Worse, over the past decade, investors would have been better off putting their money into the S&P 500 than his company’s stock. The Financial Times, which interviewed Buffett, did the math, saying investing $1 into each Berkshire Hathaway and an S&P fund 10 years ago would be worth $2.40 and $3.20 today, respectively. Ouch.
Not to pour salt in the wound, but unlike Berkshire Hathaway, bitcoin – which Buffett once referred to as “rat poison squared” – has been trouncing the stock market. Maybe it’s not bitcoin that’s dangerous to the health of investors.
Salt in Buffett’s Wound
For more than five decades, Berkshire Hathaway outperformed the S&P 500 “by 2.5 million percentage points,” according to the FT. That’s why it’s so shocking that the stock has lagged over the last 10 years.
Meanwhile, as CCN previously reported, bitcoin’s returns of more than 400% over the last two-years far surpass the approximately 20% returns generated by the S&P 500. If Buffett’s stock can’t beat the S&P 500 for investors, no wonder he’s got an ax to grind with bitcoin, which is doing just that.
Two year returns:
S&P 500: 19.9%
The non-correlated, asymmetric nature of Bitcoin makes it imperative that every portfolio include some exposure to the digital currency. #GetOffZero
— Pomp 🌪 (@APompliano) April 23, 2019
His Achilles’ heel is high-tech, not just crypto. Buffett avoids FANG stocks – Facebook, Amazon, Netflix, and Google parent Alphabet – and most tech at all costs (with the exception of Apple), and they’re what’s been fueling gains in the stock market.
.@WarrenBuffett on bitcoin just now: “it’s probably rat poison squared.” #brk2018
— Becky Quick (@BeckyQuick) May 5, 2018
As one of the wealthiest people on the planet, staying true to himself has paid off dividends for Buffett. He only invests in companies whose business models he gets. But what have you done for me lately? Buffett himself admits that the prospects for Berkshire Hathaway are no better than that of the broader stock market, telling the Financial Times:
“I think this: if you want to join something that may have a tiny expectation of better [returns] than the S&P, I think that we may be about the safest.”
Any chance of beating the S&P? Don’t hold your breath.
“If we got lucky,” said Buffett to the FT.
Rebel with a Cause
Not every stock is high-growth and Buffett’s conservative style has served him well over the years. He has a history of under-promising and over-delivering. Bitcoin’s the opposite. The community eats up the bullish price predictions. In fact, the higher, the better, and in many ways, it’s become a self-fulfilling prophecy. Bitcoin isn’t Buffett’s style, he’s made that clear. But maybe somewhere deep down inside he’s really just jealous of something that challenges his investment mantra, not to mention is on a hot streak. There’s no balance sheet, no product that you can taste or feel. That’s uncomfortable for Buffett, who according to the FT has ingested 25% of his “caloric intake” from Coca-Cola, a stock in which he poured $1 billion into in the 1980s. This pray tell makes him comfortable?
Yet bitcoin has and continues to defy the odds. Bitcoin is a rebel but not one without a cause. It has a clear mission of decentralization and it’s been effective at democratizing opportunities. Buffett is doing himself a disservice if he fails to recognize this even if Berkshire Hathaway never holds any bitcoin.
About The Author
Gerelyn is a fintech and cryptocurrency journalist who started her career writing about traditional finance/Wall Street. She has been reporting on financial services for the past 15-plus years. In full disclosure, she holds bitcoin (BTC).