Warren Buffett Hates Gold, But…

Billionaires' opinions on gold


5 March 2016

Since the start of 2016, we have seen a drastic price growth in gold.  As many people know, Warren Buffett has had a consistent opinion on gold – he doesn’t understand how to value it.  Here’s an article that goes into great detail on Buffett’s argument.  Although Warren is not a fan, there are many other billionaires that are big fans of gold at the moment.  For example, we recently saw billionaire Ray Dalio recommend a 5 – 10 % position in gold. Below is a video of Dalio talking about this recommendation in March 2016.



Additionally, billionaire currency expect George Soros is recommending gold in 2016 while billionaire Stanley Druckenmiller has a gold position greater than 20% of his portfolio.  So as we take a closer look at gold, I’d like to think of things in terms of buying and selling.  In the most basic form of understand what drives prices up or down, the difference between buying and selling is the critical variable.  With that said, let’s look at a chart from the visual capitalist that shows the current flows of buying and selling in gold since the start of 2016.

Courtesy of: Visual Capitalist
Now the thing that’s really becoming more interesting is the recent response from the ETF Company, Black Rock Inc.  Remember, Black Rock has 4.5 trillion dollars under management (yes, trillion).  The billionaire Larry Fink is the CEO of this company.  Recently, Fink’s company made the following statement:

Issuance of New IAU (Gold Trust) Shares Temporarily Suspended; Existing Shares to Trade Normally for Retail and Institutional Investors on NYSE Arca and Other VenuesSuspension results from surging demand for gold, which requires registration of new shares

iShares Delaware Trust Sponsor LLC, in its capacity as the sponsor of iShares Gold Trust (IAU), has temporarily suspended the creation of new shares of IAU until additional shares are registered with the Securities and Exchange Commission (SEC).

This suspension does not affect the ability of retail and institutional investors to trade on stock exchanges. Retail and institutional investors will continue to be able to buy and sell shares in IAU.

IAU holds gold as a physical asset. IAU is an exchange-traded commodity (ETC), which therefore is not eligible for registration as an investment company under the ’40 Act. IAU may only be registered under the ’33 Act as a grantor trust. Under the ’33 Act, subscriptions for new shares in excess of those registered requires additional filings with the SEC.

Nearly all other U.S. iShares are exchange-traded funds (ETFs), registered as investment companies under the ’40 Act. The ’40 Act provides for the continuous offering of shares and does not require registration of additional shares as the fund grows due to investor demand in connection to new subscriptions.

Since the start of 2016, in response to global macroeconomic conditions, demand for gold and for IAU has surged among global investors. IAU has $8 billion in assets under management, and has expanded $1.4 billion year to date. February marked its largest creation activity in the last decade.

This surge in demand has led to the temporary exhaustion of IAU shares currently registered under the ’33 Act. We are registering new shares to accommodate future creations in the primary market by filing a Form 8-K to announce the resumption of the offering of new shares. The ability of authorized participants to redeem shares of IAU is not affected.”

Talk about interesting.  What we have happening right now is an enormous demand for buying gold due to expectations that fiat credit expansion is now being required of financial markets in order to stimulate/sustain asset prices.  If the “market” is right and the next step is central bank easing, the growth of fiat currencies will drive the fixed supply of gold into a higher price.

What I’m doing

I’m following Ray Dalio’s advice.  I currently have a 5% position in Gold at the time of writing this post and I’m closely watching the price and flows of capital into the gold market.  Although Warren Buffett doesn’t like gold, I’m going against his thoughts on the matter because I think the global fiat currency system is broke.  The risk associated with buy gold right now is that the US dollar might get even stronger (due to FED tightening) between now and the middle of the summer (2016).  If that happens, the price of gold might struggle in the short term.  As for me, I’m going to continue holding my 5% position for the long term and look for opportunities to increase that position.  I think from a 1 to 3 year play, gold is going to do extremely well.  



  1. Dmitry March 7, 2016 at 4:09 am

    Preston. What are your thoughts on investing in Gold ETF vs ETF representing Gold Miners

  2. David Canales March 7, 2016 at 5:02 am

    Perfect article! I’m brand new at investing and learned a lot from your podcast. I’m actually loving and practicing this self development. MUX looks like it’s doing well now. I’m eager to see where we’re at in the future.

  3. Preston March 7, 2016 at 11:42 am

    Dmitry, I think either approach, Commodity ETF or and ETF representing the companies would be good. I think that there’s a bit of a lag with company performance due to reporting, but it’s very hard to say. I’m not 100% convinced that we’ve seen a bottom in gold yet, but I’m comfortable enough to take a small position. The movement we are seeing today are people “front-running” an expectation for the FED to ease in a major way (maybe in 2016). Something that obviously hasn’t happened yet. In fact, they are still signaling more tightening. I think people need to be careful but also aware of the potential opportunity. Like I said in the article, my position is likely a 3 year play. So if that’s the case, I can’t time a bottom, but I think the current price is attract when thinking about where it might be in a few years from now.

Comments are closed.


