April 2019

Masayoshi Son SoftBank

  • SoftBank founder Masayoshi Son could have saved $130 million if he paid attention to Warren Buffett.
  • The famed tech investor lost that amount on a bitcoin bet gone wrong, according to a report from the Wall Street Journal.
  • Watch bitcoin trade live.

Be fearful when others are greedy and greedy only when others are fearful,said the legendary investor Warren Buffett in 2004. In other words, buy low and sell high — and don’t follow the herd.

If SoftBank CEO Masayoshi Son had listened to Buffett’s advice, he would have saved $130 million on a bitcoin bet gone wrong. The famous technology investor lost that money by buying bitcoin near the height of the digital currency’s mania and selling after it crashed, according to a report from the Wall Street Journal.

Son invested near the peak of bitcoin’s speculative craze, when the cryptocurrency traded as high as $20,000 a coin, according to The Journal, citing people familiar with the matter, though the exact prices that Son bought and sold at are not known. Bitcoin is now trading near $5,500.

While the bitcoin bet was a personal one for Mr. Son, the investment puts a dent in his reputation as a prophetic investor. The Japanese businessman leapt to prominence when his $20 million bet on Alibaba soared to a value of more than $100 billion. On the back of that success, Son raised $100 billion for SoftBank’s Vision Fund, to invest in technology companies. 

Even if Son missed Buffett’s general advice on investing, he could have done well to listen to Buffett’s specific warnings on crypto investing.

“Cryptocurrencies will come to bad endings,” Buffett said at Berkshire Hathaway’s annual meeting in 2018. “There’s nothing being produced in the way of value from the asset.”

He continued: “It’s something where people who are of less-than-stellar character see an opportunity to clip people who were trying to get rich because their neighbor’s getting rich buying this stuff neither one of them understands.”

Bitcoin has widely been referred to as a bubble, with some analysts speculating that prices could take decades to recover and may not ever reach previous peaks. 

Bitcoin was up 45% year to date.

BTC stock chart

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Read More SoftBank founder Masayoshi Son reportedly blew $130 million in a bitcoin bet gone wrong after failing to heed Warren Buffett’s advice

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early retirement

  • Two of the most successful wealth managers in the US say the most basic approach to retirement investing — that younger people need stocks and older people should own bonds — is wrong.
  • Jeff Erdmann of Merrill Lynch and Peter Mallouk of Creative Planning have different criticisms of the philosophy, but both say investors need a different approach.
  • Forbes has ranked Erdmann as the best wealth manager in the US for three years in a row, while Barron’s named Mallouk the no. 1 independent wealth manager four times in the last six years.
  • Visit BusinessInsider.com for more stories.

It’s one of those things everyone who has thought about retirement knows: Younger people are supposed invest in stocks, and older people should mostly own bonds.

But two of the most respected wealth managers in the country say that’s a bad approach.

The objections come from Jeff Erdmann, who has topped Forbes’ list of the best wealth managers in America for the last three years, and Peter Mallouk, who Barron’s named the no. 1 independent wealth advisor four times since 2013.

Both are very positive on stocks as long-term investments. That partially reflects their focus on wealthy families and maintaining wealth that can last for generations. But their concerns about the traditional strategy also have major implications for everyday investors and anyone with a 401(k).

The standard thinking about retirement investing is that younger people should own on high-growth assets like stocks, and as the years pass they should gradually get more conservative to get a steady stream of income and protect against big losses. The non-traditional response?

“You should throw that philosophy out the window,” Erdmann said in a phone interview with Business Insider.

Erdmann, who works in Merrill Lynch’s private banking and investment group, says that investors get such weak returns from bond, CDs and similar assets that they can’t rely on them the way they did when that conventional wisdom was established.

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For example, the yield on the 10-year Treasury note was more than 10% in 1985, but hasn’t touched 5% since early 2001. Last year markets were startled when the 10-year yield briefly “spiked” above 3%. Other conservative investments also don’t provide the kind of returns they did in decades past.

“Whether you’re 88 or 18, (with) where we are in the interest rate cycle, your asset allocation is going to not necessarily be tremendously different,” Erdmann said.

That’s been a big contributor to the 10-year bull market in stocks: More conservative options just haven’t appealed to a lot of people for many years. And it’s not clear if it will change any time soon.

While Erdmann’s objection to the traditional retirement strategy is based on the modern easy-money, low-interest-rate environment, Peter Mallouk of Kansas City-based Creative Planning says he doesn’t think the strategy has ever been a good idea.

“The way the industry selects portfolio management … doesn’t make sense,” he said. “It just never has made sense.”

Mallouk runs a $39 billion company that was named by Barron’s as the best independent wealth management firm in 2017. He told Business Insider that age is nearly irrelevant to retirement investing.

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In his view, the only thing that’s really important is the needs of the investor. A well-off young person with minimal needs can make conservative investments, and an older person who is behind on retirement saving needs to be more aggressive.

Mallouk says the traditional investing philosophy can leave retirees without enough money to meet their needs late in life. 

The two views have different implications: If you agree with Erdmann, you might conclude that investing more heavily in bonds as you age makes sense assuming yields rise substantially in the future. But if you hold with Mallouk, you would focus more on stocks even into retirement.

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