Whatever prompted the comments, Warren Buffett recently claimed stocks were safer than gold and bonds, by far. Further stating, equities will prove to be the runaway winner.
When I hear comments like this, I immediately question the basis for making such a bold claim. Surely, the basis for this claim must be that Berkshire Hathaway stock has done well since the collapse of Lehman and the onset of the 2008 credit crisis. If there was ever a time when safety was foremost on the minds of investors, it would be in the days, months and years post crisis.
Today, at the time of this writing, one share of BRK-A trades at $117,862.99. On the day the 2008 credit crisis began, September 15, 2008, one share traded for $147,000. So let's talk about safe. BRK-A, today, is down 19% from its pre-crisis high. It seems BRK-A was not a destination of choice on the itinerary of the flight to safety.
Instead, investors headed for bonds, (despite negative real rates of return) Gold, Silver and other commodities. In fact, Gold prices, since the Lehman collapse have doubled. Silver is up about 80%. Maybe Mr. Buffett meant stocks in general, not just BRK-A. Today the S&P is up 8%, since September 2008, the Dow is up 13% and the Nasdaq, thanks to a couple big hitters like AAPL and GOOG, is up 30%,
So far I'm still not seeing a case for stocks being safer than gold or bonds. Maybe Mr. Buffett was not just referring to periods of time when safety was a primary investor concern. Maybe he meant in good times and bad like we've seen over the last decade. Indeed BRK-A is up over 60% in the last 10 years while the major indexes are struggling just to be even. Then what about Gold?
In the last decade gold is up 500% far outperforming stocks, bonds, real estate...has anything beat 500% over the last decade? Will the trend continue?
As we move further and further into debt - debt we cannot pay - it's hard to imagine an end to printed money or government borrowing. Surely an end to either could produce an Apocalyptic end to our financial system. Inflation appears to be the only other alternative. Print money, debase the dollar's value and in such a case drive the dollar price of gold to even higher highs.
Where do you want to bet your savings and retirement for the next 10 years?