The Stock/Investment Thread

[Wraith]

My biggest financial regret is letting you talk me out of buying BTC when it was trading around $20. I was only going to put in 1k, but that would have been worth more than a quarter million today. My second biggest regret is letting you talk me out of buying in at $100.

It is obviously risky, but you don't make money by avoiding risk, you make money by acknowledging, understanding, and embracing it. Especially when you're young and have plenty of time to recover from mistakes, you should be chasing risk. It won't always work out, and that's fine, just plan for that - for instance, since we're talking about BTC, even though I think it's still got a ways upward to go, I've already withdrawn nearly 4x my initial investment, not counting the currency I spent on stuff I wanted. It's a mistake to strictly avoid risk, instead you should be taking many risks so that the winners can pay for the losers. I'd probably be retired by now if I hadn't taken so long to truly grok this lesson.

Further, I know I'm the last person who should call someone out for hyperbole, but you call a lot of things gambling which are far more consistent and predictable than that. Not understanding the principles involved doesn't mean there aren't any.

edit: Just so nobody misinterprets me right now, I'm not making a strong advocacy for cryptocurrency at the moment. It's seen a series of high gains this year, making right now probably the riskiest time ever to invest. Throw some change at it, sure, but I'd recommend against entering heavily at this point.

edit2: For anyone looking to buy in, the dip I predicted in my earlier post has now happened, though there might be a second dip this week, it could just as easily head back up to $6k. Make of that what you will.

[Aimless]

My biggest financial regret is letting you talk me out of buying BTC when it was trading around $20. I was only going to put in 1k, but that would have been worth more than a quarter million today. My second biggest regret is letting you talk me out of buying in at $100.

This old thread is of course interesting in light of this exchange like many of you (I suspect) I have repeatedly decided against buying bitcoin, and was tempted right up until it went into the hundreds. I kept underestimating its potential to appreciate in value. That being said, my reasons for not investing in it remained compelling to me for a very long time: I didn't understand its utility, didn't like the associated legislative risks and was very uncertain about my ability to handle the security issues (eg. not getting pwnd). It's not the first spectacular but risky investment I've missed out on in my life. As much as I regret not jumping aboard this elevator, I regret holding off for a little too long on companies like Nvidia much more.

Risky and initially poorly understood investments like bitcoin can have a legitimate place in a portfolio due to their potential for outsize yields on the rare--mostly unpredictable--occasions when they do pay off. If you do chase risk, you should obviously do so with a smallish portion of your assets, reducing the risk of going bust. KISS approach to risk-management instead of attempting sophisticated strategies unsuited to this sort of investment.

Further, I know I'm the last person who should call someone out for hyperbole, but you call a lot of things gambling which are far more consistent and predictable than that. Not understanding the principles involved doesn't mean there aren't any.

More to the point, you don't necessarily have to be able to clearly identify the winners. I'm still unsure about the companies and ETFs investing in large numbers of blockchain-based companies and cryptocurrencies but I think my next risky bet will include something like that.







On a less serious note, if you'd invested in bitcoin and retired early, what would you do with your money and your time?

[Wraith]

If you do chase risk, you should obviously do so with a smallish portion of your assets, reducing the risk of going bust.

I agree, don't put all you've got into one thing and don't risk too much all at once. You should be taking risks, but not risking so much that you'd be in trouble if it doesn't pay out. When you're young, you can often afford to lose a lot of what you have, because you have plenty of time to recover from any missteps. Just don't take a second mortgage or anything crazy like that.

On a less serious note, if you'd invested in bitcoin and retired early, what would you do with your money and your time?

Start my own software company. I've got no shortage of ideas, but I want to ensure that I can safely fail.

I have a friend who actually did exactly this. His company has was initially funded entirely by bitcoin, but has since secured a couple rounds of venture capital too. He got in a lot earlier than I did.

[GGT]

I agree, don't put all you've got into one thing and don't risk too much all at once. You should be taking risks, but not risking so much that you'd be in trouble if it doesn't pay out. When you're young, you can often afford to lose a lot of what you have, because you have plenty of time to recover from any missteps. Just don't take a second mortgage or anything crazy like that.


Start my own software company. I've got no shortage of ideas, but I want to ensure that I can safely fail.

I have a friend who actually did exactly this. His company has was initially funded entirely by bitcoin, but has since secured a couple rounds of venture capital too. He got in a lot earlier than I did.

