In the game of macro economics and personal finance, everyone needs an edge, and there are a few families, companies, names that you can leverage as different indicators of how a stock, market or even macro economy is performing. These are families, people and companies that made countries, created banking policy and help run the world without that many people realizing it.
In this part one of a much larger series I would like to focus on Warren Buffett and Berkshire Hathaway, as an indicator I use to gauge markets. Now I was half tempted to give a full run down of Buffett and the wild success of Berkshire but this would turn into a book real quick and in fact many books have been written about him, which would probably be a better place to deep dive if you need to. Here is the book I read on Warren Buffett.
I will just state that Warren Buffett was brought in to help give advice and structure the bail out deal in the 2009 financial crisis, just so happened that banks he was invested in also too were some of the largest receivers of the TARP fund, after that he also increased his positions and still holds quite a few bank positions in the Berkshire portfolio. Its obvious to tell he has access to information you and I will never have access to. Knowing that I can either choose to leverage this in a way that will benefit myself and my positions or get caught up arguing the validity of my point above.
Next thing that is worth mentioning is that Buffett and Berkshire prides itself in being Value investors, vs growth investors which a lot of times has them missing out on early growth within top performers. They were late on almost every single tech stock they hold, Apple (bought finally in Feb 2017), Google (says he missed it, Berkshire owns none) & now Amazon they just acquired their first 483,300 shares this year (estimated in March).
Here are some of the comments Buffett has made about Apple, Google, Amazon…
“I was too dumb to realize. I did not think [Bezos] could succeed on the scale he has,” Buffett said, adding that he “really underestimated the brilliance of the execution.” The investor humbly admitted that he and partner Charlie Munger “miss a lot of things, and we’ll keep doing it.”
“If I was forced to buy [Google-parent Alphabet] or short it, I’d buy it; same way with Amazon. But it’s as little hard when you look at something at ‘X’ and it sells at 10X to buy it. ”
Berkshire also had positions in Goldman Sachs in 2010 at the time GS was accused of fraud by the SEC which was part of the fall out of the 2009 financial crisis, you can read the full SEC complaint here.
Nothing is full proof, but you can count on it to give you more data than you had before…
Here are the stocks that Berkshire has either added for the first time or increased positions on…
|Company (symbol)||Shares Added In Q1 2019||Estimated Avg Price|
|PNC Bank (PNC)||407,992||$130.72||No|
|Red Hat Inc (RHT)||934,679||$176.93||No|
|Delta Airlines (DAL)||5,375,456||$48.92||No|
|JP Morgan (JPM)||9,398,538||$107.31||No|
Does Berkshire Like CryptoCurrencies?
I don’t know about Berkshire as a whole company but Buffett and Munger both strongly dislike Cryptocurrencies, specifically Bitcoin which is more than a little weird actually because I couldn’t find them being this critical about any other asset or asset class in general.
Here is some of the comments they have made since 2017 about bitcoin…
Its odd that he literally makes that statement yet usually he has really sharp tongue towards Bitcoin, and Jamie Dimon CEO of JPM also strongly dislikes Bitcoin, Berkshire holds 3.02% of its portfolio in JPM currently.
“I think it [Bitcoin] is a scum-ball activity.”
” I’ve been invited during this gathering to go to a happy hour put on by the bitcoin people. And I tried to figure out what the bitcoin people do in their happy hour and I finally figured it out: They celebrate the life and work of Judas Iscariot. “
“And I think the people who are professional traders that go into trading cryptocurrencies, it’s just disgusting,” he added. “It’s like somebody else is trading turds and you decide, ‘I can’t be left out.'”Charlie Munger
Now here is what Buffett said about private equity funds, notice how essentially he is saying these people are full of shit yet doesn’t address it in the same way he does Bitcoin.
“We have seen a number of proposals from private equity funds where the returns are really not calculated in a manner that I would regard as honest.”
Munger literally compared “Bitcoin people” to those who celebrate the life and work of Judas Iscariot, who was an apostle who betrayed Jesus Christ for 30 pieces of silver. So who are “Bitcoin people” betraying…? The banks, fiat, USD…?
This to me is very telling, meaning if I knew nothing about Bitcoin, I would immediately go research it to find out what is so bad about it that its got these two guys so bent out of shape about it. The way they describe trading turds is literally how most markets work in general with retail money and investors, yet they have NEVER taken that tone with the stock market and invest 100% of Berkshire in that.
This is why we call it the Warren Buffett indicator my friends because its not just the data we get from the 13F filings each quarter to see what they may be accumulating but also dumping its also the commentary and I have never seen either one of these gentlemen come out with such a strong position against something. Now to be clear does this mean you should run out and invest all your money into Bitcoin because of what they said and how they said it? Absolutely not!