When Warren Buffett speaks, like the old EF Hutton commercials used to say, people listen. Older people at least. He is nothing less than a master investor, with an unparalleled history of success and influence. And since people tend to follow leaders, and need to be led, he can banish a stock or industry to junk bond status at any time. His recent comments for the coming year now include Bitcoin, and his commentary is not pretty.
Warren Buffett: Stay Away From Bitcoin
A little background on Warren Buffett. He seems to have a general dark spot when it comes to technology, as his quote will clearly indicate. Even IBM has never been on his hit list of superior investment vehicles. And this is not the first time he has derided Bitcoin as a poor investment as he spoke on Bitcoin earlier this year. On a pure dollar-to-bitcoin basis, he has been 100% correct about Bitcoin, at least in 2014. Bitcoin’s dollar value has gone from almost $800 at the start of the year to about $320 presently. Looking at Bitcoin only as a commodity versus the US Dollar is not seeing the forest through the trees, as I’ve explained previously. Buffett doesn’t seem to have an explanation of Bitcoin’s multi-billion dollar growth in value before Mt Gox, so he clearly missed Bitcoin early on as a straight commodity investment. So he has a 50-50 history on Bitcoin to this point, making him far from any profit in this field.
Here is Warren Buffett’s view on Bitcoin, which was second on a list of his most-heeded advice for 2015 investing:
“Stay away from it. It’s a mirage, basically. … It’s a method of transmitting money. It’s a very effective way of transmitting money, and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope Bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways, and it will be. The idea that it has some huge intrinsic value is just a joke in my view.”
Obviously, Warren Buffett has little or no understanding of Bitcoin if he compares it to a check. That’s like comparing an email to a telegram. And Buffett’s investments in defense contracting, which capitalize on wars that are created out of thin air by the Military Industrial Complex, are not mirages? The investments in the stock market, a market propped up and inflated by the “QE Unlimited” economic practices and zero percent interest rates, are not a mirage? Buffett gets a lot of information that helps him capitalize on certain markets. Anyone who thinks he just sits at his PC like you and I and decides to invest in this and that with an incredible success rate lives in another mirage.
The fifty and sixty year-olds who worship Warren Buffett are not a part of Bitcoin’s demographics now, or in the future. And Bitcoin’s transaction volume has only increased since his previous rant last Spring, after the Mt Gox collapse. He clearly knows investing in general, but Bitcoin is clearly over his head.
What do you think of “The Oracle’s” commentary from earlier this year? Share above and comment below.
Images from Flickr and Shutterstock.