Skip to main content

Sound Advice: August 11, 2021

Cryptocurrencies, Bitcoins, and the like

The most talked-about quote at the late July AICPA ENGAGE conference in Las Vegas came when keynote speaker David Kelly, Chief Global Strategist of J.P. Morgan, was asked about bitcoin.  He said he believes that bitcoin “is more of a cult than a currency.”

Kelly went on to say that real currencies are transparent and stable.  Bitcoin is neither of those.”  He also pointed out that there’s some additional risk to crypto holdings that aren’t related to the markets.  “Some 22% of the total bitcoins are out of circulation, because people either lost the passwords to their digital wallets or died and the password was lost,” he said.  This, of course, is in addition to the hacking that the crypto exchanges are constantly reporting.  Plus, there is no help desk you can call to get your money back.

The more pressing question is whether investors should invest in crypto as a diversifier, buy crypto at all or just forget about it.  Sensible investors are best advised to avoid asset classes such as these with no defined history of expected returns.  The best route to reaching their goals is to view the task as a marathon, not a sprint-like, get-rich-quick scheme.

Warren Buffett, the best-known U.S. investor, on Bitcoin: 

“Cryptocurrencies basically have no value and they don’t produce anything. They can’t reproduce, they can’t mail you a check, they can’t do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person’s got the problem.  In terms of value: zero.”

February 2020

Charlie Munger, Buffett’s partner, and also a well-known investor:

“I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of dollars to somebody who just invented a new financial product out of thin air.

I think I should say modestly that the whole damn development is disgusting and contrary to the interests of civilization.

It’s really a kind of artificial substitute for gold.  And since I never buy any gold, I never buy any bitcoin.  Bitcoin reminds me of what Oscar Wilde said about fox hunting.  He said it was the pursuit of the uneatable by the unspeakable.”

May 2021

There is, of course, another view as was obvious from Bitcoin 2021, a June gathering of more than 10,000 people in Miami to worship at the altar of cryptocurrencies.  Here’s a quote from Cameron Winklevoss, one of the social network pioneers: 

“If you own Bitcoin today, you will be a millionaire in the future. For sure. Congratulations.”

June 2021

Go figure!

N. Russell Wayne, CFP® 

Any questions?  Please contact me at nrwayne@soundasset.com.

Comments

Post a Comment

Popular posts from this blog

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme   If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead.   Our cousins in the UK would call this rubbish.   I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing.   Indeed, most of these folks are looking for double-digit gains.   Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times.   The exceptional span during that time was 1996-1999, which accounted for four of those jumps.   What followed in 2000 through 2002 was the polar opposite: 2000:      -9.1% 2001:     -11.9% ...
Post a Comment
Read more

Sound Advice: March 10, 2021

The ABCs of Stock Picking After decades of analyzing stocks (and funds) and investing for clients, I'm happy to share in plain English what's involved, what works, and what doesn't.  Keep in mind the reality that successful stock picking is an effort to maintain a good batting average. In baseball, a batting average of .300 or better is considered quite good.  With stock picking, you need to do better than .600, which means you have many more winners than losers. No one gets it right all of the time.  It's not even close.  Wall Street shops all have their recommended lists and the financial media regularly hawk 10 stocks to buy now. Following that road usually is a direct route to disaster.  Don't be tempted. Let's begin with the big picture: The stock market goes up and down over time, but the long-term trend is up.  When there's a rally under way, everyone feels like a genius.  When the market hits an air pocket, though, with few exception...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more