Ah, the time factor. Talk about risk evaluations hahahahahha

One of the early interested bidders on my house is a guy that made his fortune on AOL. But now he's wanting to use those losses as gains (sound familiar?) by selling his VA property in order to buy PA property. Let's be clear about this: even though AOL eventually failed, its executives did not. They had Golden Parachutes.

[wiggin]

My biggest financial regret is letting you talk me out of buying BTC when it was trading around $20. I was only going to put in 1k, but that would have been worth more than a quarter million today. My second biggest regret is letting you talk me out of buying in at $100.

It is obviously risky, but you don't make money by avoiding risk, you make money by acknowledging, understanding, and embracing it. Especially when you're young and have plenty of time to recover from mistakes, you should be chasing risk. It won't always work out, and that's fine, just plan for that - for instance, since we're talking about BTC, even though I think it's still got a ways upward to go, I've already withdrawn nearly 4x my initial investment, not counting the currency I spent on stuff I wanted. It's a mistake to strictly avoid risk, instead you should be taking many risks so that the winners can pay for the losers. I'd probably be retired by now if I hadn't taken so long to truly grok this lesson.

Further, I know I'm the last person who should call someone out for hyperbole, but you call a lot of things gambling which are far more consistent and predictable than that. Not understanding the principles involved doesn't mean there aren't any.

edit: Just so nobody misinterprets me right now, I'm not making a strong advocacy for cryptocurrency at the moment. It's seen a series of high gains this year, making right now probably the riskiest time ever to invest. Throw some change at it, sure, but I'd recommend against entering heavily at this point.

edit2: For anyone looking to buy in, the dip I predicted in my earlier post has now happened, though there might be a second dip this week, it could just as easily head back up to $6k. Make of that what you will.

If it makes you feel any better, I have friends IRL who are upset with me that I told them not to buy gold during the financial crisis because it had no inherent value and they were essentially just making a bet on market timing. I stand by my opinion on cryptocurrencies - you may recall that I derided the idea of a currency that had built-in deflation as being fundamentally useless as a currency. I don't think I've been proven wrong - clearly bitcoin and bitcoin-like constructs are being used primarily as an investment asset, not a currency. I personally only trade in assets that have some underlying value - i.e. a promise to pay a fixed amount in the future (debt) or a ownership stake in a company with revenues etc. That doesn't mean there isn't plenty of speculation involved in these assets, but at least it isn't all speculation. Trading in things like derivatives or 'binary options' or forex (or cryptocurrencies) is fundamentally much harder to value since there's very little in the way of an underlying asset to use for determining if the security is well-valued. There's no reason that bitcoin should be worth $6 or $600,000; it's essentially arbitrary and based on popularity. If indeed it ever gained the full hallmarks of a widely traded currency - for which IMO they'd need to do a lot of changes - it might rise to the level of forex trading, which is based on at least some sort of economic fundamentals but still pretty poor risk-adjusted returns. But as it is, it's a niche asset for goldbugs who are looking for the next big thing.

I am no fun, as my posts in this thread and others can attest - mostly I don't believe in get rich quick schemes or in bandwagons. I expect to get moderately wealthy through hard work, frugal living, and prudent investing. It means my maximal upside from investing is really not that high, but it also insulates me from the inevitable popping of speculative bubbles that happen all-too-frequently.

I am sorry, though, if you took my argumentation to heart despite having different feelings about risk. I am far from infallible on this kind of thing.

[Wraith]

There's no reason that bitcoin should be worth $6 or $600,000; it's essentially arbitrary and based on popularity. If indeed it ever gained the full hallmarks of a widely traded currency - for which IMO they'd need to do a lot of changes - it might rise to the level of forex trading, which is based on at least some sort of economic fundamentals but still pretty poor risk-adjusted returns.

It's economics, so as with all economics, there is a psychological component to it, but there's more than just that behind it's value. It's actually a lot like any other currency in where it's value comes from, it's just more complicated and tangled. I realize the futility of trying to explain any complex topic in a debate, and I would doubt my ability to adequately explain it all in a clear manner even in a receptive environment, but I'll try anyways.

