Hi Neil, I believe you have begun your journey down the rabbit hole. The other analogy people use is taking the red pill as opposed to the blue pill as per the matrix film (nothing political!).
As Raoul Pal says, "Ask yourself if tomorrow is going to be more digital than today? Yes. Then invest in digital technologies."
According to Saylor, Real World Assets like Coca Cola shares will be traded on a blockchain as well as the S&P.
If the 'middle men' fees are eliminated (significantly reduced) from the blockchain version, then market forces will dictate a transition away from the S&P. Plus it is open 24/7 (good and bad).
Any value in crypto is an illusion but the illusion may last quite some time. However, eventually crypto will blow up; if it gets too big before that happens it could cause real economic harm.
We could create our own currency on notebook paper and trade it between ourselves and get the price up to $10k per sheet of notebook paper. To me, that is basically the same thing. We could do something smart and limit the number of sheets of our "notebook currency" to those coming from only one particular notebook. Then we could get others involved to trade it too. They could get excited and trade it amongst themselves and get the price up to $100k per sheet. No real difference between our "notebook currency" and crypto, except crypto is on the blockchain. So we move it onto blockchain if we want and now it really looks like crypto - it actually is crypto. We'll call it sheetcoin. Tell me again, why is there value?
CFTC does classify it as a commodity. The fact that it exists in the ether is not the issue. All our financial assets now exist in the ether, as does GLD and PHYS. I agree physical gold is different. Do you hold stock certificates in the companies in your portfolio? You trade them in the ether. We tell all kinds of stories about things. Absent a story, gold loses value. Absent a legal system - which itself is a fiction, a story - we can’t enforce claims on our assets. That isn’t a given: China, Russia. I think it is equally interesting to hear arguments such as Munger’s and yours as to why BTC is NOT something of value. “It will end badly, but I don’t know when” sounds like “the market is overvalued and it can’t go on, but I don’t know when it will pop.” I’m curious
Financial assets represent REAL assets - generally these are things that produce revenues of some kind either now or are expected to do so sometime in the future. I'm not sure why the particular bookkeeping system matters as long as it functions adequately. Just because the bookkeeping system is digital makes no difference.
Real assets can have negative values: the house worth less than mortgage; horse worth less than cost of feeding. Apple, MS, Alphabet, Amazon - even J&J - all have goodwill in excess of 75% market cap.
What is goodwill?
Of course there are no assets underlying BTC - you know that. It is all about demand, scarcity, network effects and use cases.
Are these different from goodwill?
Traditional analytical frameworks need to shift to take in new facts. 60/40 worked until the central banks drove rates to zero and started QE.
Is your argument that some things have no value or negative value but people pay for them anyway and that means BTC has value? All those companies are valuable because people expect them to earn money, a lot of it, over time. And, also, you could not replace those companies and duplicate them even if you had a lot of $'s available to do so.
To close this loop, no. That is not my argument. Real assets is not the key criterion. Earning power may be, but the PE multiples in many cases tell me that earnings expectations are unrealistic. Over 50% of investors are not making anything other than a ‘number go up’ decision. They are piggybacking active investors. Allocations are made based on index ETF share. This is what happens. It is not irrational to invest on that basis. It is not ideal. I am arguing that many investment decisions today do not conform to Charlie Munger’s framework - or yours. That does not make those decisions unfounded or wrong. I am also arguing that many of those decisions - yours, Mungers - are made from within a framework that BTC claims to be outside. This is what is strange about BTC ETFs.
Munger and Buffet were massively negative on derivatives. Navigating new stuff is tricky.
We are going to have to agree to disagree on this. I'm fully with Munger on this one. I see no underlying value in BTC. I think the blockchain is a wonderful creation. BTC will go up and down with sentiment and there is no upper bound or it could go to zero. I just hope it doesn't get so big that should it collapse it causes real economic harm.
It’s a great debate. Why is there value, or why ought there to be value? Why is there value in Coca Cola? They take a bunch of ingredients and turn them into a product that isn’t very good for us and they sell it. People buy it, but they would be better off with water.
Value is a multi-faceted thing: utility, exchange value, intrinsic, extrinsic. Gold vs BTC: are they different in any of these aspects of value. I don’t have a moral position on BTC, or any asset for that matter. We humans have a seemingly ability to invent stuff and tell stories about it. Some stories we like more than others. I am warming to the crypto story.
