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The Emperor’s New Clothes Moment for Crypto

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“Warren Buffett should say, ‘I’m sorry.’”

That’s what a tech magazine publisher wrote in early 2000.

They were wondering how Buffett could sit out the tech bubble of the late 1990s.

Even Barron’s ran an article titled: “What’s Wrong, Warren?

By the end of 1999, the S&P 500 was up 21% and the tech-heavy Nasdaq soared 86%.

But Berkshire’s stock was off more than 20%.

In fact, on March 10, 2000, the Nasdaq hit an all-time high.

That same day, Berkshire closed at $41,300 — a 52-week low.

The Barron’s article suggested Buffett “may be losing his magic touch.”

But none of it mattered.

Buffett didn’t invest in what he couldn’t understand.

And he couldn’t understand technology stocks during that time. So, he didn’t buy.

But he wasn’t losing his magic touch. Far from it.

Over the next few years, the Nasdaq plunged 77%.

It took 15 years for it to break even with its 2000 highs.

But while Nasdaq was fighting to break even, Berkshire’s stock soared 420%.

So, that tech magazine should be apologizing. And there was nothing wrong with Warren.

If anything, his magic touch is stronger than ever…

Public Mockery

To say Buffett hasn’t been a fan of cryptocurrencies is an understatement.

Back in 2018, he said they were “rat poison, squared.”

He warned investors against crypto and said it would “come to a bad ending.”

And at the recent Berkshire shareholder meeting, Buffett’s view was even harsher.

Even if he was offered all the bitcoin in the world for $25, he said he still wouldn’t take it.

He wouldn’t know what to do with it.

His reasoning was: “Its price depends on the next guy paying more than the last guy.”

Unlike farmland or apartment houses, crypto is not a productive asset.

The crypto community lashed out at Buffett.

One person tweeted that Buffett’s view is “like asking [former basketball star] Shaq … on how to become a pro baseball pitcher.”

Buffett was mocked on Twitter and crypto forums for days.

But it only took about two weeks for Buffett to be right again…

Ticking Clock

Last Thursday, the so-called stablecoin TerraUSD crashed.

And in a span of 24 hours, $200 billion in crypto assets blew up.

Luna, another crypto on the same network, also went into a death spiral.

Last month, it traded as high as $116.

Now? The last quote I saw was for $0.0002, a loss of 99.99%.

In the past six weeks, $1 trillion in crypto market value has evaporated.

Prominent crypto trader Ran Neuner said the crash was a “real wake-up call.”

Crypto prices could fall to zero.

And that’s because there’s never been any economic value behind crypto prices.

The only thing that was keeping them higher was mass delusion.

It’s why I’ve never invested a single nickel in cryptos.

In fact, I’ve always told you to stay away from them because I couldn’t understand them.

And like Buffett … what I can’t understand, I don’t invest in.

The turmoil of the past week has destroyed many arguments for cryptos.

Analysts at UBS said: “The case for institutional adoption seems to be receding by the day.”

Cryptos won’t be building a decentralized financial system anytime soon.

Instead, they’ll likely continue to be for the get-rich-quick traders.

The Wall Street Journal columnist Andy Kessler summed it up best…

Too many momentum investors late to the crypto party traded real money for fake currency and lost.

Saving Time

A few months back, I asked one of my friends for his insight on cryptos.

He’s one of the smartest guys on the planet.

Hedge funds spend thousands of dollars on the research reports he writes on companies.

He’s that good.

Three months ago, I asked him if he ever came up with an underlying worth for cryptos.

He texted me that he only had so much brainpower.

And he didn’t want to waste it on “something that seems, on its face, to be a worthless fad.”

The way I see it, it all boils down to this…

It doesn’t matter if everyone is doing it. Only invest in what you can understand.

It doesn’t get simpler than that.

That’s why I share all my recommendation insights in simple, easy-to-understand English.

In fact, several subscribers have written in to say things like…

“Thank you for presenting your thoughts succinctly.”
“Thanks for not just making recommendations, but teaching why you’re making them.”
“My lifetime subscription has been worth my investment. ‘When the plain sense makes common sense, seek no other sense.’”

Keep writing in, Alpha Investors. I love hearing your thoughts.

And if you’re not an Alpha Investor yet, you can get my Real Talk and recommendations sent straight to your inbox. Find out how right here.

Regards,

Charles Mizrahi

Founder, Alpha Investor

BoE’s Cunliffe warns of more tough times for crypto

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