“You can’t do anything with it except sell it to somebody else,” Buffett told CNBC. “But then that person’s got the problem.”
The “Omaha Oracle” then inferred criminal activity to be the primary use-case for cryptocurrencies. So, a logical offset to holding Bitcoin would be shorting suitcases — betting that Big Suitcase fails as money launderers opt to move illicit funds with Bitcoin rather than cash in suitcases, because Scorsese movies are documentaries.
We thought: What if Buffett’s holding conglomerate Berkshire Hathaway never bought $4 billion worth of JP Morgan shares back in 2018?
What if Buffett bought and held Bitcoin instead?
Warren Buffett and the banks: A love story
Warren Buffett loves banks, and has so for decades. Mainly known for buying into Wells Fargo and Bank of America, Berkshire’s 2018 earnings reports revealed it had acquired a pretty epic stake in Wall Street powerhouse JP Morgan Chase, led by Bitcoin-hater extraordinaire Jamie Dimon.
This truly signaled hard romance. By the second half of 2019, Berkshire was in the top-five biggest shareholders of Bank of America, Wells Fargo, Goldman Sachs, Bank of New York, US Bancorp, and JP Morgan Chase — a group that would go on to be labeled Buffett Banks.
Financial services make up roughly 40% of Berkshire’s portfolio today, which in total exceeds $248 billion. Just yesterday, Buffett said he finds banks “very attractive compared to most other securities” he sees.
Thing is, Berkshire didn’t meet expectations last year. Despite earning a cool $81.42 billion in 2019, its stock rose just 11%, as the S&P 500 (a popular index) grew by 31.5% including dividends.
This was reportedly Berkshire’s biggest underperformance since 2009, capping off a lacklustre decade.
The ‘back of the envelope’ math
First, a disclaimer. Berkshire’s investments are actively managed and fluid. Buffett‘s certainly known for extremely long-term strategies, but buying stock to permanently hold is rare. Fund managers still regularly add to and trim their positions.
For the sake of convenience, let’s simply compare buying and holding $4 billion worth of JP Morgan Chase shares to Bitcoin, from the end of September 2018 (when the public first learned of Berkshire’s investment) until now.
JP Morgan Chase:
$4.02 billion invested in JP Morgan, with an average share price of $112.60.
JP Morgan share price today: $132.16 — up 17.37% since September 30, 2018.
$4.02 billion * 1.1737 = $4,718,274,000.
Total earnings: $698,274,000.
$4.02 billion in Bitcoin bought at $6,601.96.
Bitcoin price today: $9,561.35 — up 44.83% since September 30, 2018.
$4.02 billion * 1.4483 = $5,822,166,000.
Total earnings: $1,802,166,000.
If Buffett did opt for holding Bitcoin instead of building a major position in JP Morgan in 2018, he would’ve earned an additional $1,103,892,000. That’s over a billion dollars in missed gains.
It should also be noted that Berkshire has increased its JP Morgan Chase position to 60 million shares, worth more than $7.8 billion.
Buffett, realistically, doesn’t care, but Berkshire’s shareholders are reportedly growing restless, with some demanding to hear more from the firm’s vice chairmen Greg Abel and Ajit Jain in the future.
Not to mention, Berkshire is actually sitting on $128 billion in spare cash, basically doing nothing. If only Buffett put just 3% of it into Bitcoin…
Published February 25, 2020 — 14:51 UTC