You know why there is value in Coca Cola. That you even write something like that is a bit unsettling... Gold is quite different from BTC. You know this also.
All I see is that some smart people see something that other people are trading for large $'s and they think that they may have missed something. And because they are smart people they also tell themselves that they should be openminded. They tell themselves stories and convince themselves that certain truths are malleable to get around the clear conclusion - that there are people trading something useless at very high prices.
Yes, that can happen. It has happened before and it will happen again. This time may be the ultimate bubble. During the next economic downturn if enough holders of BTC need to sell there is no bottom here. There doesn't even need to be a reason, just enough folks that want to sell and no buyers left There is no value investor or any other mechanism to step in and stop a slide.
I find it so very interesting to watch people try to come up with explanations for why something like this is happening because they have a hard time believing it can be as ridiculous as it is. I am not swayed.
This will end badly. It could take years. But I have little doubt about the final result. That doesn't mean that riding the wave is a bad idea. It just means that one must be aware that the wave could crash at any moment.
I get it and I hate to bet against the words of Charlie Munger. One person, though, however wise, can’t be right all the time. It is interesting that, while Xi prohibits mining in China, individuals can still own crypto. And the reason he is against it at any level is because he prefers to develop a central bank digital currency. I wonder how people initially reacted to currencies - which Munger considers have benefited humanity above all else? I think, perhaps, that critique is off because crypto should not be thought of primarily as a currency, but rather as an asset classes, a commodity. I don’t own BTC - yet - but I am thinking of selling some of my gold position and buying some. Overall, I think I am not with Munger on this one. Thanks for the reply, though. And I think Sees candy is more addictive than BTC!
What kind of commodity can BTC be? It exists in the ether. Here we are again. You know that it isn't a commodity. I know that you know that it isn't a commodity.
You hear digging noises?
Hi Neil, I believe you have begun your journey down the rabbit hole. The other analogy people use is taking the red pill as opposed to the blue pill as per the matrix film (nothing political!).
As Raoul Pal says, "Ask yourself if tomorrow is going to be more digital than today? Yes. Then invest in digital technologies."
According to Saylor, Real World Assets like Coca Cola shares will be traded on a blockchain as well as the S&P.
If the 'middle men' fees are eliminated (significantly reduced) from the blockchain version, then market forces will dictate a transition away from the S&P. Plus it is open 24/7 (good and bad).
The genie is out of the bottle.
I have always been red pill. I feel the market right now is kayfabe. (I borrowed this from David Drudge).
I had to look up what kayfabe meant. Now I know, I believe that politics and institutions have always been kayfabe!
Any value in crypto is an illusion but the illusion may last quite some time. However, eventually crypto will blow up; if it gets too big before that happens it could cause real economic harm.
We could create our own currency on notebook paper and trade it between ourselves and get the price up to $10k per sheet of notebook paper. To me, that is basically the same thing. We could do something smart and limit the number of sheets of our "notebook currency" to those coming from only one particular notebook. Then we could get others involved to trade it too. They could get excited and trade it amongst themselves and get the price up to $100k per sheet. No real difference between our "notebook currency" and crypto, except crypto is on the blockchain. So we move it onto blockchain if we want and now it really looks like crypto - it actually is crypto. We'll call it sheetcoin. Tell me again, why is there value?
CFTC does classify it as a commodity. The fact that it exists in the ether is not the issue. All our financial assets now exist in the ether, as does GLD and PHYS. I agree physical gold is different. Do you hold stock certificates in the companies in your portfolio? You trade them in the ether. We tell all kinds of stories about things. Absent a story, gold loses value. Absent a legal system - which itself is a fiction, a story - we can’t enforce claims on our assets. That isn’t a given: China, Russia. I think it is equally interesting to hear arguments such as Munger’s and yours as to why BTC is NOT something of value. “It will end badly, but I don’t know when” sounds like “the market is overvalued and it can’t go on, but I don’t know when it will pop.” I’m curious
Financial assets represent REAL assets - generally these are things that produce revenues of some kind either now or are expected to do so sometime in the future. I'm not sure why the particular bookkeeping system matters as long as it functions adequately. Just because the bookkeeping system is digital makes no difference.
