Anirudh Sethi Report

Japan’s pledge of a new round of quantitative easing to weaken the yen has caused another push into hard assets by investors.  As a result, the price of gold touched $1,200 per ounce overnight.  If it seems like gold was pushing through $1,100 just last month, it was.  Some may look at this run by gold as a sure sign of a bubble.  While the short period of time between $1,100 and $1,200 (22 days) seems fast, there have been other periods where the price of gold eclipsed century marks in shorter periods of time. 

The chart below shows the amount of calendar days that transpired between century marks for the price of gold.  For example, after closing above 200 for the first time on 3/6/78, gold didn’t close above the $300 mark for another 459 days (6/8/79).  However, after closing above $300 for the first time, gold breezed through five different century marks over a span of only 223 days.  In January 1980, the price of gold closed above $700 on January 15th, and then closed above $800 two days later! 

And keep in mind that with each successive century mark, the percentage rally required to get to the next hurdle declines ($300 to $400 equals a 33% gain, while a rally of only 9% is needed to get from $1,100 to $1,200).  If the price of gold were to stage a rally similar to the one in 1979, $1,200 gold would seem like small peanuts.

When reading Berkshire Hathaway’s annual letters or hearing him speak, one can always take away a few great quotes from value investor extraordinaire Warren Buffett. It should come as no surprise that he is so good at dishing out words of wisdom. After all, he is known as the Oracle of Omaha. We thought it would be prudent to assemble some of his best advice in one cohesive post.

1. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1″

2. “In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.”

3. “The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.”

4. “Be fearful when others are greedy. Be greedy when others are fearful.” Read more…