Tuesday, January 25, 2011

The complexity of investing

Recently, somone asked the Oracle of Omaha (Warren Buffet), what was his opinion on Gold?
He replied in his usual characteristic simple way: "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

This is the ultimate dilemma of investing and human life. How do you value anything? What we value today highly can be totally disregarded another day. Remember how a baby takes so much interest in a colourful spinning plastic "thingy" atop its cradle? Or how much we appreciate the 100 or 1000 bucks which was the first salary and later that amount just doesnt even excite us years later. How we value the last few minutes of the death bed of a loved one but never valued the hours we spent during the lifetime knowing very well that everyone will pass away someday.

All value is relative in life, and humans need to value millions of things in their life. Coming back to investing, most of the things in investing is based on what you believe and what you value. On the other hand of Buffet, we have another equally great stud, Mr.Jim Rogers, who has always believed in commodities and will always lobby for buying commodities. That is because he believes and he has his reasons to believe in it.

So at the beginning (and probably the end) of the day, what are you going to believe?

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