As per usual, Berkshire’s chair and CEO Warren Buffett, as well as vice-chair Charlie Munger, gave their opinion on the current state of the economy and the markets. As well as answering questions from shareholders, of course.
Buffett and Munger had a lot to say on a wide range of issues. But one area might be of particular interest to cryptocurrency fans and investors.
Now Warren Buffett actually (and comically) dodged this question somewhat at the meeting over the weekend. He said that he would prefer not to comment, seeing as he feels like most people watching would have a different opinion on it than what he and Munger do.
Red flag to a bull
Mr Munger started off by saying that “those who know me well are just waving the red flag at the bull” by asking about Bitcoin. He went on to say this:
Of course I hate the Bitcoin success. I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shovelling out a few extra billions and billions of dollars to somebody who just invented a new financial product out of thin air. So I think I should say modestly that I think the whole damned development is disgusting and contrary to the interests of civilisation. And I’ll leave the criticism to others.
Ok, so let’s dig into these criticisms. Firstly, the ‘useful to kidnappers and extortionists’ part. It’s true that Bitcoin’s unregulated and anonymous nature makes it useful for some ‘black market’ illegal commerce.
But other assets, such as gold, diamonds or even just hard cash can perform similar roles. So the idea that Bitcoin is some kind of ‘gamechanger’ when it comes to unsavoury or illegal activity is arguably a stretch.
Is bitcoin ‘artificial gold’?
What about the ‘artificial gold’ or ‘thin air’ argument? Well, it’s also true that Bitcoin was created out of thin air, for want of a better phrase. Since it doesn’t produce a cash flow, the only value that it has is what investors assign to it. But again, we can say that about a range of assets.
Hard cash is created out of thin air too and doesn’t produce a yield either. Indeed, since it’s no longer tied to a gold standard, it too is a form of fiat currency. That means it is only worth what we as a society deem it to be.
Even gold itself shares many of these attributes. Gold is actually a remarkably underused metal. Gold doesn’t produce a yield. And most of the gold produced either ends up as jewellery or in bullion form as a financial asset, rather than being used industrially to produce goods.
At the end of the day, only you can decide whether Bitcoin is a legitimate asset. Or if Buffett and Munger are right and it’s essentially worthless.
Bitcoin only has value as long as investors give it value. If you think it has a future as a legitimate and unique store of value, then it’s understandable to disagree with these two esteemed investors on this issue.
There’s also nothing wrong with being in total agreement with Buffett and Munger that Bitcoin doesn’t have what it takes to be a sound long-term investment.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Sebastian Bowen owns shares of Bitcoin. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and Bitcoin and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short June 2021 $240 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
- Warren Buffett says inflation is already here. What does that mean? – May 8, 2021 9:00am
- The RBA just told us what’s going to happen with interest rates – May 7, 2021 3:07pm
- Telstra (ASX:TLS) and 2 other dividend shares with yields over 6% today – May 7, 2021 2:28pm