Readit Newsmisnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
I’m enjoying sitting on the sidelines and watching people “invest” in a digital “currency” that you cannot spend, does not produce cash flow, and whose values are determined by other shmucks buying it from previous shmucks.
What a time to be alive. No wonder the S&P 500 CAPE ratio is beyond the 1929 high. No one has any idea of what the intrinsic value is of anything.
Investing in companies that don’t make a profit, investing in companies whose investment returns are below real inflation, investing in SPACs that don’t expose financials.
You’d literally make more money today taking your cash and starting a business than dumping it in some of these worthless pursuits.
Agree re:CAPE. Meanwhile, people are ignoring the relatively attractive valuations of small, value, plus developed and emerging ex-US markets. While retail investors pile onto overvalued US stocks, these are now slowly catching back up and starting to get ahead. Funny thing about all of this to me is that people are always fighting the last proverbial war. Ten years ago, US stocks and tech in particular were in the doghouse - no one was buying them then.
TL;DR A lot of investors buy high and sell low. We're seeing that now with crypto as well as US stocks.
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
Bitcoin is probably not the best case study for this aspect of the conversation, but I suppose you have a fair enough point. Although to be clear, I am thinking of the assets more like commodities than speculative stocks or equities. I do not mean to suggest that traditional servers are going to go away or become obsolete any time soon, but after you get past the cryptocurrency hype in the headlines there really is a huge amount of potential for the technology. This is definitely what long-term investors are considering and why this is even a topic here.
My main issue is conflating the potential for an approach to technology with something like, say, Bitcoin specifically. Yes, many blockchain applications exist, but that doesn't translate into profits from investing in cryptocurrencies.
I've always liked the saying 'sell pickaxes to the miners' - rather than investing in the virtual gold, why not sell things to those who want to go find it? The real winners will likely be the companies who facilitate things (much like active trading platforms make money while the options traders on them often lose money overall).
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
>bonds pay a risk premium - crypto, gold, etc... don't generate income, which by definition makes them speculative.
What about staking? In this case, you're providing a service to the network and being compensated for it.
I know what it means but have no idea how profitable it is or whether those profits are guaranteed or fleeting. Best I can tell it's like any service (business, not investment): depending on demand and competition, you can make money for a time, then stop at some point. So far that has never been an issue for people investing in the global stock market (i.e. the global stock market persists even as individual stocks, sectors, industries, even whole countries have crashed in the past).
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
That depends on how good you are at finding needles :)
The thing not many people seem to talk about is that the 20th century had unprecedented growth in terms of population around the world (which has slowed significantly in the last few decades, although the effects usually lag by quite a bit - when the children enter the workforce and such). We're making up for some of it with technological progress, but ultimately what impact that makes is up to everyone to think about individually (look at Japan as a potential leading indicator of what demographic change can do).
Statistically, everyone trading across all different asset classes evens out, so ... sure, if you're consistently good at finding needles, power to you. Most people aren't. Many people however think they are. I prefer not to worry about it either way.
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
> If you want to hedge against inflation, I suggest TIPS and maybe a bit of gold.
I need to read up on TIPS, haven't heard about that before. Yes, gold is a decent option as well. However I view Bitcoin as digital gold and it has a few nice properties that gold doesn't have (of course gold has some good properties that Bitcoin doesn't have). One of the aspects of Bitcoin that I appreciate the most, is that it's very easy to carry around with me, for example when travelling on an airplane to another country. The same is not true for gold.
> I would also point out that the market expectation clearly isn't aligned with currencies being 'in trouble' - very low inflation in general right now.
Inflation is actually really high, but its mostly hidden in rising prices for stocks and real estate.
I won't get into the 'is the CPI accurate?' debate, but will just say I haven't seen a better metric. So I'll stick with: inflation is low.
As for the portability of Bitcoin ... OK, but then Bitcoin > Bitcoin ETF, if your goal is to transport and spend it outside of online brokerages.
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
Imagine a society not based on consumerism and quarterly report increases. Gasp!
Back in the day people used to get interest (covering more than inflation) from holding money in their bank accounts. What's changed?
Rates have been declining for years (decades, really), but so has inflation. The spread hasn't actually changed that much.
> Imagine a society not based on consumerism and quarterly report increases. Gasp!
I have literally no idea what that would look like or how Bitcoin would play a role. I guess hodlers who bought early would be rich and normal people poor?
misnamed commented on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 reuters.com/article/crypt... · Posted by u/awb
Generally, the only way to make outsized returns in the market is to go against market expectations, otherwise you would just make market returns.
So yes, a bet on crypto is a bet against the market consensus, sort of by definition :)
A good way to get high returns is to simply use a low-cost, tax-efficient combination of stock and bond index funds. After taxes and fees, the results compound in your favor. I have no interest in gambling on even higher returns - those are plenty for me. If you want to maximize your chances of getting rich as well as getting poor, yes, you can put it all on Bitcoin, or Tesla, or 32 at the roulette wheel, but I'm more interested in growing a nest egg than taking those risks.
There are other options, but hardware solutions are really expensive