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Buffett’s Investment Wisdom Shines Like Gold

By    |   Friday, 04 Mar 2011 06:51 AM

A little investment perspective for the common man or woman …

It is no secret that I have made my living as a person who allocates capital. As a former inner-city teacher, I have had to develop the skill to communicate a complicated thing like business math and accounting to those with no previous experience. I found that parables or analogies were very helpful.

The Internet is full of people who love to pontificate about investing but have never made a dime actually doing it.

Warren Buffett's Obscure Strategy to ‘Retirement Prosperity’ — Click Here

The other day I heard a great story from Warren Buffett, who like him or not, has made $200 billion for himself and his investors, a figure no one else has ever accomplished.

Here is what he said about gold:

“The real test of whether you would like it as an investment is whether you would be happy if it never got quoted again,” Buffett said.

“If you took all of the gold in the world, it would roughly make a cube 67 feet on a side,” he said. “Now for that same cube of gold, it would be worth at today's market prices about $7 trillion. That's probably about a third of the value of all the stocks in the United States," he said.

"So you could have a choice of owning a third of all the stocks in the United States or you could have a choice of owning that little block of gold, which can't do anything but kind of shine there and make you feel like Midas or Croesus or something of the sort,” Buffett said in a CNBC interview.

Now, for $7 trillion, there are roughly a billion acres of farmland in the United States. They're valued at about $2.5 trillion. This farmland is about half of the continental United States. You could have all the farmland in the United States, you could have about seven companies the size of ExxonMobil (Exxon earns more than $30 billion per year), and you could have $1 trillion of walking around money.

And if you offered me the choice of a 67-foot cube of gold or what’s behind Curtain No. 2 (all the farmland, the seven ExxonMobils and $1 trillion of walking around money) — I know, you’ll maybe call me crazy, but I'll take the farmland and the seven ExxonMobil-size companies.

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About the Author: Bill Spetrino
Bill Spetrino is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the Dividend Machine. Discover more by Clicking Here Now.
 

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A little investment perspective for the common man or woman … It is no secret that I have made my living as a person who allocates capital. As a former inner-city teacher, I have had to develop the skill to communicate a complicated thing like business math and...
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2011-51-04
Friday, 04 Mar 2011 06:51 AM
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