold stocks is not due to fear, Warren, but common sense."
British money manager Tim Price wrote in the Business Insider: "Discovering that Warren Buffett could be wrong is like suddenly not believing in Father Christmas. This twinkly-eyed, raspy-voiced, avuncular old gentleman almost embodies Clint Eastwood crossed with a Care Bear."
Price said the Fortune article "may be the most irritating thing he's ever written" even though the part about currency losing its value over time is correct.
"And he then goes on to rubbish gold using the tired and specious argument that purchasers are simply displaying 'greater fool' theory, eagerly awaiting new rises in price that will suck in new purchasers ad infinitum," Price wrote. "It looks suspiciously as if Warren Buffett, for all his undoubted investment success, has never actually studied any monetary history."
A better comparison than the farmland argument, Price said, would be gold versus a stack of U.S. Treasury bills. "While the bigger picture is fraught with monetary mismanagement in response to a grave crisis, there are plenty of other investment choices out there and a growing argument underpinning the ownership of real assets" such as gold, Price wrote.
The Business Insider also pulled out a statement on the gold standard for currency from Buffett's father, Howard. The dispute over basing currency on gold rather than faith in the government was a huge issue during Howard Buffett's four terms in Congress in the 1940s and '50s.
"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 Buffett wrote.
But Warren Buffett also has supporters. The Business Insider titled one article, "Here's Why Gold Bugs Are Such Angry People That Are Constantly Freaking Out At Critics."
Options analyst Jared Woodard said it's no accident that people who invest in gold "are often the same people who make their living writing angry, anti-society newsletters."
Gold "is inherently a greater-fool type of thing," Woodard wrote. "The presumption is that for whatever reason, someone will pay more dollars (ironically) for that gold brick than the day before. ... So when you combine people who dislike humanity with people who love making a greater-fool bet, is it any surprise that fans of the shiny metal are so angry?"
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A 'screaming buy'?
CNBC's Jim Cramer said recently that Berkshire may be the "perfect stock" and a "screaming buy" at its current price, but that many investors don't buy it because it's hard to analyze.
Berkshire holds so many different businesses that no single expert analyst can provide insight into all of its parts, Cramer said. But so many of those parts are doing well that now's a good time to buy, he said.
"Warren Buffett isn't just an oracle, he's a wizard," Cramer said. "With the turn in housing, the strength in the rails, the bull market in chemicals and the insurance renaissance, Berkshire Hathaway's just too good to ignore, even as it seems to be ignored by everyone."
Delighted in Derby
Berkshire's $9 billion purchase of Lubrizol Corp. was great news for the company's big research and development operation at Hazelwood in Derbyshire, England, the Derby Evening Telegraph reported.
The R&D team there creates oil additives that help cars start on cold mornings and keep engines running cleaner and longer, among other products, wrote Oliver Astley.
"It is technology that finds its way across the world. ... Hazelwood is an unlikely environment for a warrenlike industrial complex employing more than 300 people. In the past, lorry drivers delivering to the site were regularly confused and had to call at houses to make sure they were not lost."
New ownership normally creates unease among employees, he wrote. "But Berkshire Hathaway is no ordinary investment vehicle and shies away from the day-to-day running of firms under its ownership."
Products developed in Derby improve everyday life, said plant director Phil Shore.
"In the old days, you had to change the oil in your car every few thousand miles," he said. "The additives that we develop mean that you only need change your oil every 12 to 15 thousand miles and you probably never have to top it up. When I first had a car, you had to check axle oil every so often. Most people wouldn't know how to do that nowadays. Engine oil can contain more than a dozen different additives to help make your car run more smoothly."
The researchers test some of their products by driving a caravan of Smart cars along the surrounding streets.
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
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