May 5, 2021
Hi folks, Trish Regan here…
Regular readers know I’ve been writing about cryptocurrencies for some time now. I truly believe, with the future of the U.S. dollar seemingly uncertain, bitcoin is more than just a trend… It deserves our attention.
The popular crypto was in the news again this week, albeit in a surprising way… At Berkshire Hathaway’s annual shareholder meeting this past weekend, famed business tycoon Warren Buffett and Vice Chairman Charlie Munger shared some strong negative sentiments about bitcoin.
As soon as I read the news, I reached out to crypto guru Eric Wade. Eric’s been on my podcast where we talked about how to invest in cryptos, and he’s one of the smartest bitcoin experts I know.
Eric writes Stansberry Research’s Crypto Capital, its wildly successful crypto newsletter. Since the beginning of 2020, Eric has given thousands of readers the chance to make 1,000%-plus gains on four separate occasions.
Crypto Capital recommendations have been performing so well that Stansberry had to create a new, separate crypto “Hall of Fame” so the non-crypto investments from other newsletters weren’t bumped off the top 10 gains each month. (That is a true story!)
I wanted to hear Eric’s reaction to Berkshire’s latest crypto snub. He wrote the following story exclusively for American Consequences subscribers…
Calling Warren Buffett’s Bitcoin Bluff
by Eric Wade
I figured out why Warren Buffett never sells stocks… And once I tell you why, you’ll know exactly how you can use this information to raise your own investing success…
Before we get too far into this, here’s some context… Recently, at Berkshire’s annual shareholder meeting, Warren Buffett’s partner Charlie Munger called bitcoin “disgusting and contrary to the interests of civilization.”
Now, what I’m about to reveal about the Oracle of Omaha has probably never been written about him before…
I’m intentionally saying something new here because it’s not worth your time for me to rehash either praise or criticism of Buffett. Lord knows the hundreds of books, thousands of articles, and millions of words already written about the man have said almost everything there is to say.
I strongly suspect Warren Buffett knows he’s a terrible decision-maker.
I’ll prove it in a minute, too. But think about it… If you knew that you weren’t very good at decision-making, wouldn’t it make sense to cut in half how many decisions you ever had to make?
It’s brilliant. Take stocks for example. Most investors have two decisions to make. First, when to buy. Later, when to sell. Buffett, however, famously almost never sells stocks. Sure, the folklore that has built up over the years would have us believe that’s because “our favorite holding period is forever,” as Buffett is often quoted as saying.
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Mind you, I can completely understand Buffett’s reluctance to sell stocks. He’s afraid of making a bad decision. Buffett is a well-known student of Ben Graham, one of the most influential investment thinkers of the last century. Graham, the author of The Intelligent Investor in 1949, made the argument that investment risk doesn’t just lie within the market but also within ourselves.
And Warren Buffett knows this is true… because the risk he fears within himself is that of making a bad decision. Another legendary investor who also studied Ben Graham and was an early contemporary of Buffett once made a fabulously bad decision which – truth be told – may even be responsible for much of Buffett’s success.
I’m referring to Shelby Davis… Although Davis didn’t start professionally investing until he was 38 years old, he turned his “growth at a reasonable price” philosophy into a phenomenal compound annual growth rate of 23% over a 47-year career of investing in insurance companies. This alone has earned Mr. Davis the reputation of being “the second-best investor who ever lived.”
Like Buffett, Davis invested in GEICO when the insurer was struggling. Davis bought enough GEICO shares that he even had a seat on the board. Unlike Buffett, however, Davis eventually decided to sell all of his shares and give up his seat on the board in response to a Buffett-promoted stock sale plan that Davis disagreed with.
This decision to sell, which Davis ultimately came to regret as GEICO went on to become one of Buffett’s best buys, was not just ultimately a bad decision… It was a public bad decision that made Warren Buffett an estimated $20 billion over the years.
And – I’m likely the only one to point this out – this is probably the reason why Buffett (even subconsciously) is reluctant to make tough decisions. I’ll go even further with my bold, contrarian statements…
Warren Buffett doesn’t know what he’s talking about.
Buffett was interviewed in 2018 by CNBC. At the time, he said, “I have 11 schools coming on Friday [and] the questions will be on bitcoin, and I won’t know the answers.”
