In a recent interview with the Financial Times, Oaktree Capital chairman Howard Marks had the following to say about gold:
‘Gold is very problematic because you can’t value it. Gold, oil, diamonds, art, houses and currencies are assets that don’t produce income and as such it’s very hard to put a value on them. So it’s easy to sit here and to say, “Well, there’s concern about the dollar, there’s concern about inflation, there’s uncertainty about what the future looks like and so gold is a good idea”.
But you would have said that if the price was a thousand, you would have said that if the price was six hundred. Now I say to people, “So you’re saying that today when the price is fourteen hundred”? They say “that’s right”. I say, “Would you say it today if the price was twenty-eight hundred”? They say “no”. I say, “Then price matters”. They say “yes”. Then I say, “So how do you know today’s price is ok? How do you know that it’s ok to go into a good which you can’t price? How do you know that all of these reasons to do it aren’t priced in today”? And you can’t.’
Too true. If you want to buy an asset that doesn’t generate any income, that’s fine. But don’t call it investing. It’s speculation, pure and simple.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.