by jamix on 12/27/17, 4:24 PM with 189 comments
by mholmes680 on 12/27/17, 4:50 PM
I agree with the premise of the article, but isn't this quote a jump from that? Whats preventing bitcoin from being a temporary store of value to transmit from one person to another; Isn't there a second argument to be made on why its a bad _currency_ or not? I think something like this article: https://www.bloomberg.com/view/articles/2017-12-27/bitcoin-i...
by thisisit on 12/27/17, 6:19 PM
https://www.cnbc.com/2017/02/02/warren-buffett-simplifies-in...
This lesson is apparently lost on many people.
by XR0CSWV3h3kZWg on 12/27/17, 11:20 PM
Of course Warren buffett doesn't like it. He has made his name on being able to tell if a stock's price is above or below it's fundamentals. Bitcoin doesn't have fundamentals and it doesn't pay dividends.
by juanmirocks on 12/27/17, 4:58 PM
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
by PakG1 on 12/27/17, 5:33 PM
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".
by keypusher on 12/28/17, 3:11 PM
by root_axis on 12/27/17, 4:36 PM
by tfolbrecht on 12/27/17, 5:38 PM
Bitcoin is not the check, it's the store of value and the bank. Bitcoin is the investors, developers, the miners, the ledger, wallets(accounts), the speculators, the store of value. Bitcoin is the headline maker in the WSJ, NYT, etc. That multilayered coupling is what makes BTC valuable.
The reporter talks about intrinsic value of companies, cash flow etc. The underlying healthy and stable economy is not some axiomatic truth. With BTC, You have all of the components to have currency emerge into existence and stay from bitcoins incentive system.
How much is it worth? That depends on what the alternatives are worth, and that evaluation changes every day. I hope it's long term near worthless, but you can never be too sure.
by arisAlexis on 12/28/17, 11:38 PM
by fantasticsid on 12/27/17, 5:10 PM
by down on 12/27/17, 4:49 PM
by Kinnard on 12/27/17, 4:47 PM
by aphextron on 12/27/17, 4:57 PM
by KasianFranks on 12/27/17, 5:06 PM
by alexeiz on 12/27/17, 5:57 PM
by brndnmtthws on 12/27/17, 4:52 PM
by _red on 12/27/17, 4:44 PM
by adamnemecek on 12/27/17, 4:41 PM
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.