As he celebrates his 90th birthday at the end of August 2020, Warren Buffett is a living legend. The Oracle of Omaha remains the greatest investor of all time. Embracing the value-investing philosophy of his mentor Benjamin Graham, Warren Buffett has a track record of success that spans more than 50 years.
Staying at the top for that long obviously commands respect.
Warren Buffett has made a fortune in the stock market. He has always praised the merits of this market, which smiles at those who know how to be patient. He advocates patience because that’s how he built his success.
An absolute fan of the stock market, Warren Buffett has always been considered a fierce opponent of gold.
In a letter to Berkshire Hathaway investors dated 1998, Warren Buffett stated the following about the precious metal:
“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
Since that statement by Warren Buffett, the world has faced three major economic shocks: in 2000, then in 2008, and finally, the one we’re facing in 2020.
Considered a tremendous store of value for centuries, gold has played its role perfectly since 1998. Indeed, the price of an ounce of gold has risen by +550% since then:
While the U.S. dollar has been weakening steadily for years, gold recently saw the price of an ounce exceed $2,000 for the first time in its history.
The current situation is a real game-changer that makes even the most obtuse minds think.
Thus, Warren Buffett has officially announced that Berkshire Hathaway has liquidated most of its positions on U.S. banks, in addition to those already liquidated in March 2020 on airlines.
Berkshire Hathaway, for example, no longer has any position in Goldman Sachs.
Instead, Warren Buffett decided to buy 21 million shares in Barrick Gold, a company specializing in gold mining. This represents a position of $563 million.
Although Warren Buffett did not directly buy gold, he now seems to have changed his mind and is starting to bet on companies whose returns are strongly linked to the return on gold.
A real revolution for the Oracle of Omaha.
This change in mindset suggests that Warren Buffett may even be able to change his position on Bitcoin, which he has long called “Rat poison squared”. This seemed impossible at the beginning of 2020, but this coronavirus pandemic is likely to completely reshuffle the cards.
As a reminder, the Bitcoin price has risen by +65% since the beginning of 2020.
Often described as digital gold, Bitcoin has several important advantages over gold. If Warren Buffett had used the $563 million to buy Bitcoin, he could have bought it for more than 47,700 BTC.