Warren E. Buffett is a great investor, according to Christopher Goolgasian, a vice president at
State Street Global Advisors Inc., which markets a $74 billion gold fund, but the Oracle of Omaha just has it wrong when it comes to the metal.
“While he won't own gold, he also never owned Apple Inc. (AAPL) [up about 1,500% since January 2000] or Google Inc. (GOOG) [up 530% since August 2004],” Mr. Goolgasian said of Mr. Buffett in a March 2 regulatory filing for the SPDR Gold Trust, an exchange-traded fund managed by
State Street Corp. (STT).
In the filing, Mr. Goolgasian wrote that while Mr. Buffett's Berkshire Hathaway Inc. (BRK-A) has risen 105% since January 2000, gold has climbed nearly fivefold.
Mr. Buffett, in his annual letter to shareholders last month, wrote that investors should avoid gold because its uses are limited and it doesn't have the potential of farmland or companies to produce new wealth.
Achieving a long-term gain on the metal requires an “expanding pool of buyers” who think that the group will increase further, he wrote.
“What motivates most gold purchasers is their belief that the ranks of the fearful will grow,” Mr. Buffett wrote in the letter, posted Feb. 25 on the company's website.
“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,” Mr. Buffett wrote.
“As bandwagon investors join any party, they create their own truth — for a while.”
In his letter, Mr. Buffett estimated that the world's stock of gold if melded together would form a cube of about 68 feet per side and, when valued at $1,750 an ounce, amount to about $9.6 trillion.
"FONDLE THE CUBE'
For the same amount of money, an investor could acquire all the cropland in the U.S. and buy Exxon Mobil Corp. 16 times, while still having $1 trillion left over, he wrote.
“You can fondle the cube, but it will not respond,” Mr. Buffett wrote.
Gold futures for April delivery settled at $1,709.80 an ounce March 2 on the Comex in New York.
Mr. Buffett built Berkshire Hathaway from a failing textile maker into a firm selling insurance, energy and jewelry through acquisitions and stock picks. The company has a market value of $194 billion, according to data compiled by Bloomberg.
In his note, Mr. Goolgasian called Mr. Buffett “the greatest investor of our time.” Still, that didn't stop Mr. Goolgasian from questioning Mr. Buffett's take on gold.
“It strikes us that Buffett believes that only asset classes and investments that fit his specific investment beliefs can be sensible investments,” Mr. Goolgasian wrote.
“We, however, are agnostic about how to beat the market. We just want to do it,” Mr. Goolgasian wrote.
Mr. Buffett didn't immediately respond to an e-mail sent to his assistant, Carrie Kizer, requesting a comment about State Street's filing.
