“The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you… it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time” — Warren Buffett
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In this quote, Warren Buffett is contrasting commodities investments with other types of investments. He is saying that when you invest in commodities, you are speculating or “betting” that the price of that commodity will be higher at some point in the future when you sell it. However, the commodity itself does not produce any income like dividends or interest payments.
You are simply relying on price appreciation. Buffett views this as more risky than investing in a company or asset that will generate regular income or cash flows over time from business operations. He is arguing that investments focused on long-term income are generally better than short-term commodity bets that rely on price fluctuations.