The first part of it's value to look at should probably the first thing that gave it value at all, which would be the decentralized & security features of the currency. Enough has been said on the topic everywhere that I won't go in depth here, but it's what got the initial investments started. These are clearly real features with real value to some people. Those initial investments are the next thing that provide the currency with value - I'm not even talking about the people who bought bitcoin directly, but rather the fact that generating bitcoin is not free. There's a real world cost to creating bitcoin, as with anything else that has value. Further, the low barrier to entry means that anybody could conceivably produce bitcoin for themselves, after a modest initial investment in the hardware capable of it. The ease of entry doesn't directly fuel it's value, but it adds safety to the direct value-providing features of the currency, helping to enhance their perceived value.

Because of the low barriers to entry, bitcoin production has behaved like a fluid market; as the price goes up, so does the investment into it. Because the barrier to entry is not zero though, this has the effect of trapping some money in crypto - it's cheaper to stay in the market once already there than it is to enter it. Psychological effects serve to amplify this a bit. Comparing to fiat money, the investment into bitcoin mining can be seen as analogous to investment in a country's raw resource extraction, and has comparable effects on the value of it in spite of no physical product being produced. Furthering this comparison, there are a number of applications and physical products built on top of bitcoin which have also had serious investment put into them, which expands the BTC/crypto economy. The allocation of real-world resources to bitcoin is one of the drivers of it's value - one of the earlier price spikes was from when major banks started first pouring money into it.

Bitcoin also has value as a currency. It actually can be traded for goods and services. In the developed world this is a bit subdued, but as a personal example, I paid for my current computer entirely with BTC. What's really been driving the value of this portion of bitcoin though is outside of the developed world - because fiat money derives a large amount of it's value from trust in the government, places where people have reason not to trust their government have more use for crypto. Although rare almost to the point of non-existence in the developed world (with some exceptions for businesses that produce products directly related to the currency), there are businesses in Africa and China that are BTC-native and largely or entirely eschew their local currencies. In fact, the relatively widespread adoption in China has fueled a lot of the growth in this area.

A lot of these things serve to make bitcoin behave similarly to it's own separate economy, such as a very small country might have. It has producers, consumers, merchants, and investors, just like any other economy has. The difference is that it's not geographically based, and it's a trustless economy. The description of it being trustless isn't completely and literally true, of course, there's still trust involved, but that's another complicated topic on it's own that I don't want to go in depth into right now. It's probably used right now more as an investment vehicle than a proper currency, but it still behaves more like a foreign currency, and that's really not a bad way of thinking about it.

On the side, one of the reasons I currently like Ethereum is that it also has compute tied to it's currency. You can always trade some Ethereum for trustworthy compute (via trustless compute), which I think gives it an advantage over bitcoin. I also like their scaling story better - I think BTC has some ceilings built in that Ethereum doesn't have.

Yes, there is an element of speculation in this, but as GGT pointed out, there's speculation in everything. You can also say with confidence that the influence of speculation on BTC prices is much higher than any other crypto, because that's the one that everyone's heard of. That doesn't mean that's all there is to it though. I'm not trying to convince you or anyone to run out and buy some crypto (there is risk), just to stop saying there is no economic basis for it. There's a lot of shit going on here, and it all shouldn't be so casually dismissed, especially when the statement contradicts itself. If there's no economic basis for something that so clearly has value ($6148/btc at the time of this writing), then that is a failure of your economics and not of the thing with value.

[Loki]

It's economics, so as with all economics, there is a psychological component to it, but there's more than just that behind it's value. It's actually a lot like any other currency in where it's value comes from, it's just more complicated and tangled. I realize the futility of trying to explain any complex topic in a debate, and I would doubt my ability to adequately explain it all in a clear manner even in a receptive environment, but I'll try anyways.

The first part of it's value to look at should probably the first thing that gave it value at all, which would be the decentralized & security features of the currency. Enough has been said on the topic everywhere that I won't go in depth here, but it's what got the initial investments started. These are clearly real features with real value to some people. Those initial investments are the next thing that provide the currency with value - I'm not even talking about the people who bought bitcoin directly, but rather the fact that generating bitcoin is not free. There's a real world cost to creating bitcoin, as with anything else that has value. Further, the low barrier to entry means that anybody could conceivably produce bitcoin for themselves, after a modest initial investment in the hardware capable of it. The ease of entry doesn't directly fuel it's value, but it adds safety to the direct value-providing features of the currency, helping to enhance their perceived value.

