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Comment by duaneb | Hacker News Reader

> Glad he also threw in some "buy gold" scaremongering too.

I'll bite; why is gold a bad investment? Does it not have low risk and stable value? Hell, these days it even has REAL value as a special metal.

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Warren Buffett on gold [1]: "I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today's market prices about $7 trillion – that's probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (NYSE:XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I'll take the farmland and the Exxon Mobils."

[1] http://www.minyanville.com/trading-and-investing/commodities...

Gold has no utility. This quote changed the way I think about gold when I first heard it.

Gold has lots of utility - just not enough to justify the speculative price.

I don't often say this about Warren Buffett quotes, but that is one of the most idiotic things I have ever heard anyone say. If you owned this 67 ft. cube - all of the gold in the world - you would be able to extract any profit you wanted from the vast majority of all electronics sold in the world, along with a long list of other products. Your $7 trillion would turn into...whatever you wanted it to. Buffett is showing his age and publicly admitted lack of understanding of technology.

People would just switch to some other material for industrial uses if you demamd an exorbitant price. Gold, while useful is not indispensable.

It would take long enough to effectuate such a switch in all products across the world that you could extract enormous sums of money in the meantime - far more than your $7 trillion. At the very least, industrial gold usage has not decreased in the face of the historically highest market price of gold. You could start at that price, and increase it until you reach the optimal price.

And then what would you do with your gains? You already have all the gold in the world, so what would you buy after that if you want to increase your return on investment?

I think you're taking this a bit too literally. Consider a less extreme case; given a choice between a pound of gold or the current financial equivalent in Berkshire Hathaway equity (about 150 shares), which is more likely to provide higher returns over the long run? Buffet is basically making an optimistic case for the American economy, arguing that gold is a hedge, while market investment is a strategy.

Yes, I understood what he was trying to say, but his comparison was too far over the top and inaccurate to not be called out. His wording introduced and failed to account for the idea of someone having a monopoly on gold.

It would be challenging to find a better example of the reason why Buffet is one of the world's richest man and you're spending your time on HN than your own comment.

But something I've learned is that it doesn't matter if it actually has utility.

What matters is if you can predict how insane humans will perceive its' utility.

Which I can't do, so I am poor. (well not poor but I have to work)

Cash has no utility either. At the end of the day, cash, gold, silver..are monetary instruments. To say a monetary instrument needs to have utility is a bit ridiculous. Do we want to go back to the days of carrying around bags of salt?

I don't know how many cubic feet $7 trillion of US dollar takes up...but if I have a cubic feet of $7 trillion anything I would take it, convert it and purchase whatever I want with it.

I think encapsulated in the quote (and what the point was) is the idea that Gold isn't going to do much but sit there and retain its value, whereas Exxon and farmland are going to grow in value over time and produce useful things. Befitting an investor's quote.

It's not saying gold has to have utility. Which it actually does fwiw as a commodity.

With all investments there's no guarantee it will value over time or produce useful things...You can buy Theranos, a company once valued at $9 billion, and the next day it's worthless because you found out it's all smoke and mirrors.

It's valuable exactly because all of it in the world only makes a cube 67 feet on a side. Compared that to, say steel production, where the world has produced a cube 1900' on each side. And that was just in 2015.

People argue that gold has value in case of a world war or some kind of apocalyptic economic crash, like a nuke going off in Manhattan.

So ultimately people trust gold because they believe WW3 will start soon.

It's value isn't that stable...

It's just another commodity. It trades like a commodity, its not anything special, it's not currency, it's metal dug from the ground. People attribute way more importance to it than they should.

True, but unlike other commodities it's easy to take a long position on gold with ETFs like GLD which actually store the physical gold. For other commodities (like oil with ticker USO) it's not so simple to take a long position. The best you can do is trade options, with the added risk of a contango market.

You are potentially overselling the "store physical gold" component of GLD depending on what you think the redemption rules of the fund are. As per usual Kid Dynamite is my favorite writer on the subject:

http://kiddynamitesworld.com/why-is-gld-so-hard-for-people-t...

I'm no gold-bug.

It's value is relatively stable.

The fact that it is a commodity, or that it is not a currency, has nothing to do with its value.

It is special, in the sense that is is both a precious metal and an industrial metal, and it is also a common store of value, i.e. gold reserves.

Many incredible, valuable things are "dug from the ground."

Gold is not a bad investment as part of diversified portfolio.

To justinlardinois's point, the stability and risk duaneb refers to, are reasons fearmongers encourage divesting other holdings in to gold in times of instability.

The value of gold is not at all stable. It has higher variability than the S&P 500 index.

http://finance.yahoo.com/chart/GLD#eyJjb21wYXJpc29ucyI6IlZGS...

"Relatively stable," appropriately qualifies the statement and your link to a chart for a gold ETF is not support for your claim that, "The value of gold is not at all stable."

You dont buy gold as its stable. You buy it as it's;

1) A generally appreciating asset

2) It physically exists (or is backed by exiting material).

And most importantly:

3) It is a flight to safety commodity so when things go bad you expect to make money.

So I would argue it is something special as a commodity. People dont rush to iron ore in a market crash. Maybe people do attribute more to it than it deserves but its disingenuous to pretend it doesn't have a special place in financial markets.

> 1) A generally appreciating asset

It's down in the last 5 years. Also, all assets are generally appreciating because of inflation.

> 2) It physically exists (or is backed by exiting material).

This doesn't actually matter. All prices are set by what buyers will pay. Some things, like currencies or bonds, are backed by governments or physical assets like real estate, other commodities, land, etc...

> 3) It is a flight to safety commodity so when things go bad you expect to make money.

As are other assets and securities. Again, nothing inherent to gold.

> Maybe people do attribute more to it than it deserves but its disingenuous to pretend it doesn't have a special place in financial markets.

You could argue every commodity has a 'special' place in financial markets. I'm not arguing gold isn't real or is worthless - it does have value because of its use in electronics as well as in adornment and its historical use as currency.

What I am arguing is that:

> Maybe people do attribute more to it than it deserves

All things being equal, it's no worse than other commodities and better than many. However, there are alot of less than scrupulous people who keep pushing it onto less sophisticated investors. And many of those people are paid by various companies to herd those less sophisticated investors into buying their product.

Not saying that Bill Gross is one of those by any means, just pointing out why it has a bad rep. And if the non-GOP candidate wins, they'll be another round of "buy gold" and/or "buy guns" or another TFH approved product come January.

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