Miller is the Founder, Chairman, and Chief Investment Officer of investment firm Miller Value Partners, as well as the portfolio manager of firm’s mutual funds “Opportunity Equity” and “Income Strategy”.
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.”
In his “4Q 2020 Market Letter” (published on January 5), Miller had this to say about Bitcoin:
“At this writing, it is trading at over $31,000, up more than 50% since the middle of December. It has outperformed all major asset classes over the past 1, 3, 5, and 10 years. Its market capitalization is greater than JP Morgan and greater than Berkshire Hathaway and yet it is still very early in its adoption cycle.
“The Fed is pursuing a policy whose objective is to have investments in cash lose money in real terms for the foreseeable future. Companies such as Square, MassMutual, and MicroStrategy have moved cash into bitcoin rather than have guaranteed losses on cash held on their balance sheet. Paypal and Square alone are estimated to be buying on behalf of their customers all of the 900 new bitcoins mined each day.
“Bitcoin at this stage is best thought of as digital gold yet has many advantages over the yellow metal. If inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into bitcoin instead of cash, then the current relative trickle into bitcoin would become a torrent. Warren Buffett famously called bitcoin ‘rat poison’. He may well be right. Bitcoin could be rat poison, and the rat could be cash.“
Evans started last Friday’s interview by asking if Miller was as excited now (with Bitcoin trading around $40K) as in early November 2020 (when Bitcoin was trading under $15K), which is when they last talked.
“Oh, absolutely. One of the things that’s interesting about Bitcoin is that it gets less risky the higher it goes. That’s the opposite of what happens with most stocks… The OCC will allow all the big banks and investment banks the custody or to buy and sell Bitcoin, you can’t do that at any of them. So they’re permitted to, but they haven’t done it yet because basically I think they’re concerned, but every day Bitcoin’s a supply and demand story.
“There’s 900 new Bitcoins created every day. It’s estimated that, PayPal and Square, their customers alone are buying all of those, and Bitcoin’s total supply is growing less than 2% a year, and it’s obvious by the price that the demand is growing much much faster than that.“
Evans then asked Miller how much higher Bitcoin’s price is likely to go.
“Bitcoin tends to move in spurts, which tend to be followed by corrections. I think there’ve been three corrections of 80%, which is normal in this type of very very early technology with a very very big total addressable market, but for those people who are waiting for the pullback, they got it in the first quarter [of 2020]. You could have bought Bitcoin at what four or five thousand dollars in the first quarter…“
With regard to Bitcoin’s price volatility, Miller said:
“You have to expect that it’s going to be very, very volatile,” Miller told CNBC. “If you can’t take the volatility, you probably shouldn’t own it. But its volatility is the price you pay for its performance.“