This video discusses Warren Buffett’s thoughts on investing in stocks vs. nonproductive assets like gold and Bitcoin. You will learn why Buffett calls gold and Bitcoin a “nonproductive” assets and why he believes stocks will do better over the long-term.
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More from Warren Buffett’s letter:
The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.
This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.
The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.
What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.
Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough 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.”
7 Comments
What would you do if FTX reached out to sponsor you? Nice video 👍
Warren buffet is a simpleton simply got lucky because he is a US citizen. If he was born in Japan, the stock market has peaked 44 years ago, and he would be sitting on dead money for all this time. His assumption that oil and crop will forever hold value is also false. These commodities can become worthless as technology improve, and competition to make production cost increasinly lower, or in the case of oil – be replaced all together. Just because food is essensial to human life, doesn't make it forever valuable. Air and water are essential to survival too, but they are essentially free. Whereas, fine art is completely optional to one's well being, or have any utility at all, yet, valued at staggeringl high prices. Warren Buffet's thinking is flawed.
"What seems to us as bitter trials are often blessings in disguise." —Oscar Wilde
"Success is the sum of small efforts, repeated day—in and day—out." —Robert Collier
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"Our greatest fear should not be of failure but of succeeding at things in life that don't really matter." —Francis Chan
Our kids will study crypto and laugh that their parents were such suckers