State Street Global Advisors Takes Issue With Warren Buffett Over Gold
The second-largest US ETF sponsor and the company behind the largest ETF backed by physical gold has responded to Buffett's criticisms of gold, even taking a dig at the performance of Berkshire shares.
It's no secret that famed value investor Warren Buffett is no fan of gold. Buffett, the chairman of Berkshire Hathaway (BRK-A), perhaps the most admired financial services conglomerate in US history, basically thinks there is little utility in gold and has cautioned investors that when an ounce of gold is purchased today, all they'll have years down the road is that ounce of gold.
State Street's (STT) State Street Global Advisors, the second-largest US ETF sponsor and the company behind the largest ETF backed by physical gold, the SPDR Gold Shares (GLD), isn't taking Buffett's criticisms of gold lying down.
In a filing with the Securities and Exchange Commission, the firm says "Gold is clearly a unique asset class. It has caused brilliant investors like Buffett and (George) Soros to be on exactly opposite sides of the argument," while noting "From an event risk perspective, while moving to cash is always an option, gold can actually prosper whereas cash will be unmoved. Saving capital by moving out of a risky asset to a risk-free one can be a powerful way to preserve capital, but making money by moving out of a risky asset into an asset that provides a positive return is a result that builds capital."
SSgA even takes a dig at the performance of Berkshire shares since January 2000, saying that "while Berkshire Hathaway has gone up a very respectable 105% since January of 2000, gold has increased nearly fivefold during the same period." Over the past five years, shares of Berkshire are up 7.45%, but GLD is up more than 150%.
SSgA also argues that gold is an underowned asset class. Some estimates have recently concluded that gold and mining stocks represent just 2% of the world's invested assets. Citing a recent report by the World Gold Council, SSgA notes "US pension plans' gold investments comprise less than 0.30% of their entire holdings."
SSgA gives Buffett proper respect by calling him the greatest investor of our time, but says that title also makes him "the most famous critic of gold." The filling notes that in addition to not owning gold, Buffett didn't participate in the amazing runs offered by Apple (AAPL) since 2000 or Google (GOOG) since 2004.
Arguably, those comparisons are a bit off base if for no other reason than that until recently, Buffett has not been an avid tech investor, and despite their stellar returns, Apple and Google are not exactly the epitome of "Buffett stocks."
A more accurate comparison would be, since the filing is somewhat critical of Buffett's view on gold, the performance of GLD since inception against some of Berkshire Hathaway's largest equity investments. GLD debuted in November 2004. In that time, the ETF is up more than 270%. That compares to disappointing performances for American Express (AXP) and Wells Fargo (WFC), a gain of roughly 20% for Procter & Gamble (PG) and a nice surge for Coca-Cola (KO). All four are among Berkshire's top equity holdings.
Editor's Note: This content was originally published on Benzinga.com by The ETF Professor.
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