81–90 of 196 posts
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> I can go to Africa right now and I can imagine that even some of the remoter parts will be aware of bitcoin. The Bay Area, ladies and gentlemen. In all seriousness, I doubt people in most of the world have heard of either.
As a person from (West) Africa, I can tell you they've not only heard of Bitcoin but they're mining it, even in villages.
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What? Bitcoin has never existed before it was created, and it wasn't possible before the Internet, so I don't think Warren Buffett has seen it before unless he's a time traveler.
Ah yes, something that's never existed before. While true in the technological particulars, it's dead wrong economically. There are all sorts of "never seen before" tradable things that show up in the economy. That people think that cryptocurrencies are so different is evidence that Buffet is right, not the economic newbs. See also the efforts to force "blockchain" into all sorts of round holes where it doesn't fit,…
As someone completerly uninvested in this whole mania, I still see Bitcoin as something with an inherent value. The real problem right now is that nobody knows what that inherent value really is. Even if the price were to crash 100x tomorrow, Bitcoin would still have some value because of the energy expenditure involved with Proof of Work. Of course people that are "investing" in it now are simply gambling. But Bitco…
No, that's a fundamental misunderstanding of what value is. And a manifestation of a common one! Things don't have value because of how much it cost to create them. They have value because of how much people are willing to buy them for. If you and I both produce spoons, and the spoons that we produce are identical in every way, but I have a more efficient manufacturing process and it costs me less to produce those sp…
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So there is inherent value in burning piles of cash, because 'cash went into creating it'? I don't get the logic.
Yeah, that's like saying that a pound of shredded bills has value. Like, yeah, you can trade it, and yeah, value was spent to create it, but you can't get that back. It's not like buying bitcoin gives you back electricity.
Sending small to large quantities of wealth worldwide quasi instantly and with small fees does have a tremendous value. Ask families of immigrants. Buffet hasn’t even invested in digital tech stocks. IMO, even after all the huge respect he deserves, he doesn’t get this technology. Other than that, I don’t doubt that many current “investors” are only FOMO movers
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The author sort of covers that in this line: >I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators. Of course that sort of ignores the fact that bitcoin investors are currency speculators...
"Nobody thinks of American cash as an investment, except for perhaps those who invest in it."
Warren Buffet has previously vowed not to invest in tech b/c he said he doesn't understand it. I think it changed in the last ~5 years. But I still don't think that he "understands" tech. The Beanie Babies comparison is straight up stupid. I can go to Africa right now and I can imagine that even some of the remoter parts will be aware of bitcoin.
> I can go to Africa right now and I can imagine that even some of the remoter parts will be aware of bitcoin. The Bay Area, ladies and gentlemen. In all seriousness, I doubt people in most of the world have heard of either.
Earlier quoted context omitted.
The author sort of covers that in this line: >I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators. Of course that sort of ignores the fact that bitcoin investors are currency speculators...
"Nobody thinks of American cash as an investment, except for perhaps those who invest in it."
Most buyers of U.S. dollars buy it for non-speculative purposes. Out of those who speculate on it, most do so in tandem with buying bonds and borrowing. Most FX is a cousin of rates trading more than hoping your currency goes up.
If people think Buffet doesn't get it, everyone's entitled to their opinion. But if you want to say he's wrong, you should explain what's wrong with his logic. The OP summarizes his logic really well, and I see nobody in these threads taking apart his logic. Quoting the OP:
Intrinsic value is this continuous waterfall of cash. It’s not the stock price of Coke but the actual cash flow of the business, after costs.
Buffett made his billions by divining when the gap is greatest between intrinsic value and a stock’s share price, then buying loads of shares, tickets to real cash flow other investors would want.
Given that bitcoin is supposed to replace cash, what is the ultimate source of cash flow from digital coins created on the internet? It’s dollars flowing from the pockets of buyers who want to own those coins.
Cut off the supply of new investors and the bitcoin craze ends.
The fact is, bitcoin has no intrinsic value at all. While many digital coin “investors” would argue that neither does a dollar, I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators.
Yes, I've seen a comment somewhere in here that says, "hey, aren't people who buy American dollars currency speculators too?" Yeah, of course. But I don't see anyone attacking the part about whether or not Buffet's fundamental thinking of intrinsic value is applicable here.
I will point to another interesting article that summarizes similar thinking in another way. This article is perhaps interesting because I've seen many people here describe Bitcoin as digital gold.
http://www.nasdaq.com/article/why-warren-buffett-hates-gold-...
He considers gold a nonproductiveasset because it doesn't produce anything of value. To illustrate this point, Buffett proposed this thought experiment in his 2011 letter to Berkshire shareholders:
"Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be $9.6 trillion. Call this cube pile A.
"Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-aroundmoney (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
"A century from now the 400 million acres of farmlandwill have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever thecurrency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will beunchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond."
So, instead of nonproductive assets such as gold, Buffett prefers productive assets like farmland or companies that generate enormouswealth for shareholders -- companies like Exxon Mobil ( XOM ) , Coca-Cola or See's Candy.
And he clearly explains why:
"Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial "cows" will live for centuries and give ever greater quantities of "milk" to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from thesale of the milk willcompound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).
"I believe that over any extended period of time this category ofinvesting will prove to be the runaway winner… More important, it will be by far the safest."
This last sentence is important. Investing in productive assets carries less risk.
That's because, in the past,irrational exuberance has caused all sorts of nonproductive assets to suddenly skyrocket beyond any sane measure ofintrinsic value . The run-up on the prices of tulips in the 17th century is one colorful example.
If Buffet is wrong, take apart his logic. Otherwise, we can only wait and see. Me, I wish I'd gotten in on Bitcoin when it was $1, who doesn't wish that? But... I have yet to figure out how the heck it's reaching these prices. I see it, and it doesn't make sense to me. And I think I understand tech better than the average layperson. In fact, the fact that it's so expensive and volatile makes it difficult to use even as a currency. That makes it even more of a "nonproductive asset".