From The Desk Of A Trader #2
"respect the person on the other side of the trade"
Today, we are happy to share the thoughts from the desk of a soft commodities trader. The following views are that of Martijn Bron and do not represent the views of his employer.
In trading you always need to respect the person on the other side of the trade. Confidence in trading is needed but you should not confuse it with arrogance, complacency or the feeling you are invincible. The market will take care of you. I have seen it many times in the cocoa trade, where traders with those attributes ended up on the cocoa graveyard.
Trading is a game of mistakes. Ideally you make mistakes less than half of the time, and your sizing is aligned with your timing. Losing money and being called wrong by the market is part of being a trader, and how you deal with that says a lot about who you are as a person, and whether you are respected. I have seen traders being charming and kind when in the money, and nasty and aggressive when out of the money. Taking things personally is a sign of weakness. The market doesn't care about you being in or out of the money. You lose, you endure it like a gentleman/woman.
I admire Warren Buffett for his time tested approach to life, investing and treating people with high ethical standards. As a reminder he noted in his letter to shareholders in February that Berkshire’s investment strategy is to pick companies that have “both durable economic advantages and a first-class CEO." He added the choices are based on expectations of long-term business performance, not as vehicles of timely market moves.
Buffett's view about Bitcoin is that it has no productive ability and is a speculative asset with no other value than to speculate in it. Knowing Buffett's approach to investing this view should not be a surprise, but crypto evangelists struggle with the concept of respecting opposing views.
Peter Thiel called Buffett a sociopathic grandpa and Bitcoin's enemy number one at this week's Miami crypto conference. Bitcoin maximalist Michael Saylor last year said you should not listen to your grandfather, referring to Buffett's business partner Charlie Munger, for investments in new technology.
The comments of Thiel and Saylor are (age) discriminatory, and expressions of investors who are angry, and in essence weak in character. Both are billionaires measured in USD, but below the poverty line measured in moral standards.
Why would Saylor be so upset by Buffett and Munger? Saylor's debt loaded MicroStrategy owns 129k Bitcoin, which they started acquiring in 2019, at an average price of USD 30.7k. At current Bitcoin price of USD 43.7k this is a return of 42%. Had he invested his USD 4 billion however in the S&P 500 index instead, also starting in 2019, his return would have been 62%, before dividends.... Ouch..........You never read this in the coiner's echo chambers.
As Buffett says, for most people investing in the S&P 500 index is the best thing they can do. And looking at Saylor's Bitcoin returns, Buffett is exactly right, and he will just chuckle when he sees either Thiel's or Saylor's grandpa comments. Expression of confidence and class.
There is a limitation to the length of the post, so the key take away is what is proper behavior and Saylor’s returns are not spectacular (42% in 3 years) and do not reflect the spectacular returns that pulls in so many crypto hopefuls.
The Bitcoin uber bull, the guru of many, the legend, has reached returns which could have easily beam replicated or improved by investing in a simple index fund and many individual stocks.
Of course as always, what returns have been since 2019 depends a lot on individual decisions, many scenarios are possible. But to keep it simple, Saylor’s returns are known, and they r nothing special, especially not if you start including risk adjusted returns and take into account dividends. Good luck.
I agree - why are Thiel and Saylor so upset by Buffett & Munger? They should just ignore them.
But you made a very poor performance comparison. You are measuring the S&P 500 return from 2019 to today, which is 62%. Yet you measure bitcoin's performance from Microstrategy's average purchase price of USD 30.7k which bitcoin only reached in January 2021. You need to use the same starting point for both, i.e. either mid-2019 or Jan. 2021. Since mid-2019 the S&P 500 index returned 62% while bitcoin returned 300% from the same starting date. And since 1 Jan 2021 the S&P 500 index returned 20% while bitcoin returned 42%. Either way, Saylor is way ahead of the S&P 500 index.