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Buffet has a lot of expertise investing in businesses where cashflows can be analyzed. Not every investment is like that. Where it's not like that, his expert

Buffet has a lot of expertise investing in businesses where cashflows can be analyzed. Not every investment is like that. Where it's not like that, his expertise is less valuable

TheAdamAndChe 9y ago
Yet at the end of the day, Bitcoin is simply a store of value, just like any currency. And Buffet has plenty of experience with handling stores of value. Bitcoin's recent exponential growth screams "bubble" for anyone who knows what to watch for.
- vasilipupkin 9y ago
  I don't get this whole store of value concept. Nothing is a store of value, all there is is investments with varying levels of risk.
  - TheAdamAndChe 9y ago
    Bitcoin is just a store of value because ownership itself does not produce any profits or dividends, profits require higher demand in the future. No wealth is generated, merely transferred. This is similar to gold, and very different from, say, ownership in a farm, where goods can be consistently generated and sold every year.
    - vasilipupkin 9y ago
      gold is an investment, not a store of value. Between 1979 and 2001, it lost 70% of its value. What kind of store of value does that?
      - TheAdamAndChe 9y ago
        Lots do. The dollar has greatly depreciated due to inflation. A dollar in 1950 would be the equivilant of $10.16 today[1]. [1] http://www.in2013dollars.com/1950-dollars-in-2017?amount=1 http://www.in2013dollars.com/1950-dollars-in-2017?amount=1
        vasilipupkin 9y ago
        that's my point. "Store of value" implies storing value, not losing value. Which is why I am saying there is no such thing - all you have is various types of investments which can make or lose money over time
        adventured 9y ago
        Gold did not lose value. It locked you in at the price you paid in that time's dollar. If you then try to swap that locked in value for a dollar at a later date that has a higher value, you will suffer the imbalance. It stored your value. It's the dollar that gained (or lost) value. You're attempting to move back into the dollar afterward, when the dollar's value has shifted. What you're describing is that, as an example, a mistake was made by locking in your value by buying gold at a weak 1980 dollar price, then the dollar gained significant value in subsequent years, and then you're again trying to move back out of gold and into the dollar later (ie exchanging gold for dollars) after the dollar has climbed (while your value in the gold was set at that weak 1980 dollar). Your loss is the difference between the two different values of the dollar at two points in time separated by decades.
        vasilipupkin 9y ago
        if this was true, the same would have happened to other dollar denominated assets - but it didn't. So, no, it's specifically gold that lost its value 70% during that period, not dollar gaining value.
      - adventured 9y ago
        Every store of value that has ever existed has fluctuated - often significantly - over long periods of time. Gold 'lost' 70% of its value when priced in dollars, as the dollar regained immense value thanks to Volcker's policies breaking the inflation wave. That's a critical point you're leaving off (when priced in dollars). The point being, you have to be a lot more precise about what gold gained or lost value vs. It performed differently when priced in different currencies vs the dollar. Most currencies did not see the kind of value gain the dollar did over that window. This is one of the properties that makes it a store of value. If you buy gold in 1980, it will lock you in at the 1980 dollar value. It's the currency that is gaining or losing value, gold is storing your 1980 dollar value (which you used to buy the gold in 1980). You then try to get back out of your gold in 1999, you're attempting to swap a 1980 dollar that has been locked-in at that 1980 value for a 1999 dollar, when the two are not worth the same thing. Gold also then went up several hundred percent as the Bush dollar dropped from ~2002 onward.
bradleyjg 9y ago
Yes, every investment is like that. The sine qua non of an investment is purchasing a productive asset. If you purchase a non-productive asset--that could be hedging, or speculation, or just consumption, but it isn't investing.
- vasilipupkin 9y ago
  well, what I mean is, imagine a company that will have no cashflows for 100 years and then with probability 0.01% will have cashflows of 100 trillion gazillion. Buffet doesn't invest in those types of companies normally, that's not his edge.

Buffet has a lot of expertise investing in businesses where cashflows can be analyzed. Not every investment is like that. Where it's not like that, his expertise is less valuable

TheAdamAndChe 9y ago

Yet at the end of the day, Bitcoin is simply a store of value, just like any currency. And Buffet has plenty of experience with handling stores of value. Bitcoin's recent exponential growth screams "bubble" for anyone who knows what to watch for.

vasilipupkin 9y ago
I don't get this whole store of value concept. Nothing is a store of value, all there is is investments with varying levels of risk.
- TheAdamAndChe 9y ago
  Bitcoin is just a store of value because ownership itself does not produce any profits or dividends, profits require higher demand in the future. No wealth is generated, merely transferred. This is similar to gold, and very different from, say, ownership in a farm, where goods can be consistently generated and sold every year.
  - vasilipupkin 9y ago
    gold is an investment, not a store of value. Between 1979 and 2001, it lost 70% of its value. What kind of store of value does that?
    - TheAdamAndChe 9y ago
      Lots do. The dollar has greatly depreciated due to inflation. A dollar in 1950 would be the equivilant of $10.16 today[1]. [1] http://www.in2013dollars.com/1950-dollars-in-2017?amount=1 http://www.in2013dollars.com/1950-dollars-in-2017?amount=1
      - vasilipupkin 9y ago
        that's my point. "Store of value" implies storing value, not losing value. Which is why I am saying there is no such thing - all you have is various types of investments which can make or lose money over time
        adventured 9y ago
        Gold did not lose value. It locked you in at the price you paid in that time's dollar. If you then try to swap that locked in value for a dollar at a later date that has a higher value, you will suffer the imbalance. It stored your value. It's the dollar that gained (or lost) value. You're attempting to move back into the dollar afterward, when the dollar's value has shifted. What you're describing is that, as an example, a mistake was made by locking in your value by buying gold at a weak 1980 dollar price, then the dollar gained significant value in subsequent years, and then you're again trying to move back out of gold and into the dollar later (ie exchanging gold for dollars) after the dollar has climbed (while your value in the gold was set at that weak 1980 dollar). Your loss is the difference between the two different values of the dollar at two points in time separated by decades.
        vasilipupkin 9y ago
        if this was true, the same would have happened to other dollar denominated assets - but it didn't. So, no, it's specifically gold that lost its value 70% during that period, not dollar gaining value.
    - adventured 9y ago
      Every store of value that has ever existed has fluctuated - often significantly - over long periods of time. Gold 'lost' 70% of its value when priced in dollars, as the dollar regained immense value thanks to Volcker's policies breaking the inflation wave. That's a critical point you're leaving off (when priced in dollars). The point being, you have to be a lot more precise about what gold gained or lost value vs. It performed differently when priced in different currencies vs the dollar. Most currencies did not see the kind of value gain the dollar did over that window. This is one of the properties that makes it a store of value. If you buy gold in 1980, it will lock you in at the 1980 dollar value. It's the currency that is gaining or losing value, gold is storing your 1980 dollar value (which you used to buy the gold in 1980). You then try to get back out of your gold in 1999, you're attempting to swap a 1980 dollar that has been locked-in at that 1980 value for a 1999 dollar, when the two are not worth the same thing. Gold also then went up several hundred percent as the Bush dollar dropped from ~2002 onward.

bradleyjg 9y ago

Yes, every investment is like that. The sine qua non of an investment is purchasing a productive asset. If you purchase a non-productive asset--that could be hedging, or speculation, or just consumption, but it isn't investing.

vasilipupkin 9y ago
well, what I mean is, imagine a company that will have no cashflows for 100 years and then with probability 0.01% will have cashflows of 100 trillion gazillion. Buffet doesn't invest in those types of companies normally, that's not his edge.