And when asked about whether he’d be willing to short (that is, bet against) the cryptocurrency… “I get into enough trouble with things I think I know something about,” he said. “Why in the world should I take a long or short position in something I don’t know anything about.”
In another interview that same year, Buffett referred to bitcoin as “rat poison,” and then “rat poison squared.” Sure, that was during the 2018 to 2019 bear market, but these comments are crucial to remember if you’re going to listen to what he says about cryptocurrencies.
And like I mentioned earlier, Buffett sat by just a few days ago as Munger claimed bitcoin was “disgusting.”
Did you follow that? Buffett and Munger have been trashing cryptocurrencies for years while claiming to not know anything about them. It’s almost as if they’re having trouble deciding if they hate cryptocurrencies or are ignorant about them.
Maybe this distaste for decisions is what made Buffett technophobic for decades… He avoided tech stocks for the first 30 years of his investment career.
Sure, Buffett has interesting stakes in satellite radio, but looking at his portfolio, he prefers steady, dependable income-producers – companies that make carpets, own trailer parks, or sell auto insurance. He invests in things people need and want no matter what’s going on with the rest of the economy.
Of course, it’s an investing philosophy that has served Buffett well. He’s one of the richest people on the planet. But looking to him for guidance on cryptocurrencies isn’t much better than visiting an astrologist.
‘They Want to Burn You’
You know cryptocurrencies are striking a nerve when they can elicit such pointed criticism from people who claim that they know nothing about them. (Well, except that they’re pretty sure bitcoin is going to end civilization as we know it, right?)
“First they ignore you,” American labor union leader Nicholas Klein famously once said… “Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you.”
It took bitcoin nearly a decade to get beyond the place where it was ignored… Then we started to see the ridicule and hate. But now, some of the cryptocurrency’s harshest critics are beginning to see value in blockchain technology.
Visa, which Buffett owns, is rapidly developing blockchain technologies of its own while also rolling out plans to better integrate itself with bitcoin and other cryptocurrencies that Visa’s customers are demanding.
Insurer MassMutual has even taken a $100 million stake in bitcoin to hold as an asset. We can only guess what Shelby Davis, who avoided insurers who held risky assets like junk bonds, would make of that.
But what we do know, because history recorded it for all time, is that Davis wouldn’t shy away from making the decision if he felt that he was invested in anything “disgusting and contrary to the interests of civilization.”
Warren Buffett, on the other hand, has yet to decide if he’ll liquidate his position in Visa. Same goes for JPMorgan Chase, which probably felt better for Buffett to own when its position was decidedly anti-crypto just 36 months ago.
But now that JPM has changed its tune, embracing blockchain technology and admitting that bitcoin is a suitable investment for some of their wealthier clients… do we expect Warren Buffett to make the tough decision to sell JPM?
And don’t waste your time waiting for Buffett to call his broker and dump all of his Bank of New York Mellon stock either, even though it’s a service provider for a bitcoin exchange-traded fund and will soon be financing ventures involving bitcoin and other cryptocurrencies.
Let me clarify… It’s not that Buffett is a bad investor.
And read my words carefully… I’m not saying Warren Buffett is a terrible decision-maker. I’m saying Warren Buffett thinks Warren Buffett is a terrible decision-maker. He’s just come up with an investing strategy that cuts out half of the decisions he ever has to make.
This is not an exaggeration… Warren Buffett has a green light to hold – perhaps forever – investments that his own partner says are involved with a technology that is “contrary to the interests of civilization.”
Remember at the start of this essay, I promised you a way to improve your investing game, and here it is… Don’t hold your breath waiting for Buffett to make the decision to sell. He simply won’t do it.
Instead, learn from Warren Buffett. Figure out what you’re not good at and do less of it.
That, and buy bitcoin.
P.S. Eric’s Crypto Capital portfolio has seen life-changing gains. And the best part is you don’t need to be a crypto expert to get in on the action… He shares easy-to-follow recommendations and has step-by-step videos on how to invest in cryptos.
Also, I’d love to hear if you’ve recently dipped your toes into bitcoin and other cryptos… Send me an e-mail about it at [email protected].
Publisher, American Consequences
With Editorial Staff
May 5, 2021
Publisher, American Consequences
With Editorial Staff
May 5, 2021