Because of the low barriers to entry, bitcoin production has behaved like a fluid market; as the price goes up, so does the investment into it. Because the barrier to entry is not zero though, this has the effect of trapping some money in crypto - it's cheaper to stay in the market once already there than it is to enter it. Psychological effects serve to amplify this a bit. Comparing to fiat money, the investment into bitcoin mining can be seen as analogous to investment in a country's raw resource extraction, and has comparable effects on the value of it in spite of no physical product being produced. Furthering this comparison, there are a number of applications and physical products built on top of bitcoin which have also had serious investment put into them, which expands the BTC/crypto economy. The allocation of real-world resources to bitcoin is one of the drivers of it's value - one of the earlier price spikes was from when major banks started first pouring money into it.

Bitcoin also has value as a currency. It actually can be traded for goods and services. In the developed world this is a bit subdued, but as a personal example, I paid for my current computer entirely with BTC. What's really been driving the value of this portion of bitcoin though is outside of the developed world - because fiat money derives a large amount of it's value from trust in the government, places where people have reason not to trust their government have more use for crypto. Although rare almost to the point of non-existence in the developed world (with some exceptions for businesses that produce products directly related to the currency), there are businesses in Africa and China that are BTC-native and largely or entirely eschew their local currencies. In fact, the relatively widespread adoption in China has fueled a lot of the growth in this area.

A lot of these things serve to make bitcoin behave similarly to it's own separate economy, such as a very small country might have. It has producers, consumers, merchants, and investors, just like any other economy has. The difference is that it's not geographically based, and it's a trustless economy. The description of it being trustless isn't completely and literally true, of course, there's still trust involved, but that's another complicated topic on it's own that I don't want to go in depth into right now. It's probably used right now more as an investment vehicle than a proper currency, but it still behaves more like a foreign currency, and that's really not a bad way of thinking about it.

On the side, one of the reasons I currently like Ethereum is that it also has compute tied to it's currency. You can always trade some Ethereum for trustworthy compute (via trustless compute), which I think gives it an advantage over bitcoin. I also like their scaling story better - I think BTC has some ceilings built in that Ethereum doesn't have.

Yes, there is an element of speculation in this, but as GGT pointed out, there's speculation in everything. You can also say with confidence that the influence of speculation on BTC prices is much higher than any other crypto, because that's the one that everyone's heard of. That doesn't mean that's all there is to it though. I'm not trying to convince you or anyone to run out and buy some crypto (there is risk), just to stop saying there is no economic basis for it. There's a lot of shit going on here, and it all shouldn't be so casually dismissed, especially when the statement contradicts itself. If there's no economic basis for something that so clearly has value ($6148/btc at the time of this writing), then that is a failure of your economics and not of the thing with value.

Your argument comes down to bitcoin being like a real currency because it takes work to create new bitcoin. That's like saying the dollar is a real currency because it costs money for the Treasury to print dollars. We both know that's not the case. There's no underlying economic system for bitcoin. You can't say "production of resource x has increased y%, thus bitcoin's value should rise a similar amount." This is a vehicle for speculation with a minute use that doesn't justify anywhere near bitcoin's current value. Eventually, the bubble will burst. Except unlike a real economy, there will be no bottom. There are no underlying fundamentals. There's no one to stabilize the fall.

Psychology tells you why people might irrationally cling to something. It can't be used to explain an item's long-term valuation. Your best hope is that some country or major corporation adopts one of these crypto-currencies as its own.

[GGT]

Right GGT, speculation that averages 8% growth over the span of a century.

That 8% growth only benefits those who have been investing, consistently, for over a century. Which means having parents or grandparents who had the means, and access, to the kind of financial "investments" that made that 8% an average.

There was a time when a simple *savings deposit account* had a compound interest rate in the double digits, and people could just sock money into their savings and earn a decent return. But it was also relatively expensive to have a credit card or a home mortgage. Those times favored savers, vs debtors. Those times are gone.

At some point between the Great Depression and the Great Recession, our collective attitudes about debt and borrowing have changed drastically. It's no mistake that practically everything has been "financialized" in the modern world. (If you want to buy a home -- you probably need a mortgage. If you need a mortgage -- you have to prove that you've paid credit card debt or a car loan, or some other type of debt...) Rinse, repeat

Wiggin's upcoming essay notwithstanding, I believe it's fair to say crisis taught many people some hard lessons about the magic money machine. Anyway I don't belive Wiggin's strategy is based on a magic money machine. You forget that, unlike many small investors, Wiggin has highly sought after marketable skills that actually do protect him to a great extent from utter ruin, and the same goes for his wife. Not comparable to typical American.

