Buffett and Munger Pillory Bitcoin at annual Berkshire AGM
There is nothing sadder than watching those who inspired you during your education in contrarianism degenerate into mummified shills for a morally bankrupt status quo.
The Berkshire-Hathaway AGM was this past Saturday, and Warren Buffett and Charlie Munger didn’t sugarcoat their animus toward Bitcoin, saying
“Whether it goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything,”
Munger went further, calling it evil, ultimately headed for zero and a problem “because it undermines The Fed”.
Obviously, Buffett and Munger are hitting back at the hordes of laser-eyed barbarians for being labeled part of The Gerontocracy by Peter Thiel at his keynote address to Bitcoin2022 in Miami (I was there, it was epic).
It does warrant some comment, because there’s arguably some cognitive dissonance: The Crypto Capitalist covers publicly traded crypto companies. We don’t do technical analysis, we don’t do charting or Elliott Waves anything like that. I got into crypto stocks as a value investor. For reals.
Discovering the Crypto Value Play
The year was 2020, the world had completely lost its shit overreacting to a not-cataclysmic COVID pandemic, our brilliant (unelected) technocrats imposed lockdowns across the entire world and so, like many people, I decided to use my time as productively as possible, deciding to double-down on my investment education. Loading up on books like The Joy of Compounding, The Book of Value and listening to endless Value After Hours podcasts (love that show), I started combing through nanocap and microcaps looking for value plays.
I’d always been value oriented. I’ve got the Warren Buffett shareholder letters, dog-eared and underlined from several passthroughs. I’ve got two copies of Bevelin’s “Seeking Wisdom from Darwin to Munger” because one of them is signed by Munger and I wanted another copy to mark up and underline. Despite everything I’m about to say about Buffett and Munger, I’m still currently reading Adam J Mead’s Complete Financial History of Berkshire Hathaway. It’s fascinating stuff.
Over the course of immersing myself in the craft of value investing during lockdowns it turned out I kept finding it in a peculiar place: crypto stocks. With Bitcoin hitting all time highs, you would expect all the crypto stocks to be screaming higher at expanding multiples to nosebleed levels even more extreme than the underlying cryptos themselves. You see this in gold bull markets, in fact gold stocks typically lead the metal (both on the way up and the on the way down).
Not so in cryptos. At least not in the latter half of 2020. With Bitcoin, Ethereum and everything else ripping higher to fresh all-time highs, I was finding Bitcoin miners who were trading for less than the value of the Bitcoin on their balance sheet, with no debt. That would make them honest-to-God Ben Graham style net/nets.
It just seemed very asymmetric so I started loading up on names like Hut8, Hive, Bitfarms, Fortress Technologies (now Cathedra), Neptune Digital and this tiny little crypto-conglomerate nobody was paying attention to called Galaxy Digital. There were a couple of stinkers in there too, but overall it didn’t really make a difference. I was finding genuine valuein an entirely new and ascendent asset class. Buffett would be proud! Wouldn’t he?
Buffett and Munger loathe Bitcoin. If Bitcoin is “digital gold” (it is), Buffett has never liked gold either. There was a lot of excitement in goldbug circles when a Berkshire-Hathaway 13-F revealed they had bought a chunk of Barrick. The BRK-fanboys dissected the trade religiously and wondered out loud if that was an actual Buffet trade or one of the inner-circle who were being groomed for succession.
Buffett and Munger eschew monetary assets – like cash, or gold, because they are unproductive. They don’t generate any yield and when you can own a business that does generate returns, it doesn’t make any sense to keep anything on the sidelines. Especially when you can pick ’em the way Buffet and Munger can.
Yet they have also been known historically for steering clear of tech in general (despite now holding numerous tech investments which they entered far later in the respective companie’s lifespans).
Buy it now, or buy it later
Back in the dotcom boom, Buffett famously avoided tech stocks because he deemed them outside his circle of competence. He was ridiculed at the time as being out of touch, but he was eventually vindicated when the dotCom bubble imploded. Still, he could have bought Apple for a song in the wreckage, at (split adjusted ) prices ranging from under $1 to $2.50 or so up until mid-2006. It wasn’t until 2016 that Berkshire Hathaway backed up the truck and loaded up around the $100/share mark (pre 2020 split). By the end of 2021 nearly 40% of Berkshire’s portfolio was Apple!
