Bitcoin is still early

[CordMcNally]

I'm glad you honed in on this point that I made. I stated it for a reason.

Although I feel it is highly unlikely, it is possible that the dollar collapses in our life time. Stocks/bonds/everything would necessitate revaluation. In a situation like this, even the wealthy become poor (yes this includes you, me and everyone else who has accumulated wealth in the dollar). So I would suggest you may be incorrect stating that no one on here will be poor and that you lose nothing by "not risking anything". Just because you are currently wealthy, in one of the wealthiest countries in the world, with one of the biggest military's in the world, it does not rule out the possibility of currency collapse. It has happened many times over in the history of the world. It is likely to happen again. We just don't know when. Bitcoin is a more world wide currency and helps hedge against the American dependence on the dollar. I hope this helps explain my point (no matter how unlikely).

Also, I'm not trying to convince people one way or another. I'm only trying to provide people with realistic facts to make more educated decisions. On the topic of BTC, I think far too many people are making a lack of educated decision. They won't be when BTC hits a 1 Trillion, then 10 Trillion dollar market cap. The money will require everyone to educate themselves.

Now you’re out in left field. The American dependence on the dollar? The world depends on the dollar. There are many, many steps between a currency being the reserve currency of the world and the collapse of that currency. It’s a good thing you’re not a Bitcoin salesman.

[Dont_know_mind]

That is why I'm veering away from sector and country bets (and, tying it into this thread, I would include bitcoin as well, even though I'm not as skeptical as some) - I'm realizing there is too much idiosyncratic risk for me with trying to get that specific. Anyway, I'm glad you ended up fine despite some of those outcomes. I think it's common to make these attempts, and some end up luckier than others.

The S&P 500 stands out among your examples though. How did that end up being a "value trap"? Did you end up buying at a top and selling at a bottom? If so, I would classify that differently than a "value trap".

Oops, I appear to have deleted my original post in attempting to reply. Not sure what happened there.

Yes, I bought SP500 too early after 2000 and it was not great. That was an averaging down sin. Worse though in 2015 I actually shorted SP500 because I thought it was too overvalued.

So 2 sins I learnt from:
1. Don’t buy overvalued stuff on the way down (SP500 in 2000).
2. Don’t short anything based on perceived valuation (SP500, Bitcoin, Tesla).

There was a very good bogleheads thread on the problems of value investing based on CAPE. Basically very prone to overweighting cash, underweight equities or worse shorting equities. At least with the latter quick burn and lesson learnt. Overweight cash can take decades to come out in the wash and be the most destructive out of the 3 IMO.

It is a popular narrative to think that CAPE is showing flashing red for the last 5 years. I think this is probably wrong and statistically over fitting. Valuations matter but investing based on CAPE mean reversion is to paraphrase Charlie Munger “like being a one legged guy in an arse kicking contest”.

Great bogleheads thread on CAPE and statistical problems with it:
https://www.bogleheads.org/forum/vie...20775&start=50

[Dont_know_mind]

"will leave you poor when you had opportunity to maintain wealth"
This will not happen to any of us here- If you consistently stock away 20% in a boglehead fashion, and dont buy a tesla a year, everyone here will eventually be wealthy enough. Can you miss out on an opportunity to make millions more? Certainly, but you also lose nothing by not risking anything. This can also apply to everyone who takes an employed position vs starting their own entity/group/practice. Risk/reward etc. Taking that line of thinking to the extreme, we all missed out on opportunities to "maintain wealth" in our lives. Yet we are not poor, and I doubt anyone here will be. But as WCI said- there is no called strikes in investing. Some here will risk on BTC, others wont. I've found you cant convince either side, and there's nothing wrong with that.

You do miss out on something, namely the profit you would have gained, hence regret/FOMO.

We all would have enough to retire on if we had invested/speculated on Bitcoin in 2011 when it reached $1 (parity with the dollar) and held until today (a big if). $1000 in Bitcoin in 2011 would be worth 18M today.

My wife asked me about buying it in 2011, but I dismissed it and had no idea about how to buy it anyway. I did say the no called strikes Buffett quote when she makes a gripe at me about it now.

I guess more I could never invest in Bitcoin as it’s not consistent with my personality. There is an opportunity cost price to any choice and I don’t delude myself about that. I like to keep accurate score though and admit when I’ve been wrong.

