What is the smart money buying now?

 

Below are a couple of writings I have seen about what Smart vs Dumb money is doing. Share them for those interested!

As shown below, smart money (institutions and hedge funds) is aggressively selling this market while individual investors, aka dumb money, are aggressively buying. The difference in opinions is stunning. Hedge funds and institutions are both at or near records for negative stock market outflows, representing extreme bearishness. Conversely, individuals have been buying the dip at the highest rate since 2008. Who will be right this time?

 

It was Buffett's answer to a shareholder question about the devaluation of the U.S. dollar that caught my attention.

His reply should send shivers down the spines of every investor and saver…

The tendency of a government to want to debase its currency over time – there’s no system that beats that. You can pick dictators, you can pick representatives, you can do anything, but there will be a push toward weaker currencies… People can study economics, and you can have all kinds of arrangements, but in the end, if you’ve got people who control the currency, you can issue paper money or engage in clipping currencies like they used to centuries ago. There will always be people who, by the nature of their job – I’m not singling them out as particularly evil – but the natural course of government is to make the currency worth less over time.

Buffett’s reply isn’t just hyperbole.

Over the past 25 years, reckless government money printing has caused prices to climb for the average American. For example, the median home price is up 155%, medical care is up 121%, and the price of a Big Mac is up 158%.

As you can see, Buffett is worried about the U.S. dollar. And his concern is inadvertently making a case for bitcoin – a currency he’s dismissed for years.

Using bitcoin as a treasury reserve asset started back in 2020 with MicroStrategy but has since grown to 79 public companies. Take a look at the chart below, which shows the amount of bitcoin public companies have vacuumed up since 2017. As you can see, nearly 700,000 bitcoin (worth an estimated $65.8 billion at current prices) are held by publicly traded companies. That’s roughly 3.5% of bitcoin in circulation.   At first, these companies were questioned, mocked, and called reckless. But as bitcoin has matured with Wall Street adoption, companies and individual investors are seeing bitcoin as a life raft for their $15 trillion cash piles. The narrative around bitcoin is quickly shifting from “speculative asset” to “store of value against currency debasement.” You can bet Buffett’s concerns about the U.S. dollar are being echoed throughout the boardrooms, households, pension funds, endowments, and every other group of investors. Kraken CFO Stephanie Lemmerman predicts that about 20% of the roughly 55,000 public companies will buy and hold bitcoin within the next few years. If so, that’d be almost 11,000 companies piling into bitcoin.