Berkshire Hathaway's famous annual meeting took place this weekend, and investors from all around the world tuned in. That's typically the case when Warren Buffet and Charlie Munger speak. They're 90 and 97 years old respectively. Why is that relevant? Well, let's just say they've been around the block! They've seen it all. Of course Warren Buffet is known to be one of the best investors of our time. There is however lots of talk about Warren loosing his touch, or being "outdated" for today's environment.
I respect Buffet a lot – beyond just professionally. He's a great human being and role model. He's dedicating almost his entire fortune to philanthropy. His $100B fortune will help make a change in the world, and that's what's most important (in my opinion of course).
But, as an investor who's relatively young (if I say so myself) I don't agree with 100% of this philosophies... though I do take many pages out of his book relating to value investing. He does possess a skill that, arguably, will never go out of fashion.
Today I wanted to point out a few of the highlights from the meeting and add my commentary (aka. my two cents).
"Of course, I hate bitcoin's success... it's creating a financial product out of thin air. I don't welcome currency that is so useful to kidnappers and extortionists." – Charlie Munger
It's funny how Buffet decided not to comment on Bitcoin this time (lol). But, Charlie held nothing back. I disagree with their thought process on this, and I do think they need to study the technology behind blockchain to better appreciate it. But, I do understand they're both past 90-years-old and don't need to. If I was that age, I wouldn't either... so I don't blame them. Nor, do I hold it against them. However, I do think that blockchain as a technology is here to stay. We are far from seeing it being implemented in day-to-day transactions, but we will get there. I just don't see a world where some form of blockchain and payment processing DOESN'T exist. And that's something Buffet and Munger don't see; but like I said, it will probably be past their time before we see mass adoption in any case. They need a younger successor to Berkshire who will perhaps see the value.
"I'm looking forward to reading the S-1 [IPO prospectus]," Buffett said. "It's become a very significant part of the 'casino' part" of the market. There's nothing illegal about it, there's nothing immoral. But I don't think you build a society around it," he added. Munger took a stronger stance, calling the gamification "deeply wrong." – Warren Buffet
I'm mostly in agreement here with Buffet. Robinhood has promoted and enabled a gambling culture around stocks with the "gamification" But, we do have to give credit to Robinhood for making investing so accessible to people. They brought a lot of awareness to investing and financial literacy, which overall is a good thing. Of course a lot of these "gamblers" won't stick around (that's a given). But, I would be surprised if there weren't a handful of people who got introduced to investing through Robinhood and will be able to change their lives as a result. I don't doubt that. For that reason, I don't think it's fair to completely sh*t on Robinhood. I'm always for giving credit where credit is due.
"It's a killer," Buffett said. "When the competition is playing with other people's money... they're going to beat us... We're not going to have much luck as long as this continues." He also likened the SPAC craze to gambling. "It's shameful what's going on. It's not just stupid, it's shameful," added Munger.
I'd have to somewhat agree with Buffet here; but mostly disagree. I do agree that SPACs have run a bit too far, and there's some ridiculous companies that have unfortunately tricked investors into buying garbage. That's the unfortunate truth. You'd think the sponsors would care about their reputation when acquiring a company – which includes doing due diligence and doing what's best for investors. But, they are on a strict timeline and the competition has gotten way overheated. So, I can see why sponsors have been desperate lately because, of course, they got greedy. And, greed is typically the beginning of any end. But, to say that SPACs didn't provide investors with a democratized access to early-stage companies typically only available for private equity, is wrong. I have earned abnormally high returns for the risk profile throughout 2020. They were among my top gains, with barely any risk. I knew, however, it wasn't going to last forever. Maybe it's over now... maybe there's one more run. I don't know for sure. But, there are without a doubt companies which have successfully "de-SPAC'd" and performing well beyond expectations. Think QuantumScape (QS), DraftKings (DKNG), ChargePoint (CHPT), MP Materials (MP), and so on... So, again, it's completely unfair (in my opinion) to paint all SPACs with a negative picture. In fact, we have to understand that Buffet is coming from a perspective where he is less competitive in acquiring companies due to the increased competition coming from SPACs. So, naturally, he will have a negative view... because he's losing out on deals.
Hope you enjoyed. As always, let me know your thoughts and feedback 👍
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