The U.S. dollar is going to lose value over time. Few doubt that. But predicting rain is not as important as building arks. Many doomsayers are saying the best way to hedge against the weaker dollar is to buy gold, and gold is now just short of $1,000 an ounce. Is gold the best way to hedge now and is it worth buying?
Let me state a few facts: Gold pays no dividends. According to Wharton professor Jeremy Siegel over 95 percent of the Dow’s gain since 1900 has been from reinvested dividends. So, if you buy gold, you are counting on 100 percent appreciation.
I believe that gold can be an appropriate investment provided it is bought near market bottoms. That time is not now. Can gold go higher? Sure dot-com stocks with P\Es of 150 tripled in value in a short time.
The World's Greatest Dividend Stock on Sale Now — Click Here
But that’s gambling, not investing. My idea is to buy large-cap, multinational, U.S. companies that do at least 50 percent of their business outside the United States.
Need a reason? I’ll give 100 billion reasons.
Warren Buffett is the only man to earn more than $100 billion for himself and his investors, and he has never bought gold and only bought silver once in his 55-year career.
Multibillionaire Charlie Munger, Buffett’s partner, once said that “most of Berkshire Hathaway and all of its accumulated billions, the top 10 insights account for most of it.”
Of those 10 insights, almost every one was about U.S. company that did a significant amount of its business outside the United States and paid him dividends.
In 1988, gold was down almost 50 percent down from its 1980 high but traded at $480 .Even at yesterday’s almost record close of $990 you have doubled your money slightly with no appreciation.
Coca-Cola in that same span has increased by almost 17 times the original purchase price (almost 1,700 percent). The investor has had annual dividend yield each year starting with about 3 percent in 1988. In 2009, it will pay 32 percent of the original amount invested.
Many gold bugs do not like dealing with these facts. But that does not make them any less true.
© 2017 Newsmax. All rights reserved.