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Alex Garcia
Alex Garcia
Articles (8) 

Carnival of Berkshire #3

Robert Shiller, Warren Buffett and Seth Klarman comment on bitcoin

December 19, 2017 | About:

Welcome to this week's Carnival of Berkshire. Before anything, I want to wish everyone a safe and happy holiday season. A major milestone was hit this week as Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) A shares touched $300,000. When I started investing, I remember it was "expensive" when it was trading at $120,000. Now, that looks like a bargain. It is crazy to think Warren Buffett (Trades, Portfolio) first purchased shares of Berkshire at $7.50 when it was still a textile company.

What is Bitcoin Really Worth?

A great article by well-known economist Robert Shiller on bitcoin. I recently wrote an article about how Buffett believes you cannot value bitcoin because it is not a value-producing asset. Shiller has a similar view.

"True investing requires a rational appraisal of an asset’s value and that is simply not possible at present with bitcoin."

I personally have no interest in even opening a bitcoin account. But the warning signs are everywhere, cryptocurrencies are in a bubble and remain unregulated.

Seth Klarman calls Bitcoin a "trading sardine"

Some "heavyweights" of the financial world have come out against bitcoin and other cryptocurrencies. I found this CNBC article interesting as it contains a paragraph from Seth Klarman (Trades, Portfolio)'s book, "Margin of Safety." In regard to speculation, Klarman wrote:

"There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California. The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, 'You don't understand. These are not eating sardines, they are trading sardines.'

Like sardine traders, many financial-market participants are attracted to speculation, never bothering to taste the sardines they are trading. ... trading in and of itself can be exciting and, as long as the market is rising, lucrative. But essentially it is speculating, not investing. You may find a buyer at a higher price — a greater fool — or you may not, in which case you yourself are the greater fool."

As the article states at the end, Klarman was asked if bitcoin was "trading sardine." He replied, "Yes."

10 Questions With Todd Combs

A great question-and-answer session with Todd Combs, who is running part of Berkshire's stock portfolio ($10 billion or so). One of the things that impresses me to this day is how much Buffett, Munger and now Combs read. In the article, Combs says he reads about 12 hours a day. This has motivated me to start reading physical books again and I encourage you to do the same. You will be amazed with the information that is out there.

About the author:

Alex Garcia
Full time worker, private investor. I focus on low-fee index investing for the long term to build wealth. In 2018, I plan start start a small portfolio to save and invest regularly to show the magic of compounding.

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