What Bitcoin does in the future I have no idea about. My guess is it will go to zero, but then that’s probably why I didn’t buy any in 2011!

[billy]

You do miss out on something, namely the profit you would have gained, hence regret/FOMO.

We all would have enough to retire on if we had invested/speculated on Bitcoin in 2011 when it reached $1 (parity with the dollar) and held until today (a big if). $1000 in Bitcoin in 2011 would be worth 18M today.

My wife asked me about buying it in 2011, but I dismissed it and had no idea about how to buy it anyway. I did say the no called strikes Buffett quote when she makes a gripe at me about it now.

I guess more I could never invest in Bitcoin as it’s not consistent with my personality. There is an opportunity cost price to any choice and I don’t delude myself about that. I like to keep accurate score though and admit when I’ve been wrong.

What Bitcoin does in the future I have no idea about. My guess is it will go to zero, but then that’s probably why I didn’t buy any in 2011!

I also "miss out on the profits I couldve gained" by not buying powerball tickets. A $2 ticket could've made me 200 million! Just like not buying bitcoin, missing out wont make me poor. Im not against those making these speculative bets. I am against those saying I will be poor unless I make them, then bringing up doomsday like scenarios to justify why I should buy it (directed NapoleanDynamite here, or "he who should never be named again" in the past posts about gold, not directed at you).

Even during our most recent lost decade, those just investing in stock/bonds and stayed the course did just fine. https://www.portfoliovisualizer.com/...100&total3=100 You can play around to test all types of scenarios in this.

[jacoavlu]

So 2 sins I learnt from:
1. Don’t buy overvalued stuff on the way down (SP500 in 2000).
2. Don’t short anything based on perceived valuation (SP500, Bitcoin, Tesla).

or, don’t try timing the market

SP500 6% annual return since 1/2000. $10k invested then is now $33.9k

[EntrepreneurMD]

6%? My funds have done collectively over 50% this past year. Bitcoin did even better. I own a fund with 35% 5-year annualized return, and yes I've owned it for longer than that. 6% x 6% = 36%. 10K invested then is now $ 44.8K in just 5 years, and extrapolated to 10 years it's $201K = 20 fold, not 3.4.

Whenever I sell higher and buy back lower it seems to work out better than holding on, like October.

[Perry Ict]

Oops, I appear to have deleted my original post in attempting to reply. Not sure what happened there.

Yes, I bought SP500 too early after 2000 and it was not great. That was an averaging down sin. Worse though in 2015 I actually shorted SP500 because I thought it was too overvalued.

So 2 sins I learnt from:
1. Don’t buy overvalued stuff on the way down (SP500 in 2000).
2. Don’t short anything based on perceived valuation (SP500, Bitcoin, Tesla).

There was a very good bogleheads thread on the problems of value investing based on CAPE. Basically very prone to overweighting cash, underweight equities or worse shorting equities. At least with the latter quick burn and lesson learnt. Overweight cash can take decades to come out in the wash and be the most destructive out of the 3 IMO.

It is a popular narrative to think that CAPE is showing flashing red for the last 5 years. I think this is probably wrong and statistically over fitting. Valuations matter but investing based on CAPE mean reversion is to paraphrase Charlie Munger “like being a one legged guy in an arse kicking contest”.

Great bogleheads thread on CAPE and statistical problems with it:
https://www.bogleheads.org/forum/vie...20775&start=50

Thanks for the explanation. In that first example, it seems like the only real mistake was selling, no? My perception is that, unlike bitcoin or stock in any single company, the S&P 500 is unlikely to go down significantly and stay there for any extended period of time (a 50+ percent loss without recovery within 5 to 10 years, for example, seems improbable to me). Easier said than done on holding through a downturn like in 2000, though.

My impression is that CAPE is worth thinking about, but probably not enough on its own to make any big decisions. It probably does matter, eventually, in some way, but maybe not significantly enough for it to guide how a person should invest. That's what I think, anyway.

[CordMcNally]

6%? My funds have done collectively over 50% this past year. Bitcoin did even better. I own a fund with 35% 5-year annualized return, and yes I've owned it for longer than that. 6% x 6% = 36%. 10K invested then is now $ 44.8K in just 5 years, and extrapolated to 10 years it's $201K = 20 fold, not 3.4.

Whenever I sell higher and buy back lower it seems to work out better than holding on, like October.