But Apple wasn’t by any means the first transformative tech company Buffett eschewed at first. In 1968 Bob Noyce, was leaving Fairfield Semiconductor to start a new company Integrated Electronics and was raising an initial $2.5M seed round. Both Buffett and Noyce were trustees for Grinnell College’s endowment fund. Buffet signed off on an investment for the college, but declined to put any of Buffett Partnership’s capital into “Intel”. He wouldn’t be invested in the behemoth until 2011, and even then, he was out within a year.
Despite the general aversion to the tech sector, Buffett never called integrated circuits, personal computing or the internet “rat poison”.
I believe the reason for the visceral hatred toward monetary assets, like gold or Bitcoin is because on some subconscious level, Buffet knows that one of the major tailwinds of his stellar investment career has been the destruction of the monetary base layer and The Cantillon Effect.
Uncle Warren, Poor Charlie and Cantillion Mercantilism
Buffett and Munger’s belief is that the only reason for owning gold (or now Bitcoin) is in the hope of selling it to somebody at a higher price in the future. Yet, in Buffet’s own words, he likes to own businesses he understands when he
“like[s] the price at which they’re selling relative to their future prospects, and thinks 10 years from now that they’ll be worth more money”
There is a strange kind of tunnel vision here. All investment seeks to either preserve or accumulate wealth, and everybody does a variation of the same thing: deploying capital where they feel will hold or gain value in the future.
Buffett, who’s “favourite holding time is ‘forever'” should perhaps think more deeply around why he would rather hold his wealth in productive businesses rather than unproductive gold, or even the ostensibly risk-free asset that is cash.
John Maynard Keynes once said of inflation:
“By this means the government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
Buffett is of those men, saying:
“Inflation swindles the bond investor … it swindles the person who keeps their cash under their mattress, it swindles almost everybody,”
The most important word in this sentence is “almost”. Inflation swindles (steals, defrauds) almost everybody. But there are a few people whom inflation doesn’t rob, but actually enriches. Those people are Cantillionaires. Buffett and Munger, as skilled as they may be in investing, belong to the Cantillionaire class.
Richard Cantillion, the British entrepreneur who wrote one of the earliest economic treatise was the first to formalize how expanding the money supply is experienced in two different ways within an economy:
The elites who have direct proximity to the new money experience it as rising asset prices, making them wealthier, and giving them the ability to further compound their wealth by buying up even more of society’s assets.
Everybody else, the plebes, the rabble, the permanent underclass, they don’t experience it as rising asset prices, because they can’t afford to acquire any assets. They live on a permanent treadmill that keeps accelerating while the incline constantly increases… Euphemistically characterized by policy makers as “inflation”.
When you see the picture that lays out how the dynamics of Cantillon Mercantilism works, it makes more sense why the uber-wealthy like Munger and Buffett might rationalize hard money assets such as gold as “unproductive” and Bitcoin as “rat poison”. It’s because that magic money printer at the center of their world can’t print hard assets.
But it can and does print cash which even though they know it decays, and the more the machine prints the faster it decays, they also know that they’re first in line to get it. That means they can use it to inflate the value of their own assets before it hits the outer fringes society where it inflatesthe cost of staying alive.
In the 2008 Global Financial Crisis: Berkshire-Hathaway didn’t receive bailouts directly, but at least four of their holdings did, to the tune of nearly $100 Billion USD (Wells Fargo, American Express, Bank of America, and Goldman Sachs).
During the COVID Panic: The Fed directly purchased Berkshire-Hathaway bonds (along with those of numerous other companies, all of whom were worth over $100 Billion USD).
Bitcoin Fixes This
Bitcoin, when widely adapted as money and a store of value puts an end to the Cantillon Effect. Because it is an inelastic, deflationary and asset based money, it gains purchasing power over time (volatility aside, which I expect to smooth out over the coming years).
