Buffett’s Business Partner Hates Cryptocurrencies… Should You?
Warren Buffett and vice-chairman Charlie Munger sat down for an extensive Q&A session this weekend at the Berkshire Hathaway shareholder meeting.
The event was different in many ways this year. It was held in L.A., for example, rather than the usual setting in Omaha.
The two nonagenarians were especially candid, offering explanations on matters ranging from their exiting of positions in the major airlines (at arguably the worst possible time) to tax policy, cryptocurrency, and more.
Also, in an amusing turn of events, Charlie Munger let slip the name of Buffett’s hand-picked successor. “Greg will keep the culture,” Munger said when referring to Berkshire’s management structure and its ability to outlive both he and Buffett. (CNBC later confirmed this with Buffett.)
We may devote some space to covering Buffett and Munger’s more quotable thoughts from the meeting in a later issue. But for now, I want to share with you my favorite moment – along with my thoughts. It has to do with the a topic seemingly everyone has an opinion on these days. And more importantly, it’s one that many investors are wondering whether it’s time to get in…
I’m talking, of course, about cryptocurrencies.
Munger Bashes Bitcoin, ETH Reaches New Highs
As I mentioned, one of my favorite moments came from Munger, who brought out the big guns to bash bitcoin:
“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 shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. I should say modestly that I think the whole development is disgusting and contrary to the interest of civilization. I’ll leave the criticism to others.”
Tell us what you really think, Charlie.
While I don’t disagree with much of what he said here, I also (respectfully) feel like there are some elements to the cryptocurrency space that Munger and Buffett simply don’t understand.
For example, I have yet to see any quotes from either Buffett or Munger addressing the potential applications made possible by cryptocurrencies, such as decentralized finance (DeFi), that could be legitimate gamechangers.
Now, I want to make one thing clear. You won’t find either Jimmy or myself posting silly memes about cryptocurrencies or otherwise shilling for them. But we do think there are some very real potential applications that are being overshadowed by the hype.
It seems the market may be catching on to this notion, too. Back on April 14th, I wrote about the appeal of the Ethereum platform. In our opinion, as the one platform with the most practicality and use cases, it’s where you want to be if you’re going to venture into this space. And since then, we’ve seen even more decentralized apps, more NFTs make their debut, and more headlines.
ETH is up a staggering 40% since then, by the way – but that’s only a fraction of its total gain over the past year.
Getting Buffett and Munger to weigh in on bitcoin doesn’t really serve much of a purpose other than generating headlines, if you ask me. I personally would like to know what they think about ETH. Is it a flash in the pan? Or is it the real deal? And what about the applications?
I’m not holding my breath, though. I’ve been a student of Buffett for years, and even he has admitted that there were some things he just didn’t get — and thus, avoided, over the years that turned out to be great investments. Is this one of them? I’m not sure, but the truth is, only time will tell either way. In the meantime, ETH is quickly gaining ground on bitcoin in terms of market cap…
Action To Take
Again, I want to reiterate what Jimmy and I have said from the very beginning. This is not something you should bet the farm on. It is still a very speculative space to be, and only the most risk-tolerant investors should even contemplate dipping their toe in the water.
Whatever you ultimately decide is up to you. But I have to give credit where it’s due here… My colleague Jimmy Butts and his team made their call on ETH back in January as a part of their list of “shocking” investment predictions for 2021…
Jimmy predicted that the big cryptocurrency winner of 2021 would be Ethereum – eventually passing bitcoin in popularity. While ETH may not overtake bitcoin this year, if you followed Jimmy’s call, you’d be up over 300% on this prediction alone…