3 March 2016

I just want to start by saying thanks to Stig and Preston for the opportunity to write here at ‘We Study Billionaires – The Investors Podcast’. It’s an absolute honour to be part of the team. It was funny how I originally found the guys.

How did I find, “We Study Billionaires – The Investors Podcast”?

Part of my daily routine has always involved jogging while listening to a investing podcast. I type ‘value investing’ into iTunes and listen to whatever podcast I find. One day i found a podcast called, “We Study Billionaires – The Investors Podcast, with two blokes called Stig and Preston. These guys were chatting about books they’d read on billionaires, and for some reason it resonated with me.

Like you, I was new to investing and looking for guidance on a investing strategy that would suit my personality. I’d listened to dozens of investing podcasts. Most used terms like, discounted cash flow, net current asset value, portfolio management, and fundamental analysis, and I didn’t understand any of them.

Around the same time, I was watching a series of YouTube videos called ‘Talks at Google’. I heard a presentation called Deep Value, by an Australian guy called Tobias Carlisle. I’m Australian, so at least I could understand him. His presentation was based on his latest book ‘Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations”.  Here’s the video.

Tobias is like a modern day Ben Graham. Graham was a very cool investing dude from many years ago. He was chatting about the idea of ‘Deep Value Investing’, which for me as a novice investor sounded interesting. I can remember not understanding a word of what he was saying but at the same time thinking somehow this makes sense.

I must have listened to that presentation half a dozen times to try to figure out what the heck he was talking about.

It’s fair to say, Tobias Carlisle’s presentation changed my life!

So, you can imagine my surprise when I tuned into my new favourite investing podcast, “We Study Billionaires – The Investors Podcast’, and they’re interviewing my new investing guru, Tobias Carlisle – EP25: Deep Value Investing – With Tobias Carlisle

Tobias Carlisle

Tobias chatted about his book and how he applies Deep Value in the real world.  Stig and Preston seemed open to the idea of an alternative strategy to the traditional Warren Buffet methods.

I gotta tell you, it was like my investing universe came together. I decided at that moment that the Deep Value strategy was for me, cause Stig and Preston ‘liked’ it.

What is Deep Value Investing?

Tobias would explain it much better than me, but put simply, it’s a mechanical method of investing, that requires little or no human intervention. You’re not trying to calculate the future value of a company based on discounted cash-flows, or trying to buy companies that are valued at less than their net current asset value. We use something called ‘The Acquirer’s Multiple®’.

The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows:

Enterprise Value / Operating Earnings

Tobias says, the more humans intervene in their own investing strategy, the less likely they are to succeed. In fact, mechanical screens have outperformed humans infinitum. If only we could get out of our own way!

So, to start my deep value investing career, I went to Tobias’ site, ‘The Acquirer’s Multiple’, where he runs a ‘stock screen’, and I followed the steps to his investing strategy.

I know what you’re thinking, “How can you simply follow a mechanical screen?”.

My response is always the same. If you’re happy with your investing strategy, and it fits with your personality, and you’re getting results, then good for you. If however, you’re continually worried about which stocks to buy, how to value them, when to buy them, how long to hold them, how many to hold, and when to sell them, then maybe a mechanical investing method would suit you better.

If you think having a mechanical screen eliminates all of your investing stress, then think again. My international share portfolio has gone down by 25%, up by 15%, and  back to level, but you know what, I don’t care, I just stick to my strategy!

As an Deep Value investor, you need to forget about what happens day to day and month to month. Do I like to see my stocks dropping by 25%? No! Do I like to see them rise by 25%. Yes. Do I buy or sell based on this? No!

Pick Your Strategy and Stick to it!

The best investors of all time have rigorously followed their strategy, and that’s what’s made them successful! It is better to follow a mediocre strategy rigorously than to keep chasing performance.

As humans, we hit the panic button when our stocks fall significantly, and get overexcited when they rise but, what we need to do is chill out! Trust your strategy and stick to it, otherwise you’re in for a life of out-performance in the stock market.

Tobias has graciously let me set up a little project on his website. I run my international stock portfolio (live) there, using my own money. Every month I provide an update regarding the portfolio’s performance, together with comprehensive analysis of my next two stock picks.

My International Stock Portfolio (live)

Here’s my international stock portfolio (live) as it stands at the time of writing (03/01/2016):

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As you can see, my international portfolio is up 13.17% since inception, and outperforming the Russell 3000 index by 11.21%.

Anyway, I’ll be back in the next couple of weeks to look at specific deep value stocks for Stig and Preston, and my investment analysis. Every one of the stocks I invest in is underperforming for a reason. These stocks will make you feel sick when you look at them, but that’s ok. I’d rather be buying undervalued stocks that meet my criteria than following the latest star performer.

Once again, thank you boys, and I look forward to having some deep value analysis for you in the next couple of weeks.



About the author

Johnny Hopkins is a Deep Value investor, using  a mechanical method of investing, and is based in Melbourne, Australia. He runs his own blog called Brokers be Gone. He’s also a freelance writer for The Motley Fool in Australia, and writes for Tobias Carlisle’s site, ‘The Acquirer’s Multiple’, where he runs his international stock portfolio live.