By Jay Martin –
on August 28, 2020
I am going to talk about Warren Buffett.
I apologize in advance because the topic of Buffett investing in gold has already been beaten to death - but most of the narratives are either click bait or flat out wrong.
Buffet’s $562 Million investment in Barrick Gold is notable - but not for the reasons people are saying. “He’s finally admitting he was wrong about gold...”, and blah blah blah.
First of all - the ability to change your mind is not a sign of weakness, it is a sign of strength and intelligence.
Second, he didn’t change his mind (or buy gold, btw), he bought shares in a company (Barrick) that just announced a 14% increase in their quarterly dividend - which is exactly aligned with his historical investment thesis.
Many pundits have talked about the negligible figure he invested when put in the context of his portfolio - I talked to a well known asset manager earlier this week who told me, "It's literally 0.28% of his portfolio, it is throw away money for him..."
Okay big guy.
Buffet is worth $80 Billion because he sweats every penny. This is the guy who "treats" himself to the $3.17 breakfast at McDonalds only if the market is up. He settles for the $2.61 with no bacon if the market is down and he is "not feeling so prosperous" - his words.
So please, stop it with this “$500M is throw-away money to him.” That’s a garbage statement. Buffet doesn’t throw away a dime. He cuts his own hair. He's lived in the same house since 1958. He's had the same wallet for 20 years. When he married his second wife in 2006, he didn't even rent a venue - he had his daughter host at her house.
The ceremony took 15 minutes.
He is remarkably frugal. It's respectable. He will die with Billions. I could never become a billionaire because I like living too much, but that's the wonderful thing about free will - You decide what to squeeze out of this wild and precious life.
I digress, the point is - people are having the wrong conversation.
Here is a fun fact - Buffett made 95% of his wealth after the age of 65. How? By making very long term bets. This man is the antithesis of hot money. 100% of Buffet’s critics make the mistake of applying a short term outlook to his long term plans.
He dumped his airline stocks - and the airlines rallied. Dave Portnoy, and day traders everywhere, called him a fool.
But Buffet is not thinking about next quarter. He is thinking multi-generational.
So what does he see that has convinced him the gold industry is a safe and profitable long term bet? Possibly a global economy near the brink of collapse and Jerome Powell stating he plans to inflate away the US debt...?
Or maybe, he sees a business that spent eight years tightening their belt, lowering COGS, and now with an increase in per unit sales (gold price rising) this well oiled machine is set up for an incredible decade.
Regardless - here is something to pay attention to:
When Buffett wanted to invest in pharmaceuticals, he didn't buy one drug manufacturer - he bought 3.
When he bought airlines, he didn't buy one - he bought 4.
He didn't buy one bank - he bought 6.
The point is Buffett doesn't pick stocks - he picks industries. The question isn't why did he buy Barrick - it's what's next?
And that's the question we ALL want the answer to: What's Next?
So maybe this was click bait - because I don't have that answer.
But I'm always looking for it. And I am glad you are here for the ride.
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It's Friday, go do some push-ups and finish the week strong.
CEO, Cambridge House
About the Author
His ideal day begins with a hard workout followed by dark coffee and a couple hours to read anything related to futurism and...