Warren Buffett on Gold, extrapolated to btc
Warren Buffett on gold, extrapolated to btc
1. “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
1.1 How would Martians looking at ProofOfWork brute force SHA256 hashing and cryptographic scarcity feel any different?
2. “The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”
2.1. Gold is inherently speculative. So are bitcoins, as a currency; with the caveat that that they can only exist if the p2p network still exists.
3. “Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything."
3.1 IMHO bitcoins as a currency could not have emerged in any other time than in a time where the governments of the world are on a serious QE binge in a desperate bid to prevent a double dip and an extremely damageable deflation era, like the 33-39 one, that can only be resolved by the reset a global conflict brings. If we can snap out(inflate out) of the current slump, bitcoins as a currency will not hold up, nor will gold. Gold is already on the decline.
4. “I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.”
4.1 This is a key point for all the speculators out there. You will get burned. Buy solid earnings of management-owned moat-protected business. Invest in startups. Invest in brains. Dont get burned by this artificial bubble and the prospect of easy money. There is no such thing. Talk to all the house flippers. They were holding concrete: hard assets; protected solid future earnings is where value is. Growth in in brains.
5. “The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.”
5.1 Gold is safer than bitcoins in the fact that it does not depend on an honest p2p network to exist individually and requires physical access to get stolen.
6. “What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As 'bandwagon' investors join any party, they create their own truth — for a while."
6.1 This is the same for bitcoins, when the expansion of demand comes to an end the whiplash is going to hurt. The bc protocol is a very interesting concept that IMHO will certainly find a use, and as such the POW will have a value; but it will eventually be indexed to the actual energy costs and expected future earnings. If it fits in capitalism it will have to conform to it's rules, and IMHO that's how capitalism works.
7. “I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."
7.1 The egg-laying goose is running miners. That opportunity is long gone for btc. If you are interested and fired up about bitcoin, I would suggest investing in a bitcoin startup. That's your best bet; investing in brains. Not things. Especially not virtual things.
Cheers, good luck, and remember, time is the ultimate asset. It has infinite value because you can never buy it back. Invest it wisely !
1. “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
1.1 How would Martians looking at ProofOfWork brute force SHA256 hashing and cryptographic scarcity feel any different?
2. “The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”
2.1. Gold is inherently speculative. So are bitcoins, as a currency; with the caveat that that they can only exist if the p2p network still exists.
3. “Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything."
3.1 IMHO bitcoins as a currency could not have emerged in any other time than in a time where the governments of the world are on a serious QE binge in a desperate bid to prevent a double dip and an extremely damageable deflation era, like the 33-39 one, that can only be resolved by the reset a global conflict brings. If we can snap out(inflate out) of the current slump, bitcoins as a currency will not hold up, nor will gold. Gold is already on the decline.
4. “I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.”
4.1 This is a key point for all the speculators out there. You will get burned. Buy solid earnings of management-owned moat-protected business. Invest in startups. Invest in brains. Dont get burned by this artificial bubble and the prospect of easy money. There is no such thing. Talk to all the house flippers. They were holding concrete: hard assets; protected solid future earnings is where value is. Growth in in brains.
5. “The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.”
5.1 Gold is safer than bitcoins in the fact that it does not depend on an honest p2p network to exist individually and requires physical access to get stolen.
6. “What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As 'bandwagon' investors join any party, they create their own truth — for a while."
6.1 This is the same for bitcoins, when the expansion of demand comes to an end the whiplash is going to hurt. The bc protocol is a very interesting concept that IMHO will certainly find a use, and as such the POW will have a value; but it will eventually be indexed to the actual energy costs and expected future earnings. If it fits in capitalism it will have to conform to it's rules, and IMHO that's how capitalism works.
7. “I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."
7.1 The egg-laying goose is running miners. That opportunity is long gone for btc. If you are interested and fired up about bitcoin, I would suggest investing in a bitcoin startup. That's your best bet; investing in brains. Not things. Especially not virtual things.
Cheers, good luck, and remember, time is the ultimate asset. It has infinite value because you can never buy it back. Invest it wisely !
posted by Francois Payette at
6:57 AM
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