For those who feel running an economy on deflationary, inelastic money is impossible I would suggest reading, Nik Bhatia’s Layered Money, Saifedean Ammous’ The Bitcoin Standard, or Detlev Schlichter’s Paper Money Collapse first edition of which came out before Bitcoin was barely on anybody’s radar (2011).
There is no barrier to entry for asset accumulation with Bitcoin, because you can start with a microscopic amount and watch it gain purchasing power over time. It enables savings and capital formation.
Ordinarily, enlightened capitalists like Buffett and Munger should be on board with this. But they instead recoil from it with every fibre of their being. Perhaps, without being consciously aware of it, they understand on a subconscious level that Bitcoin presents a direct assault on Cantillion Mercantilism.
Munger and Buffett bring living example to the famous Updike quote: “It is impossible to get a man to understand something whose livelihood depends on them not understanding it”
What compounds dissonance about their posture toward crypto-currencies is that this is one of the few sectors of genuine value in the equities markets right now. In other words, right now, in Q2 2022, crypto stocks are value stocks. Granted, it’s been widely acknowledged that Buffet (and Berkshire) ceased being value investors a long time ago, optimizing more for “growth at a reasonable price”. It’s hard to find value at the scale BRK operates at.
Were Buffet to retrench to his value roots he could buy up Galaxy Digital ($4.6B), Silvergate Bank ($4B) and Coinbase ($30B) and still not really move the needle. This shows just how early it still is in the Bitcoin and crypto story.
Size matters, and sometimes not in a good way: BRK’s outperformance has been in secular decline for decades….
It would be fair play should the likes of Buffett and Munger simply dismiss crypto-currencies as outside their circle of competence thus uninvestable for them. They’ve done that continually throughout their career and it has served them well and been a great lesson in discipline for all aspiring investors.
But the venom with which they demonize Bitcoin smacks of “methinks doth protest too much”
People who understand #bitcoin buy it. People who don't understand #bitcoin talk about it.
Mathematicians use AI to identify emerging COVID-19 variants
Scientists at The Universities of Manchester and Oxford have developed an AI framework that can identify and track new and concerning COVID-19 variants…
Scientists at The Universities of Manchester and Oxford have developed an AI framework that can identify and track new and concerning COVID-19 variants and could help with other infections in the future.
Scientists at The Universities of Manchester and Oxford have developed an AI framework that can identify and track new and concerning COVID-19 variants and could help with other infections in the future.
The framework combines dimension reduction techniques and a new explainable clustering algorithm called CLASSIX, developed by mathematicians at The University of Manchester. This enables the quick identification of groups of viral genomes that might present a risk in the future from huge volumes of data.
The study, presented this week in the journal PNAS, could support traditional methods of tracking viral evolution, such as phylogenetic analysis, which currently require extensive manual curation.
Roberto Cahuantzi, a researcher at The University of Manchester and first and corresponding author of the paper, said: “Since the emergence of COVID-19, we have seen multiple waves of new variants, heightened transmissibility, evasion of immune responses, and increased severity of illness.
“Scientists are now intensifying efforts to pinpoint these worrying new variants, such as alpha, delta and omicron, at the earliest stages of their emergence. If we can find a way to do this quickly and efficiently, it will enable us to be more proactive in our response, such as tailored vaccine development and may even enable us to eliminate the variants before they become established.”
Like many other RNA viruses, COVID-19 has a high mutation rate and short time between generations meaning it evolves extremely rapidly. This means identifying new strains that are likely to be problematic in the future requires considerable effort.
Currently, there are almost 16 million sequences available on the GISAID database (the Global Initiative on Sharing All Influenza Data), which provides access to genomic data of influenza viruses.
Mapping the evolution and history of all COVID-19 genomes from this data is currently done using extremely large amounts of computer and human time.
The described method allows automation of such tasks. The researchers processed 5.7 million high-coverage sequences in only one to two days on a standard modern laptop; this would not be possible for existing methods, putting identification of concerning pathogen strains in the hands of more researchers due to reduced resource needs.
