This morning, our editor Henry Blodget wrote a post on Warren Buffett’s brilliant explanation of the absurdity of gold.
The gist is this: If you had $10 trillion, you could buy a cube of all the gold in the world, or you could buy boatloads of productive assets
If you had $10 trillion sitting around, Buffett further observes, instead of buying the cube of gold, you could buy all the cropland in America ($400 billion-worth) and 16 Exxon-Mobils. And you would still have $1 trillion of “walking-around money.”
Over the next hundred years, your cropland and Exxon-Mobils would produce trillions of dollars of dividends (the size of which would be adjusted for inflation), and you would still have them at the end of the century, at which point you could probably sell them for vastly more than the $9 trillion you bought them for.
Naturally, the commenters are flipping out, and Henry has been taking flack on twitter.
For example, here’s one from @boobycluck: @hblodget you putz….gold goes up from time to time….like it has the last decade……god why didn’t you die with lucent technology #lose
There are others, as well.
So the question is: Why do gold bugs act like this? For one thing, you’d think they’d be really happy, since anyone whose been sitting on gold for any length of time has made nice profits on it, and beyond that, gold like any other asset has to have sceptics and haters for it to go up. As long as people like Henry Blodget or Warren Buffett are sceptical of it, there are more potential buyers out there, right?
Well actually, it’s just a fundamental thing with gold bugs, and it actually goes back to Buffett’s example up top.
If you bet on gold, you’re fundamentally betting against human ingenuity, and the human institutions that create wealth.
A long-term believer in gold, is inherently a misanthrope.
This point was nicely elucidated in a series of tweets from options analyst Jared Woodard yesterday.
Photo: Jared Woodard
As Woodard states, it’s no accident that gold bugs are often the same people who make their living writing angry, anti-society newsletters (See: Whoever wrote the Ron Paul letters).
So gold bugs don’t like people, but there’s another layer, which is that gold — unlike productive assets which create wealth — is inherently a greater-fool type of thing. The presumption is that for whatever reason, someone will pay more dollars (ironically) for that gold brick than the day before. That’s it. You could respond by saying that it’s the same with stock investing, except that companies actually do build value, and create value in a manner that’s not just: Someone will pay more for it.
So when you combine people who dislike humanity with people who love making a greater fool bet, is it any surprise that fans of the shiny metal are so angry?
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