Bitcoin is still early

[FIREshrink]

Actually no...he outperformed for 15 years in a row (the chance of doing that is about 1/2.3 Million) and then 2008 hit him hard. He has since outperformed again. Of course that is mostly due to Amazon for which he was an early investor and Bitcoin which he started buying between $200 and $300

With the exception of that one really bad year....he has done pretty ************************ well.

Still, I was surprised he hasn't diversified more at this point. But his motto has been make big bets on good companies and watch them very closely/know everything about them.

Think your math is wrong, 1/(2^15)=1/32,678

I haven't paid attention to him in years, but what I recall is that his fund outperformed for a decade plus until the 07-09 meltdown during which it "outperformed" so badly that cumulatively (life of fund) he had then underperformed TSM.

Now you're saying he's outperformed again? Sounds like he gambles big in risk on environments and then gets hammered in risk off and ends up worse off especially net of risk/volatility than boring old index investing. More like gambling than investing.

[xraygoggles]

In news that no one could have possibly predicted (/s): Moody's downgraded El Salvador sovereign debt. Lol.

Imagine how loathsome someone has to be to not only daytrade Btc on FTX app and shitpost on Twitter for brownie points, but start on the path to bankrupting their already-unstable country's finances.

Not only that, but like Saylor, this dude seems to always buy the top, then gloat about it. He's prolly down 30-40% on his purchases. Meanwhile local citizens are starving.

This dude may implode his entire country before the volcano bonds even get distributed.

[CordMcNally]

In news that no one could have possibly predicted (/s): Moody's downgraded El Salvador sovereign debt. Lol.

Imagine how loathsome someone has to be to not only daytrade Btc on FTX app and shitpost on Twitter for brownie points, but start on the path to bankrupting their already-unstable country's finances.

Not only that, but like Saylor, this dude seems to always buy the top, then gloat about it. He's prolly down 30-40% on his purchases. Meanwhile local citizens are starving.

This dude may implode his entire country before the volcano bonds even get distributed.

You could tell how things would end just by his Twitter profile picture.

[chucki]

Am I supposed to show up here and say "I told you so" when BTC goes down like you show up and post "I told you so" when BTC goes up? Not sure what the protocol is.

But seriously, here's what I really can't figure out. There are precious few ways to really value BTC. The only one I can really put any faith into is how much energy it costs to mine a Bitcoin, right? I mean, that's one way to value Gold. BTC is supposed to be "digital gold" right? If it costs $1500 an ounce to mine Gold, then when you can buy it for $1400, that's a good deal. If it's selling for $1600, well go mine some instead of buying it on the open market. Well, a BTC costs something like $10K to mine. I don't really want to go to Kazakhstan and buy a bunch of computers and pay some guys with AK-47s to stand around the building and guard those computers, so maybe I'm willing to pay $12K for a BTC or even $15K. But $40K? Or $67K? Seems like I'd be better off setting up a mining operation, no?

So BTC fanatics, why would someone be willing to pay 4+ times what it costs to go mine your own other than you think you can find someone willing to pay even more for it?

The cost to mine at scale is much cheaper than at-home mining which is most likely a break-even venture (if you have really cheap electricity and miners for wholesale prices, maybe you can outperform) vs purchasing btc on-exchange. Long term, most think mining will become less and less profitable with most players bowing out. The main benefit of home mining is to obtain non-KYC bitcoin and participating in the network for interpersonal reasons.

[NapoleanDynamite]

Am I supposed to show up here and say "I told you so" when BTC goes down like you show up and post "I told you so" when BTC goes up? Not sure what the protocol is.

But seriously, here's what I really can't figure out. There are precious few ways to really value BTC. The only one I can really put any faith into is how much energy it costs to mine a Bitcoin, right? I mean, that's one way to value Gold. BTC is supposed to be "digital gold" right? If it costs $1500 an ounce to mine Gold, then when you can buy it for $1400, that's a good deal. If it's selling for $1600, well go mine some instead of buying it on the open market. Well, a BTC costs something like $10K to mine. I don't really want to go to Kazakhstan and buy a bunch of computers and pay some guys with AK-47s to stand around the building and guard those computers, so maybe I'm willing to pay $12K for a BTC or even $15K. But $40K? Or $67K? Seems like I'd be better off setting up a mining operation, no?