Thomas House, Professor of Mathematical Sciences at The University of Manchester, said: “The unprecedented amount of genetic data generated during the pandemic demands improvements to our methods to analyse it thoroughly. The data is continuing to grow rapidly but without showing a benefit to curating this data, there is a risk that it will be removed or deleted.
“We know that human expert time is limited, so our approach should not replace the work of humans all together but work alongside them to enable the job to be done much quicker and free our experts for other vital developments.”
The proposed method works by breaking down genetic sequences of the COVID-19 virus into smaller “words” (called 3-mers) represented as numbers by counting them. Then, it groups similar sequences together based on their word patterns using machine learning techniques.
Stefan Güttel, Professor of Applied Mathematics at the University of Manchester, said: “The clustering algorithm CLASSIX we developed is much less computationally demanding than traditional methods and is fully explainable, meaning that it provides textual and visual explanations of the computed clusters.”
Roberto Cahuantzi added: “Our analysis serves as a proof of concept, demonstrating the potential use of machine learning methods as an alert tool for the early discovery of emerging major variants without relying on the need to generate phylogenies.
“Whilst phylogenetics remains the ‘gold standard’ for understanding the viral ancestry, these machine learning methods can accommodate several orders of magnitude more sequences than the current phylogenetic methods and at a low computational cost.”
Journal
Proceedings of the National Academy of Sciences
DOI
10.1073/pnas.2317284121
Article Title
Unsupervised identification of significant lineages of SARS-CoV-2 through scalable machine learning methods
While the size of the United States makes it hard for it to compete with the inter-city train access available in places like Japan and many European countries, Amtrak trains are a very popular transportation option in certain pockets of the country — so much so that the country’s national railway company is expanding its Northeast Corridor by more than one million seats.
Running from Boston all the way south to Washington, D.C., the route is one of the most popular as it passes through the most densely populated part of the country and serves as a commuter train for those who need to go between East Coast cities such as New York and Philadelphia for business.
Veronika Bondarenko captured this photo of New York’s Moynihan Train Hall.
Veronika Bondarenko
Amtrak launches new routes, promises travelers ‘additional travel options’
Earlier this month, Amtrak announced that it was adding four additional Northeastern routes to its schedule — two more routes between New York’s Penn Station and Union Station in Washington, D.C. on the weekend, a new early-morning weekday route between New York and Philadelphia’s William H. Gray III 30th Street Station and a weekend route between Philadelphia and Boston’s South Station.
According to Amtrak, these additions will increase Northeast Corridor’s service by 20% on the weekdays and 10% on the weekends for a total of one million additional seats when counted by how many will ride the corridor over the year.
“More people are taking the train than ever before and we’re proud to offer our customers additional travel options when they ride with us on the Northeast Regional,” Amtrak Executive Vice President and Chief Commercial Officer Eliot Hamlisch said in a statement on the new routes. “The Northeast Regional gets you where you want to go comfortably, conveniently and sustainably as you breeze past traffic on I-95 for a more enjoyable travel experience.”
Here are some of the other Amtrak changes you can expect to see
Amtrak also said that, in the 2023 financial year, the Northeast Corridor had nearly 9.2 million riders — 8% more than it had pre-pandemic and a 29% increase from 2022. The higher demand, particularly during both off-peak hours and the time when many business travelers use to get to work, is pushing Amtrak to invest into this corridor in particular.
To reach more customers, Amtrak has also made several changes to both its routes and pricing system. In the fall of 2023, it introduced a type of new “Night Owl Fare” — if traveling during very late or very early hours, one can go between cities like New York and Philadelphia or Philadelphia and Washington. D.C. for $5 to $15.
As travel on the same routes during peak hours can reach as much as $300, this was a deliberate move to reach those who have the flexibility of time and might have otherwise preferred more affordable methods of transportation such as the bus. After seeing strong uptake, Amtrak added this type of fare to more Boston routes.
The largest distances, such as the ones between Boston and New York or New York and Washington, are available at the lowest rate for $20.
I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.
I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.
This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.
How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.
This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.
This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.
Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.
We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.
Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.
Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.
In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.
Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.
The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.
Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.
At the crossroads
Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.
Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.
It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.
Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.
Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.
How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.
To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.
Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
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