The last couple of days Warren Buffet’s comments on Bitcoin have been making the rounds and generating buzz in cryptocurrency circles. With sensational headlines like; “Warren Buffet: Bitcoin is a delusion that attracts charlatans” and CNBC’s “Warren Buffet: Bitcoin is an asset that produces nothing” people might believe that the Oracle of Omaha has made an about-face, or some change has happened to inform his recent comments.
But there has not been. And he is saying the same thing about cryptocurrencies that he has since it was trading at its peak of ~$19k. Warren Buffet has called cryptocurrencies “rat poison” and has more than once said they will come to a bad end.
To this writer, in watching the full interview, it is obvious that he wants us to believe that cryptocurrency is different in some way from all other financial investments, or even the dollar, in that it is based on pure speculation and “produces nothing” in the way a farm does. And even points to “the time of Christ” to show that investment in money, in that case gold, has produced marginal returns over many years.
He also used an example of someone acquiring gold in 1942 ahead of WWII and laughs at using it as a store of wealth because it would have returned “only a penny for every dollar” if instead invested in the stock market.
I wholly understand his typical investment logic in that speculating on a stock of a company producing a tangible asset, such as corn or oil, is inherently more attractive over the long term than speculating on a currency. For an informed investor, there is less guess-work involved than with intangible assets such as the dollar or Bitcoin, thereby producing less volatility. Again, for an informed investor.
Of note about Warren Buffet, and the advantages he has had at becoming an informed investor, rather than an electrician, garbage man, or engineer; is that he grew up in brokerage houses. His father Howard Buffet owned a brokerage firm. And while at the Columbia Business School he studied under Benjamin Graham and David Dodd, both seriously connected securities analysts.
The vast majority of working people don’t have those luxuries, and therefore don’t have access to the same information about and from business decision-makers. We don’t know whether that farm will yield more corn or less or is on a flood-plane during el Nino, but he does.
This is typical of people who have access, fervently believe in the American credit cycle, and accept volatile boom-and-bust economics as a preferable state.
Also of note about Warren Buffet, and his $83 billion dollars, is that he only started donating to charitable causes at the age of 75. I imagine he was probably just busy Scrooge McDuck diving before that.
Many of us reject that volatile and cutthroat environment and seek to simply live our lives in peace and relative prosperity. Many of us even donate our time and money to the less fortunate.
Most in the working class would prefer a more stable approach to saving our lifetime of toil and its yields rather than surrendering our well-being to the whims of politicians, speculators, and bankers. Or having to hang out with them.
Though we lack information about oil or corn production, what many of us do know is that more people worldwide will want a stable store of their current wealth outside of the dollar tomorrow than do today. Many of us don’t want to trust the boom-and-bust business cycle, war time profiteers, and connected gamblers with our family’s future. And even some of us think the game is rigged at the top (gasp!).
Though $83 billion sounds real nice, I think I’ll just keep doing my best to hold on to what I have and keep my soul.
Full interview below:
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