I think you should be extrapolating your returns over 50 years.

[hightower]

Here’s why bitcoin makes no sense to me as an investment.
First, it’s not a company. It’s a currency. It’s like buying a digital dollar. I get the whole crypto tech argument so you don’t need to explain. But I think a lot of “investors” are buying it without understanding that key point
Second, it’s a currency that is 100% dependent/tied to another currency...the USD. The only reason most people even care about btc is because it’s worth X number of USD.
Third, and most importantly, it’s too volatile to ever be used as an actual currency. No retailer is going to price their goods in “bitcoins” because their value changes so much from day to day. Because of this, it will remain 100% tied to the USD which defeats its most fundamental purpose which is to be a replacement for the USD.

Think about it. You can’t buy a car with bitcoins because today your bitcoins may be worth the price of the car in USD, but tomorrow they could be worth way less or way more. How could the buyer or the seller ever agree to a fair price?? It’s impossible. So the only way a bitcoin has any value is if you cash it in for dollars...which again defeats its purpose that it was designed for in the first place!

Right??

[Nysoz]

I think you should be extrapolating your returns over 50 years.

Out of curiosity I plugged numbers into an investment calculator. EMD has at least $1M. 35% returns for 50 years is $3.3T

[CordMcNally]

Out of curiosity I plugged numbers into an investment calculator. EMD has at least $1M. 35% returns for 50 years is $3.3T

Exactly. Just as ludicrous as most of his other posts.

[EntrepreneurMD]

Part of the success that one derives from this site is hearing from others that you can't accomplish what they may be afraid to. Helps one realize how rare some skills are. Psychology is so important.

I'll enjoy my retirement account growth this year regardless of course.

Some will track a prosperous 50 years. Funds, stocks, bitcoin, a DaVinci, businesses. Some perhaps, I can't you can't. Wish you all well nonetheless.

[CordMcNally]

Part of the success that one derives from this site is hearing from others that you can't accomplish what they may be afraid to. Helps one realize how rare some skills are. Psychology is so important.

I disagree. To me, this forum is to help physicians realize that they don’t need to spend tons of money on a financial advisor just to underperform the market while still paying unnecessary fees. This forum is to help empower any high earner to take control of their finances and realize that with a simple knowledge base they can easily meet any financial and retirement goals. They don’t need complex financial products or a complicated plan to succeed.

[NapoleanDynamite]

Here’s why bitcoin makes no sense to me as an investment.
First, it’s not a company. It’s a currency. It’s like buying a digital dollar. I get the whole crypto tech argument so you don’t need to explain. But I think a lot of “investors” are buying it without understanding that key point
Second, it’s a currency that is 100% dependent/tied to another currency...the USD. The only reason most people even care about btc is because it’s worth X number of USD.
Third, and most importantly, it’s too volatile to ever be used as an actual currency. No retailer is going to price their goods in “bitcoins” because their value changes so much from day to day. Because of this, it will remain 100% tied to the USD which defeats its most fundamental purpose which is to be a replacement for the USD.

Think about it. You can’t buy a car with bitcoins because today your bitcoins may be worth the price of the car in USD, but tomorrow they could be worth way less or way more. How could the buyer or the seller ever agree to a fair price?? It’s impossible. So the only way a bitcoin has any value is if you cash it in for dollars...which again defeats its purpose that it was designed for in the first place!

Right??

Hightower,

I am not trying to be rude here, so please don't take it that way. But literally everything you have written above (in bold) is wrong. You are probably right that "most" people care about it because of it's worth in USD (although I have no data to back that up). The rest of your statements are common misconceptions and part of the problem with people's dogmatic opinions on Bitcoin. If you invest the time, you will learn just how wrong the statements above are.

Thanks!

[CordMcNally]

Hightower,

I am not trying to be rude here, so please don't take it that way. But literally everything you have written above (in bold) is wrong. You are probably right that "most" people care about it because of it's worth in USD (although I have no data to back that up). The rest of your statements are common misconceptions and part of the problem with people's dogmatic opinions on Bitcoin. If you invest the time, you will learn just how wrong the statements above are.

Thanks!

Just a quick comment but misconceptions play a huge part in the public’s perception of something and that’s something Bitcoin will have to overcome. Just like the patient that comes in for a completely unnecessary z-pack. They think you’re an idiot when you don’t give them one.