Tell me, what are the underlying assets for BTC?
Real assets can have negative values: the house worth less than mortgage; horse worth less than cost of feeding. Apple, MS, Alphabet, Amazon - even J&J - all have goodwill in excess of 75% market cap.
What is goodwill?
Of course there are no assets underlying BTC - you know that. It is all about demand, scarcity, network effects and use cases.
Are these different from goodwill?
Traditional analytical frameworks need to shift to take in new facts. 60/40 worked until the central banks drove rates to zero and started QE.
Is your argument that some things have no value or negative value but people pay for them anyway and that means BTC has value? All those companies are valuable because people expect them to earn money, a lot of it, over time. And, also, you could not replace those companies and duplicate them even if you had a lot of $'s available to do so.
I wasn’t restarting - just realized there was a post I hadn’t answered
To close this loop, no. That is not my argument. Real assets is not the key criterion. Earning power may be, but the PE multiples in many cases tell me that earnings expectations are unrealistic. Over 50% of investors are not making anything other than a ‘number go up’ decision. They are piggybacking active investors. Allocations are made based on index ETF share. This is what happens. It is not irrational to invest on that basis. It is not ideal. I am arguing that many investment decisions today do not conform to Charlie Munger’s framework - or yours. That does not make those decisions unfounded or wrong. I am also arguing that many of those decisions - yours, Mungers - are made from within a framework that BTC claims to be outside. This is what is strange about BTC ETFs.
Munger and Buffet were massively negative on derivatives. Navigating new stuff is tricky.
We are going to have to agree to disagree on this. I'm fully with Munger on this one. I see no underlying value in BTC. I think the blockchain is a wonderful creation. BTC will go up and down with sentiment and there is no upper bound or it could go to zero. I just hope it doesn't get so big that should it collapse it causes real economic harm.
Fair enough. I am not convinced either of us is right. I am curious though.
It’s a great debate. Why is there value, or why ought there to be value? Why is there value in Coca Cola? They take a bunch of ingredients and turn them into a product that isn’t very good for us and they sell it. People buy it, but they would be better off with water.
Value is a multi-faceted thing: utility, exchange value, intrinsic, extrinsic. Gold vs BTC: are they different in any of these aspects of value. I don’t have a moral position on BTC, or any asset for that matter. We humans have a seemingly ability to invent stuff and tell stories about it. Some stories we like more than others. I am warming to the crypto story.
You know why there is value in Coca Cola. That you even write something like that is a bit unsettling... Gold is quite different from BTC. You know this also.
All I see is that some smart people see something that other people are trading for large $'s and they think that they may have missed something. And because they are smart people they also tell themselves that they should be openminded. They tell themselves stories and convince themselves that certain truths are malleable to get around the clear conclusion - that there are people trading something useless at very high prices.
Yes, that can happen. It has happened before and it will happen again. This time may be the ultimate bubble. During the next economic downturn if enough holders of BTC need to sell there is no bottom here. There doesn't even need to be a reason, just enough folks that want to sell and no buyers left There is no value investor or any other mechanism to step in and stop a slide.
I find it so very interesting to watch people try to come up with explanations for why something like this is happening because they have a hard time believing it can be as ridiculous as it is. I am not swayed.
This will end badly. It could take years. But I have little doubt about the final result. That doesn't mean that riding the wave is a bad idea. It just means that one must be aware that the wave could crash at any moment.
https://www.youtube.com/watch?v=Uf7OZld47K4
I get it and I hate to bet against the words of Charlie Munger. One person, though, however wise, can’t be right all the time. It is interesting that, while Xi prohibits mining in China, individuals can still own crypto. And the reason he is against it at any level is because he prefers to develop a central bank digital currency. I wonder how people initially reacted to currencies - which Munger considers have benefited humanity above all else? I think, perhaps, that critique is off because crypto should not be thought of primarily as a currency, but rather as an asset classes, a commodity. I don’t own BTC - yet - but I am thinking of selling some of my gold position and buying some. Overall, I think I am not with Munger on this one. Thanks for the reply, though. And I think Sees candy is more addictive than BTC!
What kind of commodity can BTC be? It exists in the ether. Here we are again. You know that it isn't a commodity. I know that you know that it isn't a commodity.