So BTC fanatics, why would someone be willing to pay 4+ times what it costs to go mine your own other than you think you can find someone willing to pay even more for it?

Good question. Like Chucki says, at home mining is much less likely to yield BTC at a cost of 10-15K simply due to electricity costs. Now, if you live on a farm and happen to already have a surplus of energy from wind/solar/hydroelectric that you happened to have set up for personal use, then mining BTC is probably more profitable than simply buying it.

But one thing that Chucki didn't discuss is the volatility. In the past 12-13 years there have been many times when mining is actually not profitable. That has added to the volatility as many miners have to shut off their rigs and either sell their ASICS or just hold their rapidly aging ASICS until it becomes profitable again. The up front cost of acquiring the needed hardware makes this a difficult thing to do. This is one reason for the 4 year cyclical price that has occurred with BTC. At some point in the future, the price will become less volatile and these profitable/not profitable times will decrease and the margins on mining will decrease significantly. The main competition will be for cheap electricity. Without cheap electricity, one will not be able to compete with the larger companies and countries that will take over the mining industry. For your metaphor, it would be like me traveling out to the rockies with some dynamite and a pick axe and trying to mine for gold and compete with a company like Barrick's who does it at scale. It just doesn't make sense.

Right now, yes it would make sense to buy ASICs and start home mining. In fact many are on this craze right now. But as the margins decrease over the coming years/decades this will be done less and less frequently.

Valuing BTC is a ball of wax that is argued about at the highest levels. So that question is tough to answer. What I have said from the beginning and still say, is that BTC either has an intrinsic value of zero or it is still highly undervalued. Obviously I believe the latter to be true. Why? Well, what is the value of the entire global economy? Much higher than the 800 Billion mkt cap that BTC currently holds. It still has at least 100X upside in my opinion. Others can argue it has a value of zero. I understand the argument, but at this point I strongly disagree with it.

As for the "I told you so" comments...I like the ribbing and banter. But I will point out that over the past 24 months (when I started investing in it) my BTC has outperformed every other asset class in my portfolio. It is up almost 400%. So it's really not even close and so far has been an outstanding decision. Now, if the price drops another 75% or more and completely fails, I not only want you to show up and say "I told you so", I expect it . Gotta keep me honest and humble. Bad investment decisions have a way of humbling people. But they are also a great teacher.

[NapoleanDynamite]

Think your math is wrong, 1/(2^15)=1/32,678

I haven't paid attention to him in years, but what I recall is that his fund outperformed for a decade plus until the 07-09 meltdown during which it "outperformed" so badly that cumulatively (life of fund) he had then underperformed TSM.

Now you're saying he's outperformed again? Sounds like he gambles big in risk on environments and then gets hammered in risk off and ends up worse off especially net of risk/volatility than boring old index investing. More like gambling than investing.

Your math is sound...but your assumptions may not be. Mine probably are not sound either. Either way, we agree that beating the market 15 years in a row is exceedingly unlikely. Here is a good explanation that is not mine:

There’s a huge number of variables that go into a calculation like this….. and some of that data we simply can’t get. So in order to simplify it to a solvable problem we’re going to make some assumptions, which are completely false, but are required to make it solvable and will at least give you an approximation of the actual answer (think spherical chickens in a vacuum and what not).

The probability that one RANDOM investor will beat the stock market 10 years in a row is calculable assuming we make some assumptions:

Assumption 1: They do not pay brokerage

Assumption 2: All investors are reset at the start of each year to have the same amount of capital under management as each other.

In this case the probability is given by 0.5 to the power of 10, 0.09%, roughly 1 in 1000.
The skeptical math nerds will notice that would be the calculation if we assumed 50% of the INVESTORS made profit and 50% made losses, which is not one of our assumptions and will not be the outcome in a simulation run with our assumptions. But its simply that given generic investors and a perfectly level playing field every *individual* has a probability of 50% for beating the market in a given year, which is why this works.

