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well it's that time again the 13 f's are out uh so we as the little investors get to have a look at what the big money managers of the world are buying and selling and definitely the most watched 13f filing is definitely that of mr warren buffett and uh his 13 they're filing this round was quite surprising i definitely did a double take because it said that berkshire hathaway was buying gold to me this was very surprising because warren buffett has gone on the record multiple times saying how he doesn't like the idea of investing in gold quite simply because it's a non-productive asset if you if you buy an ounce of gold today and you hold it a hundred years you can go to it every day and you can you can coo to it and you can caress it and and you can fondle it and and and 100 years from now you'll have one ounce of gold and it won't have done anything for you in between if you buy a hundred acres of farmland it will produce for you every year you can use that money to buy more farmland you can do it all kinds of things but for a hundred years it'll produce things for you and you still have 100 acres of farmland at the end of the 100 years uh you could buy the dow jones industrial average for 66 at the start of 1900 gold was then 20 at the end it was 11 400.
but you'd all gotten dividends for 100 years so a productive asset of any kind a decent productive asset is going to kill a non-productive asset over time now and this has long been warren buffett's viewpoint and the reason why he stays well away from investing his money in gold when you buy gold it doesn't do anything you just sit there you can watch it it looks pretty and then eventually you hope down the track to sell it to someone who wants to buy it from you for more than what you originally paid for it it's not like a business where you can buy a part ownership and while you hold the shares of that business the company still makes money right it produces cash flow so it's a completely different way of of thinking about investing so yeah i was certainly very very surprised when i flicked open berkshire's 13f and there you go warren buffett is buying gold so it seems as though his opinion around gold is changing a little bit now one thing to clarify is that he didn't actually buy just straight up physical gold he didn't do that what he did is he bought a stake in a gold mining company called barrack gold so berkshire hathaway they bought 21 million shares of barrett gold currently worth around 563 million dollars and it's kind of funny this is kind of like the most warren buffetty gold investment you can get because instead of just buying straight up physical gold he's decided to buy a business that mines and sells gold and this is actually pretty clever because if you just bought physical gold then you as the holder you are just at the mercy of whatever the gold spot price currently is however there's another dimension if you own a gold mining company yes their profits and thus the share price will definitely be directly affected by whatever the price of gold is at the time however there's that other dimension that you can still get a good return if the company is able to you know increase their operations they're able to mine more gold and sell more gold for example here's a quick look at what the gold price has looked like over the last little while now if you bought just straight up physical gold your investment the value of your investment would just ride the ebbs and flows of whatever this chart says however in this chart here you can see barrick gold's production numbers and if you take out the last couple of quarters so if you take out the shutdown then what you can see is that over time this gold mining company is able to dig up more and more gold so they've got more and more and more product to sell at whatever the price is at that time now this is also reflected in their earnings so if you have a look at their earnings when the production was low and the gold price was also low then the earnings were negative however when the production was high but the price was low then the earnings were slightly positive but then when the production was high and the price was high then the earnings were great and when the production was down but the price was up then the earnings were not quite as good so instead of buffett just buying gold and being at the mercy of that price he buys into a business where yes their business will be impacted by the gold price but they've also got the potential of mining more and more gold over time and in this case copper as well so with that said the next question to ask is well why did warren buffett actually do this and i think i think the real reason for that is that he is quite concerned about the future outlook of the economy and he wants to protect his downside risk in these times of uncertainty because traditionally and this is very very much ray dalio's view on gold gold is a a store of value that protects you against the flaws of a fiat currency and a fiat currency is what we currently have it's a government issued currency that isn't backed by any commodity so you can't trade in your dollars for gold anymore and you know usually we don't really think about the nuts and bolts of currency too much because it doesn't really change it doesn't really impact our lives too much i mean we go to work we earn 30 bucks an hour or something and a loaf of bread costs three dollars but we have to remember that all that is true because there are a certain number of dollars that exist out there so each dollar we understand without even truly realizing it we understand what the value of a dollar actually is however the problem with fiat currency is that the central bank has the ability to create more dollars literally out of thin air they are just able to print brand new dollars and what that means that means that dollars are more abundant or in other words dollars are now less scarce than what they were before they started printing money so the value of those dollars slowly goes down if the central bank is creating more of the dollars now occasionally this can get really out of hand for example this is why in a country like zimbabwe you can have a banknote that says on the front it's worth 100 trillion dollars however gold isn't like that there's only a finite amount of gold that is here in the earth right there's we can't 3d print gold out of plastic or something it just doesn't work obviously so there's always that scarcity of gold and that's why investors like ray dalio always like to keep some of their money invested in gold because they hope that that scarcity keeps the value of gold quite stable when something like a dollar that value might change over time as a central bank prints more and more money i think he's making a big mistake yeah gold is like cash it's an alternative version of cash so over long term it's it's not the best investment over long term it's um you know a little bit better than cash over a long time it is as however on when you're having a monetary crisis when you have a fiat monetary system and you have the need for money debt is a promise to deliver money right so if you look at each of those devaluations that have taken place each year what march 1933 president roosevelt closes the banks and then opens them and says you can get your money and then they broke the link with gold and so the history over that period of time is that money uh can be produced gold is somewhat limited it's an effective it's a it's it's an alternative that should be part of everybody's portfolio but not in a big way and that's why a lot of investors like to flock towards gold in times of economic uncertainty right they're hoping that that's the store of value right it's a it's a safer store of value at the current time than money than dollars because the central banks can influence what those dollars are actually worth so in periods of economic uncertainty people like to buy gold and that's exactly what we're seeing right now we're seeing you know central banks around the world absolutely printing truckloads of money so they're making their dollars worth a little bit less and a little bit less so a lot of investors like well no i'm just going to buy gold because hopefully that stores the value and that is why over the past year we've seen the price of gold go up so much because all of a sudden there's now a much higher demand for gold and when the demand goes up the price goes up so overall that's kind of the thinking behind gold and you know i do probably think that warren buffett is warming a little bit to gold however i should say that he's definitely not changing his tune in a great rush like this investment that he just made in this gold mining company is only worth about 500 million dollars now that's a lot of money but it's not a lot of money to berkshire hathaway remember they've currently got 146.6 billion dollars of cash on the sidelines right their portfolio is worth 202 billion dollars so this investment is only 0.28 of their portfolio so i don't think that warren buffett is necessarily changing his opinion in a great hurry but i probably think that one of the factors that's led to this purchase is quite simply the fact that berkshire hathaway currently has so much cash they have so much cash sitting there in the bank and perhaps they just want a little bit of downside protection by having a little bit of gold from the potential of those dollars being worth less and less and less if the central banks of the world keep printing more and more dollars so anyway guys that is the video for today that is warren buffett's big new headline investment warren buffett buying into a gold mining company i'd love to hear your opinion on this drop that down in the comments section below do you think that warren buffett's warming to gold or do you think this really isn't something that we should be paying much attention to and what are your opinions on gold do you hold it in your portfolio do you believe in that idea of the store of value or do you stick 100 to businesses that keep producing cash flow no matter what anyway i'd love to hear from you guys if you enjoyed the video leave a like on it it greatly helps me out helps the channel out helps the video out easiest way to support the channel so i really appreciate you guys leaving a like on the video subscribe to the channel if you haven't done so already check out profitful if you'd like to learn my two different investing styles passive investing active investing step by step walkthroughs that stuff is linked however that is it for today thanks very much for watching guys and i'll see you all in the next video you
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