Insurance

Bill Miller Hype Bitcoin As Financial Insurance (Slam Warren Buffett)

Bill Miller Hype Bitcoin As Financial Insurance (Slam Warren Buffett)

there’s several uh i think everybody’s got blind spots in one way or another and and they’re they’re error-prone but certainly one of them is that they are old you know and they’re just not they’re not used to new things i mean they’re not the type of people who are embraced new technologies and different ways of doing things they look at the tried and true and tested and they also don’t want to take a lot of risk bill miller is an investing legend who famously beat the s and p 500 for 15 years in a row bill in a recent interview with william green the chairman and chief investment officer of miller value partners talks about the enticing bargains he sees in today’s beaten down market and reveals the biggest bets in his personal investment portfolio he also explains why he’s so bullish on bitcoin which he began buying at 200 and why he thinks warren buffett is wrong to criticize it warren buffett said at the berkshire hathaway annual shareholders meeting last month that bitcoin is not a productive asset and it doesn’t produce anything tangible despite a shift in public perception about bitcoin buffett still wouldn’t buy it whether it goes up or down in the next year or 5 or 10 years i don’t know

but the one thing i’m pretty sure of is that it doesn’t produce anything buffett said it’s got a magic to it and people have attached magic to lots of things till the end to find out why bill miller thinks that warren buffett is so wrong about bitcoin and why he remains so bullish on the king cryptocurrency asset the switch and the lid came up and a hand came out and it turned the switch back off again and get one down in the box so basically that’s what bitcoin is it’s a protocol and effectively the number of of bitcoins is and it has a certain feature that it basically goes in half the new supply goes in half every uh four years and so i think it’s i think it’s what is it 12 12 bitcoins every 10 minutes are created and that’s what and then all the computers and the miners are solving equations just so they can get those bitcoins which are given to them if they if they verify that the uh that the protocol is is uh functioning properly and and there’s no you know no double counting and stuff like that so but that but that’s fixed it’s 21 million and 21.40 that’s when that’s that’s when the supply will run out and then for bitcoin

at the tried and true and tested and they also don’t want to take a lot of risk you know buffett says you know buffett has said many times heard him say to me that you know he he’s taken enough risk in the insurance business you know and he didn’t even realize how much risk he was taking until like 9 11 like oh you know if we got all this property casualty stuff out then think about that so it’s not just it’s not just what your you know what your experience is because we didn’t we had no experience with somebody flying into buildings before it’s also your exposures and so he had to rethink his sense of exposure there as as mark andreessen memorably said the first time that buffett ducked on this 2017 that buffett dumped on uh bitcoin he said the record of old white men uh who don’t understand technology crapping on new technologies they don’t understand is 100 and so uh which then sent me when i heard mark say that that silver blaze story jumped out at me because i said aha there’s the guard dog there’s guard dogs here that aren’t barking about bitcoin and they’re called venture capitalists and venture capitalists job is to assess new technologies and to decide which ones might be worthwhile and which ones aren’t and there’s a whole ecology of them out there and there’s not a single one of them that i ever heard dumping on the technology of bitcoin now they might not have invested in it early because they weren’t sure about it but they certainly didn’t dump on it and that’s

the case where uh and now there’s probably there’s certainly not a prominent adventure firm in the country if not in the world that doesn’t have exposure to bitcoin and in fact you know many of them the biggest ones like andres and horowitz for example you know all of them are are doing their own dedicated crypto funds so last year was 27 billion dollars went into crypto ventures that venture investments that’s more than the previous all the history of bitcoin combined did they did that just in one year this year uh in the first quarter more five times as much money went into bitcoin uh ventures as did it last year which was the all-time record so the money is pouring into this space which again is a is a a mesh excuse it was a measure of what the demand is for these sorts of things you know goldman has um just did their first uh loan i believe backed by bitcoin and um so i i think that you’re going to see and goldman wasn’t you know i’ve talked to pete breeger and i and some other people wences you know talk to the folks at goldman the management team

there you know a couple of years ago they they had no they had curiosity but no interest and now they have a high degree of interest and you know fidelity has been all over the stuff from the beginning bitcoin also acts as a hedge against inflation bitcoin is an effective hedge against inflation thanks to limited supply and decentralization these factors bring in scarcity resilience and power when looking into the query can bitcoin prevent inflation two major factors you need to consider are limited supply and decentralization the supply of bitcoin has been algorithmically capped to 21 million coins by the end of 2021 18.77 million bitcoin had already come into circulation in other words 83 of the bitcoin that could come into existence have been mined within 12 years of the inception of the cryptocurrency the decentralized structure of bitcoin takes it out of the control of a centralized authority with thousands of nodes functioning across the globe the network is optimally resistant to external attacks that might be seeking to alter its monetary policy which might put the inherent scarcity of the digital coin in peril when it comes to levels of decentralization no other currency comes even close to bitcoin

