BUFFETT AND SILVER
“What should you do if you are worth nearly $40 Billion? Maybe #6 on Mr. Buffett’s list was to buy a few million bags of silver dimes. Comments?” — J.B.
Let’s not kid ourselves that Warren’s not in the enviable position of being able to move markets — and knowing in advance which way he will move them, which gives him (an entirely legal) edge.
Sounds as if his analysis of the supply/demand for the commodity itself showed it to be a good bet. So he got silver’s value as an inflation hedge for free.
DIAMONDS AND SPIDERS
“How about discussing the advantages and disadvantages of buying diamonds and spiders (DIA and SPY) as opposed to buying index mutual funds? I am still a little confused about this.” — Chris
These two derivatives — baskets of the Dow stocks and the S&P stocks that trade just as if they were themselves stocks — are very convenient, with tiny transaction costs, and thus may even beat out index funds (if you already have a deep-discount brokerage account through which to buy them), though at some level you wind up splitting hairs; i.e. both are very good. The question with both is whether the Dow and even the S&P have gotten ahead of the smaller stocks. (That’s the question; I don’t have the answer, though I don’t feel the Dow is cheap here.) If you think so, you may want to explore an even broader index fund.
While I laud the humor in your recent column, keep in mind that Croatia and the current Yugoslavia are peaceful and have not been involved in the war in Bosnia. Incidentally, most Bosnians speak Serbian, a relative of Croatian. — Dan Scott