A Soros state of affairsPublished by MAC on 2010-11-22
Source: Reuters, InvestorPlace.com (2010-11-16)
"The present world order is on the brink of breaking down".
Thus declares one of the world's most generous benefactors of development and human rights NGOs, Mr George Soros.
But what does the statement signify in relation to his long-standing backing for gold?
Yes, he's reduced some of his big bets on gold, and "trimmed positions" he holds in Barrick Gold, Great Basin Gold and Newmont Mining.
But he clings on to major investments in NovaGold Resources and Kinross Gold - companies certainly not untainted by criticisms from communities and NGOs alike .
Meanwhile, George has been made "Globalist of the Year" by the Canadian International Council - a "non-partisan, nationwide foreign policy council, established to strengthen Canada's foreign policy".
To give him due, the iconic philanthropist recently expressed support for C-300 - the currently-stalled Canadian parliamentary bill designed to curb egregious activities by Canadian extractive companies overseas.
Nonetheless, these companies include some of the very enterprises in which he himself invests.
Interestingly, while Soros continues banging the drum for gold, his major rival as a wealthy "market guru" is blowing raspberries at the gilded metal.
Warren Buffet puts it plain and simple: "Gold is useless".
Amen to that!
[Comment by Nostromo Research, 19 November 2010].
Previous MAC story on George Soros: Who's Soros Now?
Soros: Conditions 'Pretty Perfect' for Gold to Rise
16 November 2010
Billionaire investor and philanthropist George Soros may be cutting back on his gold bets, but he says the precious metal still has some kick to it, as long as conditions like low interest rates prevail.
"The conditions for (high) gold are pretty perfect," he said during a speech in Toronto Monday evening to accept the Globalist of the Year award from the Canadian International Council.
"The big negative is that too many people know this and a lot of hedge funds are very exposed ... Gold has a tendency to go parabolic," he said, pointing at its tendency to fall as quickly as it rises.
In fact, gold fell for a third successive day on Tuesday to its lowest level in two weeks as a stronger U.S. dollar kept commodities under pressure, but spot gold was still above $1,300 an ounce.
Soros reduced some of his big bets on gold in the third quarter, trimming positions in miners including Barrick Gold Corp., Great Basin Gold and Newmont Mining. He left large positions in NovaGold Resources and Kinross Gold unchanged.
Changing World Order
Soros also spoke on the changing geopolitical order, outlining his expectations for a rapid decline of the United States, equaled in speed only by the ascent of China's economy since the global economic crisis erupted.
China, he told his audience - which included Bank of Canada governors past and present and CEOs from banks and corporate giants like Research In Motion - has been unscathed by the crisis and now has a better working economy and a better working government than the United States.
The present world order is on the brink of breaking down, he said.
"There is now a rapid decline of the United States and a rapid rise of China," he said. "It is happening very quickly."
He said that China got to where it is today by looking out for its own interests, but he warned that the Asian powerhouse would have to start considering the needs of others if the new world order is to emerge intact.
"If they persist in their present course, it will lead to conflict," he said, adding that China's neighbors are already getting nervous about its rising global influence.
Why Warren Buffett Hates Gold
Buffett stays on-message as gold prices soar
By Jeff Reeves
17 November 2010
Warren Buffett is an investing icon, and when he talks about the stock market, individual investors and Wall Street insiders alike take notice.
But perhaps Buffett's most controversial investment advice regards gold prices. Gold bullion, gold miners and gold ETFs simply have no place in Warren Buffett's portfolio.
And to hear Buffett tell it, gold should have no place in yours, either.
So why does Warren Buffett hate gold so much? Well, the famous value investor has been pretty clear on this. In a word, gold is useless.
Just look at what Warren has said publicly about gold. As early as 1998, Buffett was criticizing gold bugs. The oracle of Omaha emphasized the non-productive aspect of gold in a speech at Harvard that included this gem:
[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
More recently, in 2009, he echoed these thoughts in a CNBC interview. He was asked, "Where do you think gold will be in five years and should that be a part of value investing?"
"I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot - and it's a lot - it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that".
In October, Warren Buffett told Ben Stein:
"You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all - not some - all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
He has certainly stayed on message over the years. Key talking points for Buffett appear to be that gold is expensive to store, has no practical use and doesn't generate and income. Those are all pretty good reasons to hate gold.
However, whatever Warren Buffett's reasons may be, it's hard to argue against performance.
In 1998, when Buffett made his remarks at Harvard, gold averaged around $300 an ounce for the year - meaning the precious metal has quadrupled in value! Buffett's Berkshire Hathaway (NYSE: BRK.A), on the other hand, has tallied gains of only about 150% from its 1998 lows to present day. That's three times the broader market, but doesn't come close to gold prices.
In the short term, however, the results are mixed. At the time of the March 9, 2009, CNBC spot, gold closed at about $923 an ounce - meaning the precious metal has gained a bit under 50% since that date. Berkshire Hathaway stock, on the other hand, is up 60% and has outpaced gold. And at the time of the Ben Stein interview on Oct. 19, gold was trading at $1,339 an ounce. That's essentially flat compared with a small loss for Buffett's Berkshire Hathaway in the same period.
It's hard to tell what the future holds for gold prices. But one thing is for sure - Buffett will continue to sit out the gold rush. The billionaire investor hasn't changed his tune on gold just yet, and it's hard to believe that he will change course anytime soon.
Jeff Reeves is editor of InvestorPlace.com.