In real life, the actual answer would depend an enormous amount on capital distribution. “Beating the market” is a zero-sum game. And if you backtest over the LAST ten years and select random investors, you’ll probably find that your random investor has an incredibly small chance of beating the market 10 years in a row, much less than the 1-in-1000 figure we calculated in our contrived example. And this is because in that zero-sum game, losses are usually incurred by large numbers of small retail investors, whereas the relatively small number of managed funds will have done much better over the same period. (Having said that, managed funds outperformance is rarely worth their fees, and you’re better off using an index fund). As a result of this skewed distribution where portfolio size sort of correlates to effectiveness (which is further perpetuated by the fact that ANY investor, retail or institutional, which is an effective investor will end up with a larger portfolio because it will grow), selecting a RANDOM INVESTOR will give that investor a very low chance of beating the market at all, let alone beating it 10 years in a row.

However if you select a random DOLLAR….which is a sort of meaningless concept since dollars are fungible and exchanged for shares during this process, but bear with me. If we consider a random dollar (including dollar-value portions of assets) in the asset pool of all investors, that dollars chance of beating the market or not will be exactly 50%. The benefit of this approach is that we can discard assumption 2 and just keep assumption 1. And yeah, surprise surprise, the chance of that dollar beating the market 10 years in a row is once again 0.09%, because the calculation is exactly 0.5^10 again. This is a recurring theme.

Essentially, anything can be “calculated” as long as you assume enough incorrect variables. But if you wanted to get closer and closer to the ACTUAL truth for a specific real-world investor (rather than a random one) you’d have to start plugging in things like the wealth distributions of all the worlds investors, historical success of each investor, correlating those successes with market conditions and comparing them to present market conditions…. it can become infinitely complicated if you let it. And you will never have enough data to perfectly model reality, because by the time you collect it, the thing you were trying to predict will have already happened.

[FIREshrink]

Your math is sound...but your assumptions may not be. Mine probably are not sound either. Either way, we agree that beating the market 15 years in a row is exceedingly unlikely. Here is a good explanation that is not mine:

There’s a huge number of variables that go into a calculation like this….. and some of that data we simply can’t get. So in order to simplify it to a solvable problem we’re going to make some assumptions, which are completely false, but are required to make it solvable and will at least give you an approximation of the actual answer (think spherical chickens in a vacuum and what not).

The probability that one RANDOM investor will beat the stock market 10 years in a row is calculable assuming we make some assumptions:

Assumption 1: They do not pay brokerage

Assumption 2: All investors are reset at the start of each year to have the same amount of capital under management as each other.

In this case the probability is given by 0.5 to the power of 10, 0.09%, roughly 1 in 1000.
The skeptical math nerds will notice that would be the calculation if we assumed 50% of the INVESTORS made profit and 50% made losses, which is not one of our assumptions and will not be the outcome in a simulation run with our assumptions. But its simply that given generic investors and a perfectly level playing field every *individual* has a probability of 50% for beating the market in a given year, which is why this works.

In real life, the actual answer would depend an enormous amount on capital distribution. “Beating the market” is a zero-sum game. And if you backtest over the LAST ten years and select random investors, you’ll probably find that your random investor has an incredibly small chance of beating the market 10 years in a row, much less than the 1-in-1000 figure we calculated in our contrived example. And this is because in that zero-sum game, losses are usually incurred by large numbers of small retail investors, whereas the relatively small number of managed funds will have done much better over the same period. (Having said that, managed funds outperformance is rarely worth their fees, and you’re better off using an index fund). As a result of this skewed distribution where portfolio size sort of correlates to effectiveness (which is further perpetuated by the fact that ANY investor, retail or institutional, which is an effective investor will end up with a larger portfolio because it will grow), selecting a RANDOM INVESTOR will give that investor a very low chance of beating the market at all, let alone beating it 10 years in a row.

However if you select a random DOLLAR….which is a sort of meaningless concept since dollars are fungible and exchanged for shares during this process, but bear with me. If we consider a random dollar (including dollar-value portions of assets) in the asset pool of all investors, that dollars chance of beating the market or not will be exactly 50%. The benefit of this approach is that we can discard assumption 2 and just keep assumption 1. And yeah, surprise surprise, the chance of that dollar beating the market 10 years in a row is once again 0.09%, because the calculation is exactly 0.5^10 again. This is a recurring theme.

