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Bautis Financial Advisor Commentary: March 17, 2022

Marc Bautis Advisor Commentary

In this installment of Advisor Commentary, Kayla Waller fills in for Marc, sharing the latest on cryptocurrency and digital assets, and three key takeaways from Warren Buffett's recent letter to shareholders.

This is a new installment in an ongoing series where Marc Bautis and colleagues comment on hot topics in the financial industry. This week, Kayla Waller, Paraplanner, fills us in.

Biden’s Crypto and Digital Assets Executive Order

On March 9, 2022, the White House took a large step towards regulating cryptocurrency when President Joe Biden signed an executive order directing federal agencies to study the benefits and risks of cryptocurrencies. 

The Executive Order calls for the study of: 

  • Consumer and investor protection
  • Financial stability
  • Illicit activity
  • U.S. competitiveness on a global stage
  • Financial inclusion
  • Responsible innovation

The administration also wants to explore a digital version of the dollar. Other central banks around the world have experimented with central bank digital currency, or CBDCs, most notably China. People are able to use their phones to make payments. 

Biden is not saying that the U.S. should launch its own digital currency, but he is saying that the government should place “urgency” on research and development of a potential digital currency.

The executive order will help banks get more comfortable with the idea of crypto and meet the demand that Americans have to get cryptocurrencies directly from their banks. Overall, crypto enthusiasts viewed this as a positive step. Skeptics saw the measures as a step back. 

Key Takeaways From Warren Buffett’s Letter to Shareholders

Legendary investor Warren Buffett released his annual letter to Berkshire Hathaway shareholders on February 26, 2022. The 91-year-old investing legend has been publishing the letter for decades now and it is considered a required read in the investing world. These were my top three nuggets of wisdom. 

  1. Berkshire Hathaway finds success by focusing on the long term strategy: “Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.”
  2. Understanding your tolerance to risk is critical: “People who are comfortable with their investments will, on average, achieve better results than those who are motivated by ever-changing headlines, chatter and promises.”
  3. Berkshire Hathaway understands the power of diversification: The company owns dozens of businesses. Some are wholly-owned, and others are only a partial equity stake. Of these businesses, Warren Buffett picks four which he calls the “Four Giants”. The Big Four are its cluster of Insurance businesses, Apple, BNSF Railway, and BHE. The image below shows the 15 largest equity holdings of the companies which they do not have control over. 
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