In a recent episode of the FutureProof podcast, legendary American value investor William H. Miller III—who is the Founder, Chairman, and Chief Investment Officer of investment firm Miller Value Partners, as well as the portfolio manager of mutual funds “Opportunity Equity” and “Income Strategy”—talked about Bitcoin.
Before starting Miller Value Partners, Bill Miller and Ernie Kiehne founded Legg Mason Capital Management, and they worked as portfolio managers of the Legg Mason Capital Management Value Trust from its inception in 1982.
It is important to point out that Miller is not your average fund manager.
As CNBC noted back in June 2018, Miller’s 15-year streak (through 2005) of beating the is S&P 500 is still a benchmark no active manager can touch.”
With that introduction out of the way, let’s take a closer look at what Miller said about Bitcoin in this episode of the FutureProof podcast, where Miller had a discussion—moderated by Jonathan Braunstein—with Mike Novogratz, Founder and CEO of crypto-focused merchant bank Galaxy Digital, that aimed to answer the question “When is the Right Time to Buy Into Bitcoin?”.
Braunstein started the conversation by asking Miller when he first got into Bitcoin.
“I got involved in Bitcoin… around 2013. I think it was trading at around 200 bucks or so, which is where I started buying it, and then it ran up—and going on memory here—to around $1100 or $1200 and then… it collapsed all the way back down to $200 again in 2014
“And I began to buy it again, and so I bought it up to probably around 500 bucks… my average cost is I think around $300.”
The moderator then wanted to know why Miller felt those were the right times to buy Bitcoin.
“Well, Bitcoin has been, as you may know, an extraordinary performer. We call it “digital gold”. We’re on cryptocurrencies basically ever since it came out, and so I came to it relatively late compared to when it first came out…
“But my thought then was it was a really interesting technological experiment and because the nature of what it was trying to do, it had many different ways to win and my view was that if it became a payment system, if it became a non-correlated asset, any of those things, much less all of them, would lead to a very dramatic move in the the underlying price.
“And that was that was also helped along by the fact that it’s limited to 21 million bitcoins, it’s decentralized, and it’s not able to be tampered with or debased.
“So my view was the distribution there was a huge right skew and with anything you can only lose a hundred percent of what you invested…
“I could make a hundred times my money. I could make a thousand times, maybe more than that, and I can only lose, you know, a hundred percent.
“So, I did it as a technological experiment, and to give me a giving a rooting interest in it and I still haven’t sold any Bitcoin.”
Then, after Novogratz had explained why he believed that now was the right time for investors place a bet on Bitcoin, Miller was asked if this indded was the right time to buy Bitcoin.
“Absolutely… where I come from in this is that for most assets that you that you buy, especially that your FAs [financial advisors] are putting in client accounts, the more they go up in price, the less value there is to be extracted out of it, and the riskier it becomes.
“Bitcoin in is in the unusual position of being almost the exact opposite of that. It was very risky when it was trading at a dollar or five dollars or ten dollars.
“I think it could have easily disappeared, but at the current price in the high nine thousands, with the all the venture money that has gone into it, with what Mike said [about] the institutional interest, with some of the big-named players he talked about… getting interested, I think it’s reached the stage right now where it’s actually much safer than it ever has been before.
“Point two is that if you don’t have it, then any time is the right time to have it…
“With Bitcoin, what I find interesting is I don’t see why an FA would not advise all of their clients to put one percent of their liquid assets in Bitcoin…
“I think if you put one percent in there, you have very little risk of any harm to your financial condition, but the potential to dramatically increase that, and I’ll just end on saying, what Ray Dalio believes, which is that we’re going to have a new paradigm shift in the overall global global macro position, and that may include or may trigger significant increase in gold…
“My view is that in any environment where gold works, Bitcoin works far far better than gold because it’s infinitely divisible, it can be sent at virtually no cost, and it’s got other characteristics that gold doesn’t have…
“Back in the 70s and early 80s, people were talking about putting five percent of your assets in gold because it’s a hedge, it’s like an insurance policy in case inflation comes back again as it did in the 70s, and I would say that if that’s a sensible thing to do, then then certainly to have one or two percent of your assets in Bitcoin makes makes great sense here.”