What I'm not 'forgetting' is that wiggin comes from an already fortunate background, just as I do. We are not the "typical" small investor. I'm also
not 'forgetting' that we're products of the US educational system, where living in certain zip codes means better educations.

[wiggin]

It's economics, so as with all economics, there is a psychological component to it, but there's more than just that behind it's value. It's actually a lot like any other currency in where it's value comes from, it's just more complicated and tangled. I realize the futility of trying to explain any complex topic in a debate, and I would doubt my ability to adequately explain it all in a clear manner even in a receptive environment, but I'll try anyways.

The first part of it's value to look at should probably the first thing that gave it value at all, which would be the decentralized & security features of the currency. Enough has been said on the topic everywhere that I won't go in depth here, but it's what got the initial investments started. These are clearly real features with real value to some people. Those initial investments are the next thing that provide the currency with value - I'm not even talking about the people who bought bitcoin directly, but rather the fact that generating bitcoin is not free. There's a real world cost to creating bitcoin, as with anything else that has value. Further, the low barrier to entry means that anybody could conceivably produce bitcoin for themselves, after a modest initial investment in the hardware capable of it. The ease of entry doesn't directly fuel it's value, but it adds safety to the direct value-providing features of the currency, helping to enhance their perceived value.

Because of the low barriers to entry, bitcoin production has behaved like a fluid market; as the price goes up, so does the investment into it. Because the barrier to entry is not zero though, this has the effect of trapping some money in crypto - it's cheaper to stay in the market once already there than it is to enter it. Psychological effects serve to amplify this a bit. Comparing to fiat money, the investment into bitcoin mining can be seen as analogous to investment in a country's raw resource extraction, and has comparable effects on the value of it in spite of no physical product being produced. Furthering this comparison, there are a number of applications and physical products built on top of bitcoin which have also had serious investment put into them, which expands the BTC/crypto economy. The allocation of real-world resources to bitcoin is one of the drivers of it's value - one of the earlier price spikes was from when major banks started first pouring money into it.

Bitcoin also has value as a currency. It actually can be traded for goods and services. In the developed world this is a bit subdued, but as a personal example, I paid for my current computer entirely with BTC. What's really been driving the value of this portion of bitcoin though is outside of the developed world - because fiat money derives a large amount of it's value from trust in the government, places where people have reason not to trust their government have more use for crypto. Although rare almost to the point of non-existence in the developed world (with some exceptions for businesses that produce products directly related to the currency), there are businesses in Africa and China that are BTC-native and largely or entirely eschew their local currencies. In fact, the relatively widespread adoption in China has fueled a lot of the growth in this area.

A lot of these things serve to make bitcoin behave similarly to it's own separate economy, such as a very small country might have. It has producers, consumers, merchants, and investors, just like any other economy has. The difference is that it's not geographically based, and it's a trustless economy. The description of it being trustless isn't completely and literally true, of course, there's still trust involved, but that's another complicated topic on it's own that I don't want to go in depth into right now. It's probably used right now more as an investment vehicle than a proper currency, but it still behaves more like a foreign currency, and that's really not a bad way of thinking about it.

On the side, one of the reasons I currently like Ethereum is that it also has compute tied to it's currency. You can always trade some Ethereum for trustworthy compute (via trustless compute), which I think gives it an advantage over bitcoin. I also like their scaling story better - I think BTC has some ceilings built in that Ethereum doesn't have.

Yes, there is an element of speculation in this, but as GGT pointed out, there's speculation in everything. You can also say with confidence that the influence of speculation on BTC prices is much higher than any other crypto, because that's the one that everyone's heard of. That doesn't mean that's all there is to it though. I'm not trying to convince you or anyone to run out and buy some crypto (there is risk), just to stop saying there is no economic basis for it. There's a lot of shit going on here, and it all shouldn't be so casually dismissed, especially when the statement contradicts itself. If there's no economic basis for something that so clearly has value ($6148/btc at the time of this writing), then that is a failure of your economics and not of the thing with value.

I have precious little free time right now, but I wanted to briefly respond because you took the time to make a thoughtful and substantive post.

