Sorry, Warren Buffett, You’re Wrong

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By Mauldin Economics. Originally published at ValueWalk.

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I’ll warn you now.

What I’m about to say about the greatest investor of all time is controversial…

First, let me clear the air. We all know Warren Buffett is a legend when it comes to stocks. He’s made an annualized return of 20% for his shareholders since 1965. No one can match his track record, discipline, or longevity.


Q1 2022 hedge fund letters, conferences and more

As my colleague, Chris Reilly, pointed out on May 16, Buffett’s buying quality stocks hand-over-first right now with markets down.

That’s a smart move that’s likely to pay off big time.

But Buffett’s dead wrong about something else…

Crypto.

Warren Buffett’s Words About Bitcoin

  • Buffett had some harsh words for bitcoin (BTC) recently.

Buffett is the CEO of the world’s seventh-largest company, Berkshire Hathaway (NYSE:BRK.A).

During Berkshire’s annual meeting in Omaha a few weeks ago, Buffett was asked about bitcoin. Here’s what he had to say:

If you told me you owned all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it… Apartments are going to produce rental [income], farms are going to produce food… If I’ve got all the bitcoin… what would I do with it? It doesn’t do anything.

He made similar comments in a CNBC interview a few years ago: “Cryptocurrencies basically have no value, and they don’t produce anything… They just sit there. You can stare at it all day, and no little bitcoins come out.”

Buffett made his fortune investing in productive, cash-generating businesses. He owns insurance giant GEICO, which raked in $35 billion in sales last year, and it grows each year.

As Buffett said, bitcoin doesn’t produce anything. Some folks have likened it to digital gold. It just sits there.

This is true for cryptocurrencies

  • But most cryptos are not cryptocurrencies.

Imagine if most investors thought every stock in the market was a meme stock like GameStop and AMC.

You could debunk that instantly by comparing GameStop Corp. (NYSE:GME) and AMC Entertainment Holdings Inc (NYSE:AMC) to real businesses like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL), or Microsoft Corporation (NASDAQ:MSFT), which rake in hundreds of billions of dollars.

Yet… this is how Warren Buffett and most investors view crypto today.

They think every crypto is a worthless digital coin that doesn’t produce anything. What they don’t understand is virtual currencies like bitcoin are just one type of crypto asset.

I want you to erase the term cryptocurrency from your mind. It’s a distraction from the generational money-making opportunity unfolding in front of us.

Today there are real crypto businesses… with real products… producing real cash flow.

The Fastest-Growing Wireless Network

  • Can you name the fastest-growing wireless network in history?

Helium (HNT) is building a new kind of wireless network.

One that’s not owned and controlled by a big corporation like Verizon or AT&T but owned and operated by folks like you and me.

Helium’s wireless network runs on hundreds of thousands of hotspots which reach about 200X further than a standard Wi-Fi connection.

Anyone can go out and purchase a Helium router to set up in their home. I did, and so have a few of my colleagues. We’re now earning Helium’s HNT tokens. With Helium, the users are the ones getting paid, not the service providers.

Helium has 800,000 hotspots live in 172 countries across the world. It’s the fastest-growing wireless network in history.

And get this… it raked in $15 million in revenue this quarter… up over 2,500% year-over-year. Companies like Nestle, Lime Scooters, and Volvo pay to tap into Helium’s network.

Helium is a real business, providing real value to customers.

  • Another crypto business processed $11.6 trillion worth of transactions last year…

For perspective, that’s more than Visa, Mastercard, or PayPal.

Its revenues also totaled $10.7 billion… and they’re growing 50% per year.

That business is Ethereum (ETH), the second-largest crypto asset, valued at around $250 billion. If it were a “company,” it would be the around the 25th largest stock in the world.

Ethereum is basically a virtual computer that allows anyone to transfer money, buy or sell assets, store files, and so much more. It’s like Visa, the New York Stock Exchange, and the Google Cloud Platform rolled into one.

Describing Ethereum as a cryptocurrency simply isn’t accurate. That term conjures images of digital money that, as Buffett said, “don’t produce anything.”

How could you say that about a platform which handled more transactions than Visa or Mastercard?

  • Much of the world is still convinced crypto is a stone-cold fraud.

To be clear, there are many cryptos you shouldn’t touch. CoinGecko.com lists 13,000 crypto assets.

I wouldn’t invest in 99% of them.

But the 1% I do invest in are real, cash-generating businesses changing the world.

In the early ‘90s, young, hungry, talented entrepreneurs founded internet startups. Today, the smartest minds in the world are building crypto businesses.

Mark my words: a big chunk of the world’s fastest-growing, most-innovative businesses will be built in crypto over the coming years.

Although we’ve been hearing about bitcoin for over a decade, the opportunity in crypto is only getting started.

It remains the most misunderstood asset in the world. And it’s playing out just how the internet did…

In the beginning, nobody understood how internet businesses worked or how they made money. This skepticism showed you the opportunity was in its infancy. And investors who positioned themselves early made life-changing money.

By the time Buffett and others understand what crypto is really about, a lot of the money will be made.

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Article By Stephen McBride, Mauldin Economics

Updated on

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