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The View | Charlie Munger’s wisdom on crypto ‘poison’ shows investment experience counts
- Munger, along with investment partner Warren Buffett, built a strategy around good assets that had been underpriced by the market
- With a little of Munger’s discernment, investors and regulators might have avoided much pain over the likes of FTX and Binance
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Charlie Munger, the Robin to Warren Buffett’s Batman, has died at 99, leaving an unparalleled investment legacy. Famous for his one-liners, he remains a beacon for the critical role of experience in investment. One of his oft-quoted aphorisms is “The big money is not in the buying or selling … but in the waiting.”
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Trading is the mechanism by which investors get exposure to stocks. Trading in and out, constantly trying to buy low and sell high is not investment but speculation, which often results in the opposite outcome because of human emotion.
Munger could be wise and pithy, describing bitcoin as “rat poison”. After its price rose from US$150 to US$9,000, he described it as “more expensive rat poison”. To those who knew Buffett-Munger value-style investing, this was unsurprising. The two sought to buy and hold good assets when the market had underpriced them.
Buffett’s Berkshire Hathaway today has an US$800 billion portfolio of shares like Apple, Bank of America, American Express, Coca-Cola, Mitsubishi and BYD. This is the opposite of the fluky world of the cryptocurrency exchanges, whose dodgy dealings and lack of value have recently been exposed in the litigation and bankruptcy courts. With a little of Munger’s experience and discernment, both investors and regulators might have avoided such pain.
Like stock and commodity markets, the new cryptocurrency exchanges allow an expanding investor base to easily trade cyber tokens in cash and derivative form. The biggest of them, Binance, has no headquarters or national regulator, and was founded in 2017 by Changpeng Zhao (known as CZ), a Chinese-born citizen of Canada and the United Arab Emirates.
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FTX was established in 2019 in Hong Kong and grew like a weed when it moved to the lightly regulated Bahamas. FTX ran an advertising campaign starring Super Bowl champion Tom Brady and his then wife, supermodel Gisele Bundchen. (Meanwhile, footballer Cristiano Ronaldo is being sued for US$1 billion in a class-action lawsuit alleging that his endorsement of Binance caused loss-making investments.)
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