Warren Buffett: Bitcoin Is An Asset That Creates Nothing | CNBC

at one point this weekend you said that Bitcoin and this was basically you were asked Charlie said bitcoins like rat poison you were asked about that comment and you said well it's probably more like rat poison squared Charlie went on in the meeting to then basically call Bitcoin turns he is an expressive store I just want to ask you about that because it sparked so much controversy and particularly on Twitter and some of the places where you might expect people who are trading in cryptocurrency to be pretty loud about what they heard what what is it about Bitcoin that gets you guys so fired up well when you buy a farm you look at the crop every year and what prices are and you decide whether it was satisfactory invest buy I mean you look to the asset itself and what it produces for you when we buy a business we look at what the business burns and decide how we feel about it in terms of what we paid but we are buying something that at the end of the period we not only have what we bought in the first place but we have something that the asset produced and when you buy non-productive assets all you're counting on is whether the next person is going to pay you more because there are even more excited about another next person coming along but the asset itself is creating nothing one of the interesting things for example is gold if you go back to the time of Christ and you look at how many hours we had to give up in order to buy an ounce of gold and you take it forward to now you'll you'll find the compound right maybe a tenth or two-tenths of one percent you know and and then you have to ensure during that time but make sure you know somebody doesn't steal from you in everything but it doesn't produce anything and productive assets you may have didn't pay too much for a productive asset but I've bought a farm in the 1980s and and every year look at how much it ruins the way of soybeans and corn and at the end of that period I've still got the farm and I've gotten some significant income off of it apartmenthaus operating business but if you eye by various cryptocurrencies they're not they're not got a mobile plant they're gonna be a bunch of rabbits sitting here in front of us then they're just gonna sit there and I got a hope next time you get more excited after I bought it from you and then yeah I'll get more excited and buy it from you and actually we could we could sit in the house by ourselves and we could keep running up rice potatoes but at the end of the time there's one Bitcoin sitting there and now we got to find somebody else and and they come doing that I mean oh yeah I mean that's a greater fool theory that's what you're saying well yeah it's it's it's buying something because you expect the pool of people who want to buy it because they want to sell it to somebody else will grow and and and it's wonderful because it does create a rising price does create more buyers and people think I've got to get in on this and and it's better if they don't understand it that's the other thing about non-productive you don't understand it you get much more excited than if you understand it I mean if you buy a bondage it's gonna pay you four percent a year you're not getting any pleasant surprises she's going to pay a four percent here but if you you can have anything you want to imagine if you just look at something say that's magic you can do it with shark's teeth there's seashells or or anything and you know they did it with tulips and and listen 17th century and and I'm jamming and and they'll do it again I mean people they like to speculate they like to gamble and if you can get something maybe they had something half plausible going on if you had bought gold in 1942 and said we might lose the war we might have to run off to some other country and you know so let's put our assets in gold you would have less than a penny for every dollar you got from owning stocks less than a penny now somebody calls that a store of value I mean I think they're delusionary andrew has a question - Andrew hey Warren related to this issue of Bitcoin you saw that goldman sachs just last week announced they were going to create a effectively a trading operation around crypto currencies in bitcoin in particular you've been investor in golden what do you think of their decision to do that well they probably think that lots of people are going to get very excited about not well and maybe already are but they they think there's money to be made trading them I don't think they're expressing an opinion on the ultimate value I would be very surprised at the top partners of Goldman or are selling their Goldman stock and putting it in the Bitcoin but I want to cover the subject now because my friends Charlie will come on at 8 o'clock there's no telling what he will that's my own entire point I do want to ask Charlie about it because I think when he talked about the turds he was referring to this he said if you're trading this it's like watching other people trading turds and deciding you want to get a piece of that well you're not gonna get pretty combat on that hopefully Charlie's not awakened because people do trade on very crazy things over time you know imagine people selling their homes to buy a tulip in Amsterdam if people think they're going to make money the next day and worse yet if they think somebody else but they know is going to make money and they aren't going to make money it just draws people in you know I I I could whisper something on this program and and and kind of the more silly it was the bourret might react because there's no quantitative limits if you buy a stock you say well I'll buy 215 times earnings but I won't buy the 20 times rate but when you get into something that doesn't produce anything you know there's no there's no check point sir listen there's nothing to reference it to it's just it's gone up so yeah hey there thanks for checking out CNBC on YouTube be sure to subscribe to stay up-to-date on all of the day's biggest stories you can also click on any of the videos around me to watch the latest from CNBC thanks for watching

Channel: CNBC

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Keywords: CNBC, Mad Money, Squawk Box, Power Lunch, Opening Bell, Closing Bell, Financial News, Finance News, Stock News, Stocks, Trading, Investing, Stock Market, US News, World News, business news, finance, stock, news channel, news station, breaking news, cable, cable news, money, money tips, warren buffett, warren buffett cnbc, warren buffett advice, warren buffett and bitcoin, warren buffett company, bitcoin, bitcoin trading, cryptocurrency markets, warren buffett investment

Id: LtITDtZPYEw

Length: 6min 17sec (377 seconds)

Published: Mon May 07 2018

Reddit Comments

[u/caffeine93]

If they don't understand it, they'll get much more excited than if they understand it

[u/PatrickBitmain]

It does create something. It creates losses for the majority of participants.

SELL $BTC

SELL $ETH

SELL $BCH

[u/[deleted]]

The comments section of that article are pure gold. Idiots telling Warren Buffett that he is an idiot. ahahahaha.

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[u/sillysmilez]

Buffett trying to explain grade school level finance to cryptonerds is like that saving private ryan meme of shooting at the tank. Nice try, but they're retarded.

[u/Bekayasi]

Buffet is secretly buying...

Hes too old to understand...

Soros, globalists, new world order bullshit...

These are the types of people who support this delusion. Some cant even hang out with their old friends because theyve gone full retarc

[u/beanietulipbubble]

Lol. Buffett. What does that old man know about bitcoin? Currency of the future, right here, that old timer clearly doesn't understand.

[u/UpDown]

P/E used to be 5-8, now it's 30-50 in a lot of cases. So you bought the farm and its producing assets, but you still can't be sure if 30-50 is the new norm of if its severely overpriced. You end up speculating that 30-50 is the new norm. It doesn't end up mattering that much whether the asset produces more assets or not since the fact that it's a producing asset inflates its price and makes that production 'priced in'. Bitcoin or gold doesn't produce anything and everyone knows that, so no profitability is priced in. It also doesn't owe anything, which is an offsetting perk. With stocks, you end up speculating that the next buyer will want to pay 30x earnings instead of 5x in the same way you'd speculate that someone would want to pay X for a non-production asset. Some times when you buy stocks or other assets you don't just end up with the asset and products, some times you end up with debt in excess of your earnings, and you end up having to sell the farm to pay debtors. In this case you end up with nothing, AKA bankruptcy. Fortunately, diversification pretty much protects against this but in this case you also don't understand what you are buying and the P/E people are willing to pay for the basket is mostly a random function of market sentiment. How many of you know the top 5 stocks in your ETF? I bet very few. Warren buffett is a specialist that works very long and hard picking stocks and building a portfolio, but most people just grab an SP500 ETF and call it a day. So in that case the buyers of stocks generally dont understand it nor consider what P/E they are paying for the assets. Virtually everyone is a naive speculator/gambler.

[u/MyStolenCow]

Funny thing is Buffett has enough money to buy every bitcoin in existence at current market value (which you shouldn't becauses bitcoin wont be a currency anymore).