Essentially, anything can be “calculated” as long as you assume enough incorrect variables. But if you wanted to get closer and closer to the ACTUAL truth for a specific real-world investor (rather than a random one) you’d have to start plugging in things like the wealth distributions of all the worlds investors, historical success of each investor, correlating those successes with market conditions and comparing them to present market conditions…. it can become infinitely complicated if you let it. And you will never have enough data to perfectly model reality, because by the time you collect it, the thing you were trying to predict will have already happened.

A lot turns on whether his outperformance was net of fees, etc. But my point stands, the odds are nothing like 1 in several million as you first claimed. And 1 in several ten thousand basically means take all the professional money managers in the last ten years, cherry pick the best performing 1 or 10, and attribute their outperformance to skill rather than chance. Similar to a fair coin flipping heads 10 or 15 times in a row, it's not astrology or skill - it's just randomness.

Anyway following the financial crisis he was not a net outperformer, so the entire discussion is moot. In 2015 his fund trailed 93% of peers over the trailing fifteen year period. He makes a lot when the markets are up and then loses nearly everything when the markets go down and his track record suggests he isn't adequately compensates for the risks he takes. You say he has big cojones, but I don't think his appetite for risk signals anything about whether his investment choices are any good. If I want to lose to TSM I'd rather just season my TSM with TBM.

https://www.investmentnews.com/bill-miller-back-on-top-but-questions-remain-after-financial-crisis-downturn-63706

[Rthoma23]

Anyone have any recommendations for software that helps with tax loss harvesting record keeping?

[orthodds]

Cryptos are on sale! Who’s buying?

[Doc Spouse]

Something that took me a year or two to learn and maybe could be of use to others - NFT's are handy in times like this. They tend to keep real dollar value much better than tokens/coins. When the market tanks like this, I'm usually selling NFT's and buying up tokens. When the market recovers, I then use those tokens with increased value to buy even more NFT's. If you don't have any NFT's atm, you may still be able to find good deals (especially on NFT's that are not pegged to the dollar and have limited utility), but I'd still hold off if they're new to you. Just keep this in mind the next time the market is roaring and you're looking for something that will appreciate in value (unlike stablecoins), yet still hold value during dips.

[HikingDO]

Cryptos are on sale! Who’s buying?

I saw that tulip bulbs were on sale too. I’ll pass on both.

[CordMcNally]

Something that took me a year or two to learn and maybe could be of use to others - NFT's are handy in times like this. They tend to keep real dollar value much better than tokens/coins. When the market tanks like this, I'm usually selling NFT's and buying up tokens. When the market recovers, I then use those tokens with increased value to buy even more NFT's. If you don't have any NFT's atm, you may still be able to find good deals (especially on NFT's that are not pegged to the dollar and have limited utility), but I'd still hold off if they're new to you. Just keep this in mind the next time the market is roaring and you're looking for something that will appreciate in value (unlike stablecoins), yet still hold value during dips.

Are you talking about the NFTs that people 'buy' from themselves to try to set a price floor or are you talking about different ones?

[jz-]

I'm following the boom --> bust gold rushes.
bitcoin------>etherium-------->solana----------> next?

[xraygoggles]

Something that took me a year or two to learn and maybe could be of use to others - NFT's are handy in times like this. They tend to keep real dollar value much better than tokens/coins. When the market tanks like this, I'm usually selling NFT's and buying up tokens. When the market recovers, I then use those tokens with increased value to buy even more NFT's. If you don't have any NFT's atm, you may still be able to find good deals (especially on NFT's that are not pegged to the dollar and have limited utility), but I'd still hold off if they're new to you. Just keep this in mind the next time the market is roaring and you're looking for something that will appreciate in value (unlike stablecoins), yet still hold value during dips.

I'm not sure I agree - not only because 99% of NFTs are utter crap, but also b/c they are highly illiquid, especially during a crisis. Very hard to get a bid and liquidate.

[NapoleanDynamite]

I'm not sure I agree - not only because 99% of NFTs are utter crap, but also b/c they are highly illiquid, especially during a crisis. Very hard to get a bid and liquidate.

Hopefully multimillion dollar JPEGs will go away with this bust....along with 99% of the other crap coins. Personally, I would love to see ETH go with them although this sentiment is probably not shared by most.