Stock Guru: Jack Ma

Warren Buffett says bitcoin is 'rat poison'

Tell us how you really feel, Mr. Buffett.

The price of bitcoin took a dive after Warren Buffett renewed his criticism of the cryptocurrency — even comparing it to rat poison.

Bitcoin had been closing in on $10,000, but it fell nearly 6% Sunday and was down another 2% Monday to just over $9,300.

Buffett, the CEO of Berkshire Hathaway (BRKB), has been a bitcoin bear for years. He has often compared the cryptocurrency to gold, saying that both assets are strictly speculative and don't produce earnings and dividends like stocks do.

Before the Berkshire annual meeting on Saturday, Buffett told CNBC that bitcoin was "probably rat poison squared."

During the meeting itself, Buffett joked that "if you had bought gold at the time of Christ and you figure the compound rate on it, it's a couple tenths of a percent." What Buffett was saying about bitcoin was that you can buy it, but it will never produce anything of value.

He also responded to a question from the audience about bitcoin by saying that it and other crytpocurrencies "will come to bad endings."

Berkshire vice chairman and longtime Buffett confidant Charlie Munger was even more blunt.

"I like cryptocurrencies a lot less than you do," Munger said to Buffett. "To me, it's just dementia. It's like somebody else is trading turds and you decide you can't be left out."

Munger has also referred to bitcoin as poison. At the shareholder meeting of The Daily Journal(DJCO), a newspaper publisher in Los Angeles where Munger serves as chairman, he called it "noxious."

Strong words. But to be fair to bitcoin bulls, both Buffett and Munger have been wrong about the cryptocurrency. Buffett in particular.

He first called bitcoin a "mirage" in 2014 — back when it was trading for about $600. So even with the recent pullback, bitcoin has drastically outperformed the broader market, not to mention Berkshire stock and top Berkshire holdings like Apple (AAPL).

That's why some cryptocurrency experts think that investors should ignore Buffett's and Munger's repeated bitcoin bashing.

"What I do find monumentally baffling is that two of the world's most successful investors cannot see the intrinsic value of some form of cryptocurrency," Nigel Green, CEO of financial consulting firm deVere Group, wrote in a report early Monday.

"Do they honestly believe that there is no place for, and no value of, digital, global currencies in an increasingly digitalized and globalized world?" Green added.

Investment Lessons from Warren Buffett

Why has Warren Buffett developed a huge throng of devotees? Well, sure, he’s amassed a fortune of nearly $60 billion, making him one of the wealthiest people on earth. But that’s not the only reason professionals and amateurs interested in financial management follow the Berkshire Hathaway CEO so avidly. There’s a clarity and sturdy logic to Buffett’s philosophy that makes it attractive to fund managers and small-scale investors alike.

Retirees, in particular, would do well to take a few pages from Buffett’s playbook. Here are six that have extra significance for those entering their post-workday years.

1. Think Long-Term

A few years ago, an Associated Press-LifeGoesStrong.com poll found that more than one in four adults expect to live to at least 90, including nearly half of those who said they were currently 65 or older. And census data suggests that by mid-century, ninetysomethings will make up 2% of the total U.S. population, up from 0.7% in 2010. So it’s important to make your money last.

One of the best ways to do that is to keep a percentage of your portfolio in the stock market.

Yes, that may seem to fly against conventional wisdom: Seniors are often advice to allocate their assets away from capital appreciation and towards income-producing vehicles.

The key, according to Buffett, is to stay in the market but focus on stable companies that look like a good play over the long haul. His admiration for a certain soft drink maker is a perfect example. Back in 1988, he purchased more than $1 billion of Coca-Cola stock, calculating that its strong brand would safeguard the business from competitors.

Buffett turned out to be right. Coke’s stock price grew roughly 16-fold over the next 27 years.

2. Do Your Homework

Not all of Buffett’s investments have looked like home runs right after he made them. But more times than not, his decisions proved to be the right ones over time. A big reason: the iconic investor does his research before making a big decision. Often, that gives him the confidence to go down some less-than-obvious paths.

Berkshire’s gamble on Burlington Northern Santa Fe in 2009 was a case in point. On the heels of a major recession, purchasing a major railway operator seemed dicey, to say the least. But the company’s fundamentals suggested otherwise.

Buffett’s move now looks prescient. The carrier’s revenue rose to $23.2 billion in 2014, up from $18 billion in 2008, before Buffett bought it. Research has its rewards.

3. Keep Emotion in Check

Mom-and-pop investors often make decisions based on gut reactions. When the market turns south, they start selling off stocks. When it’s up, they buy more. It's natural, but not a smart investment strategy, since they often end up losing money on the sales, and spending too much on the purchases.

Buffett advocates doing the exact opposite. “Be fearful when others are greedy, and be greedy when others are fearful," as he once wrote in a New York Times op-ed piece. Follow that advice and you’ll end up buying low and selling high, which is precisely how you maximize profits.

This is especially important for people in retirement. The occasional downturn is unavoidable. If you panic and start selling, you’re not giving the market time to rebound. Historically, it always does. (And don't forget, if you're in your 60s now, you may well have a good 20 years or so to ride out market fluctuations.)

4. Invest in Ideas

According to Buffett, having a genius CEO at the helm doesn’t necessarily make a company worthwhile. Instead, what he focuses on are businesses with an unshakable competitive advantage.

He once told investors to select companies so wonderful that even an idiot could run them. If you don't think that applies to a particular organization, you might want to think twice before buying shares in it.

5. Try Passive Investing

Buffett has built his fortune by beating the market with his stock picks. But he realizes that most individuals don’t have that ability. So in recent years, he’s been a big advocate of index funds, whose portfolios simply mimic a certain benchmark like the S&P 500.

In a letter to Berkshire investors, he once wrote: “The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well.” For some specific ideas, see 3 Passive Index Funds That Are Top Bets for Retirement in 2016 (VCIT, HYG).

The advantage of index funds is that, without an active fund manager, they keep expense ratios and other costs low (since they have low turnover, they also generate lower long-term capital gains, making them also relatively tax-efficient). In fact, Buffett has instructed the trustee of his estate to leave his wife mostly index funds when he eventually passes away.

6. Find a Good Value

At heart, Buffett has always been a value investor, buying up stocks that he thinks are underpriced. He only purchases shares that have a significant “margin of safety” – that is, they’re selling well below what they’re truly worth. If he thinks a stock is worth $20 a share, he might wait until it’s going for $17.

The key, then, is having patience. Know what you’re willing to pay for a stock – or a slice of an index fund, for that matter. If the market is commanding more, resist the urge to dive in.

When you have a margin of safety with your investments, you’re not only maximizing potential gains, but minimizing potential losses. For someone who’s already living out their retirement, that’s more important than ever.

Stock Guru

วันพฤหัสบดีที่ 21 มิถุนายน พ.ศ. 2561

Warren Buffett says bitcoin is 'rat poison'