You could say Warren Buffett is loaded for bear. The “Oracle of Omaha” says he’d like to make permanent investments in U.S. companies with decent long term prospects, but not while the U.S. stock market is so overpriced. Maybe he should buy Bitcoin instead.
In his 2019 annual letter to Berkshire shareholders, Buffett wrote:
“In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects.”
Buffett added that he and long-tenured Berkshire Vice Chairman Charlie Munger “continue, nevertheless, to hope for an elephant-sized acquisition.”
“Even at our ages of 88 and 95 — I’m the young one — that prospect is what causes my heart and Charlie’s to beat faster. (Just writing about the possibility of a huge purchase has caused my pulse rate to soar.)”
Would you just listen to the way Warren Buffett talks about investing? His description of anticipating a big asset purchase is so earnestly and frankly sensual. He is hilarious.
This guy’s writing graphic annual investment love letters to his company’s shareholders. I guess that shouldn’t be too surprising for a billionaire investor.
The bestselling book “Think and Grow Rich” by Napoleon Hill (a protege of American steal magnate Andrew Carnegie) suggests readers can grow rich by developing a “money consciousness.” But that would clearly be bested by Warren Buffett’s money sensuality.
What did you expect?
The man really loves investing.
And he loves having a heart.
In recent years, he has given away a considerable number of Berkshire Hathaway shares as donations to various charities and foundations.
Get on Warren Buffett’s level.
But back to the point at hand: What have U.S. companies been doing with all those easy Fed notes since 2008?
If Buffett says they’re not worth their pumped-up values on the U.S. stock market, then what is the Federal Reserve supposed to do if inflation gets out of control too?
Let Warren Buffett buy the whole thing cheaper than dirt? That $132 billion in liquidity is an unearthly amount of money, but you still can’t fit all the damage in that dragon’s belly.
Compared to the Federal Reserve’s business, those are rookie numbers.
So what then?
Keep pausing interest rate hikes and tank the U.S. Dollar?
Based on history, it’s clear that they are very willing to do just that. They’ll keep pumping, fold their hands, and pray someone invents cold fusion before hyper-stagflation hits.
Pressure’s on, Elon Musk.
We’re going to need you to start working more hours. You better look dog-tired all the time. We don’t want to see any more of you smoking blunts on hippy podcasts.
But Elon’s not the only one using technology to do what people thought impossible.
If he wants a bargain price on something with at least decent long term prospects in line with his income and value approach to investing, longtime crypto skeptic Buffett should finally consider the possibility that Bitcoin is a sufficiently conservative investment with good long term prospects.
And that because cryptocurrency is in the third stage of global market adoption, it is a mature, profitable industry on stable footing, with enormous upside potential.
One can see why Warren Buffett reacts so reflexively against Bitcoin, at one point calling the cryptocurrency “probably rat poison squared.”
It’s a bunch of computer software people led by cryptography geniuses getting into finance.
And Buffett has directly profited, very handsomely from decades of the banking industry living unchallenged, in a bubble, protected by high barriers to entry for competitors.
“As of June 30, 2018, Berkshire Hathaway’s portfolio is substantially in financials at 41%. Berkshire has 12 financial holdings at the following portfolio weights.”
Who wouldn’t expect this guy to claw at Bitcoin? Just look at this portfolio weighting:
Wells Fargo: 12.81%
Bank of America: 9.79%
American Express: 7.60%
US Bancorp: 2.57%
Moody’s Corporation: 2.15%
Bank of New York Mellon: 1.79%
Goldman Sachs Group: 1.49%
M&T Bank Corp: 0.47%
Synchrony Financial: 0.35%
Torchmark Corp: 0.26%
Maybe I wouldn’t.
However, since he’s so invested in financial services and technology, a small investment in Bitcoin would actually be very consistent with his sizable holdings of 12 major financial companies.
An investment in Bitcoin would complement his other assets and have a lot of synergy potential with these companies. It would not be diversifying, which Warren Buffett has no interest in, but studying his own industry and learning its new ins and outs in greater depth.
Better late than never.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.com.
Last modified: July 2, 2020 7:32 PM UTC