Following is a guest post by Roy Sebag, the founder of BitGold. The post originally appeared on GoldMoney Insights.

Buffett’s Math Trumped by Gold

“The first principle is that you must not fool yourself and you are the easiest person to fool.” Richard P. Feynman


Every year, I patiently await the release of Warren Buffett’s Annual Letter written to shareholders of Berkshire Hathaway. Though I have “evolved” when it comes to macroeconomics and my understanding of monetary history, I still consider myself first and foremost a bottom-up deep value investor and view this methodology as the only logical method to analyze, invest, or short securities traded by market participants in a free market. As far as value investors go, Buffett and his mentor Benjamin Graham are not only the best practitioners of the craft but have basically re-invented it and evangelized it. For that, every investor should have and maintain great respect for Warren Buffett, Benjamin Graham and others including Charlie Munger, Irving Khan, Walter Schloss, and David Gottesman.

View the entire Research Piece as a PDF here…

Value investing is what led Buffett to become the greatest investor of all time. He has, through his initial understanding of value investing, accumulated a collection of nearly 300 businesses spanning the globe. He has also amassed a significant fortune and more importantly, power. The same goes for Charlie Munger. With that power also comes an undoubted level of hubris, patriotism, and dare I say, statism.

Anyone that has followed the two as closely as I have can point to the specific moment when both realized their position of power was far more important to their interests than their ability to deduce market and political behaviour based on logic. It was 2008 when the financial crisis hit. That was when I believe Buffett and Munger realized they had become so successful and so big while the rest of the financial sector was so indebted and insolvent that, unless they started cheerleading, everything they had built would also be lost. It was ultimately fear which led Buffett to support Hank Paulson and even the big banks in stark contrast to his public positions in the prior decade.

I wrote about this in depth in an essay from 2012 which is entitled: “Respectfully Disagreeing with Buffett’s Recent Views on Gold“. I found it difficult to reconcile Buffett’s unsolicited comments about gold with the empirical historical data relating to his investment in silver, his public comments about inflation, and his father’s deep comprehension and support of the gold-standard as a congressman. Later this year, I will also dismantle Buffet’s comment to Becky Quick on CNBC by demonstrating that gold has actually outperformed the Dow. That piece will show that there has not been any investment vehicle that would have enabled an investor to mirror the performance of the Dow index.

In short, reaching this stage has required a deep understanding of value investing, Berkshire Hathaway’s history, and gold to disprove these arguments, and I am grateful to possess this multidisciplinary approach.

Buffett’s Latest Rhetoric

In Buffett’s 2015 Annual Letter, sandwiched between a logical review of the company’s achievements, is Buffett’s latest attempt to cheerlead and obfuscate. Unfortunately for Buffett, I had nothing to do this weekend and decided to put together a point by point rebuttal to his latest rhetoric and sophistry.