so who’s going to maintain that what are the miners going to do then well they’re still going to maintain the ledger and they’re going to do that though they get fees for that instead of getting bitcoin so it’s the same same process will be underway unless they go from what’s called proof of work to proof of stake um which i think is a is a a potential risk to bitcoin right now but not a big one so the one that everybody will understand is when you know what what buffett says is that bitcoin is a non-productive asset he said that you know i wouldn’t give you 25 for all the bitcoins in the world you know i mean but if i you know if i buy farmland that i can grow stuff with it you know if i buy a company it can generate dividends and earn and cash for me bitcoin doesn’t do any of that stuff so he says it’s like gold you can sit there and look at it it sits in a place in your portfolio but it’s not it’s not productive and and therefore um he can’t value it and i think fair enough i mean that if the only thing that you think you can value are productive assets then you know you don’t no one’s making you buy it right so ignore it now the other maybe the more more mundane thing for most people would be that um you know i’ve used this i think i might have told you i used this with chris then my good friend chris davis and i said to chris who who’s been in every meeting major meeting

that i’ve been in on bitcoin going back to when it was 200. and he’s never bought and um and his argument is well you know uh yes i understand that it could be digital gold in fact it probably might be better than gold but i don’t know gold either because non-productive asset he’s got a buffett view on that so why would i own bitcoin and my first answer to them is well the objective of investing is not to own productive assets the objective is to make money so the question is can you make money with this thing not not can you does it give you dividends but if you can make money with it you know so uh so what i said to i said look there here’s a better way to think of it chris like um you’re an expert in insurance right and he’s like yes well i are purported to be my grandfather is the insurance commissioner of new york and my father you know was a long-time insurance analyst and i i published a newsletter when i was young called the insurance you know analyst observer or something like that and uh and i said so how do you value an insurance policy and he said well you can value an insurance company really easily you can look at the exposures you can look at the capital uh you can look at the experience

they’ve had you can look at the quality of their investment portfolio on and on i said i didn’t say an insurance company i set an insurance policy and he paused a second i said well here let me tell you the way i think about that and you tell him where i’m wrong i said you you own insurance right you have health insurance your car insurance you have homeowners insurance life insurance stuff like that right property insurance he’s like yeah i said what’s the what’s the intrinsic value of those policies you you write a check every year for those policies right and uh yeah and i said and and what’s the value of those and i said the way i look at that is you are you are paying somebody else basically and you for a policy that you hope is worthless you don’t want to die prematurely you don’t want to you know get serious illness you don’t want to have your house broken into and it’s valuable to you to have something that will what will pay you if something really bad happens and it cannot be uh except the company goes bad it’s it’s yours you own it and it’s it it’s gonna solve your fight solve your problem with that that happens well right now you know we have something called gold which could do that but again its supply

is isn’t fixed and um but everything else out there is something that you know if you live in venezuela you live in nigeria live in lebanon you lived in uh ukraine when the when the war broke out all of that you know stuff afghanistan when the u.s pulled out when the u.s pulled out of afghanistan western union stopped sending remittances there or taking them from afghanistan but if you had bitcoin you were fine you know your bitcoin is there you can send it to anybody in the world you have to have a phone and so um i i consider bitcoin basically uh you know a an insurance policy against financial catastrophe of one sort or another and it doesn’t have to be all or nothing doesn’t have to be like the you know the the uh there’s some war in the united states just some kind of thing where the banks are all shut and stuff like that it’s just the case that if there’s a you know look what happened to the money supply with the pandemic head you know that’s you know when the when the fed stepped in in that pandemic and started gunning the money supply and bailing out in essence the mortgage uh the mortgage reits and the other people are doing commercial paper and stuff like that bitcoin functioned fine there was no run on bitcoin

it went down a lot initially but the but the but the um the system functioned without fed and without any interference and everybody got their bitcoin and the price adjusted and then when the bitcoiners and newer bitcoiners realized wait we’re going to have inflation down the road bitcoin went through the roof so that’s that i think is it’s it’s it’s an insurance policy do i look at it bill miller is not the one who considers bitcoin insurance policy investors like greg foss the career high-yield bond trader turned bitcoin bull has gone on record as saying that every fixed income investor needs to consider bitcoin as portfolio insurance the reasoning will be familiar to long-time bitcoin acolytes central bank manipulation of open market pricing mechanisms fiat currency and debasement but fastest pedigree gives his words added ballast an expert in pricing and trading corporate credit he spent over 30 years in traditional financial markets before focusing himself as a laser-eyed bitcoin strategist in the words of greg foss money has always been a technology for storing the value of presently expended time energy work for future consumption in that light i believe that bitcoin offers my generation

as well as my children’s generation the best opportunity to escape the certainty of fiat currency debasing the reasons are not only mathematical every fixed income investor needs to own bitcoin to hedge against the inherent risks of the current credit environment many investors are still focused on the threats of inflation i believe that credit concerns are likely to overwhelm inflation concerns in this next cycle and that bitcoin offers the best insurance against this impending risk he said so when you think about the comments that warren and charlie made in the last few weeks in omaha these guys are i mean you’ve said to me before right they’re they’re bona fidely geniuses they’re they’re incredible investors um they’re incredibly thoughtful is there some sort of bias or prejudice or blind spot that makes it particularly difficult for them to understand bitcoin uh yes um there’s several uh i think everybody’s got blind spots in one way or another and and they’re they’re error prone but certainly one of them is that they are old you know and they’re just not they’re not used to new things i mean they’re they’re not the type of people who are embrace new technologies and different ways of doing things they look

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