I recognize many of the factors you highlight. In particular, I realize that cryptocurrencies have some utility to people because they act a little like gold and a little like cash, but without the hassle of either. What I mean by that is that they are ostensibly a hedge against inflation because of the restricted supply of the currency (like gold), and they are ostensibly anonymized (like cash). The hassle of physically storing and transporting either gold or cash is eliminated, and it can be exchanged for a sufficient variety of goods and services to be at least a moderately useful currency. I think there are still some serious security and governance issues with some (not all) of the crytocurrencies, but at least in principle I get the appeal.

What gets me a bit concerned, though, is that if they're like gold, I don't want to have anything to do with them. The only reason why gold is worth $1300 an ounce is because of a collective delusion that gold is worth something. It's true that any 'currency' is worth something because of a collective agreement to use them as a medium of exchange, but other currencies have governments backing them - essentially, the government agrees to provide goods and services in exchange for their currency, and if you trust the government, you trust the currency. These governments also control the supply of said money and how transactions are carried out, which gives them a lot of levers to smooth pricing swings etc. Gold, on the other hand, is unmoored from any anchoring pricing, so the price fluctuates wildly depending on, essentially, the moods of investors. Its supply is physically constrained, meaning that there's not much scope to smooth pricing or handle demand spikes. I am unconvinced that the pricing of gold (or cryptos) are in any way tied to their fundamental value to their owners, but rather susceptible to the whims of a flighty market.

I see real niche applications of cryptocurrencies - obviously the criminal market, but maybe there could be a space in using blockchains for trustless and cashless transaction systems that could supersede the current payments mess (though this is more an application of the technology without actually requiring the currency). But I'm not convinced that cryptocurrency 'investment' would ever be able to yield anything - there are no dividends, no interest payments, nothing except the hope that even more people will demand the (artificially limited) supply of an unregulated and unbacked store of value.

I like that you bring up the psychology of it, because I agree with you completely - this is entirely about psychology. Behavioral economics can probably put together a reasonable explanation for the seemingly irrational behavior of cryptocurrency markets based on some model of perceived value, bandwagons, FOMO, human trouble with accurate risk assessment, etc. That doesn't mean that it actually has an economic basis, though - people have bid up the prices of all sorts of assets over the centuries (e.g. tulips) and have been proved wrong, spectacularly. That doesn't mean it will happen with quite that much drama here, but in the absence of a value proposition that I understand and find compelling, I will stay away from it.

I could, of course, be entirely wrong.

That 8% growth only benefits those who have been investing, consistently, for over a century. Which means having parents or grandparents who had the means, and access, to the kind of financial "investments" that made that 8% an average.

First off, you're wrong. In a person's normal life, with no inheritance, it's entirely possible to amass a decent amount of wealth on a 8% return. And it's not exactly hard to access mutual funds or ETFs, and hasn't been for decades.

I do recognize that past trends do not equal future results, and I have been assuming that stock yields in the coming decades will be lower than trend due to a variety of headwinds - the pace of technological development, demographic challenges, etc. But that doesn't mean that a prudent person can't still take advantage of a broadly diversified portfolio to dramatically increase their savings.

There was a time when a simple *savings deposit account* had a compound interest rate in the double digits, and people could just sock money into their savings and earn a decent return. But it was also relatively expensive to have a credit card or a home mortgage. Those times favored savers, vs debtors. Those times are gone.

That was also a time with incredibly high inflation. Your real risk adjusted return was not that great.

What I'm not 'forgetting' is that wiggin comes from an already fortunate background, just as I do. We are not the "typical" small investor. I'm also
not 'forgetting' that we're products of the US educational system, where living in certain zip codes means better educations.

I don't deny that on an objective scale, I am indeed fortunate. Certainly I had the fantastic fortune to be born in the United States to reasonably well educated parents. But I think you overestimate the effect here. My parents, at their peak earning years, probably had a family income that edged up into the top quartile or quintile, though just barely. I grew up in a relatively nice upper-middle class neighborhood, though nothing particularly fancy (or a particularly good school district). My parents have nearly zero investments since my father worked for the government for most of his career (earning him an okay pension), and they never had enough money to save anything else. My grandparents were in a similar boat - there were certainly no windfall inheritance or anything.

What makes me fortunate (other than being an American citizen) was that my family was more or less functional and I got a decent (though not spectacular) primary and secondary education. This meant that I was able to attend a decent university, and by dint of being clever and working hard, I leveraged that into a great education that opened up some excellent career opportunities. Every cent I have invested has come from my earnings (or those of my wife), not some inheritance. Although my household income is certainly quite high on a percentile basis (and likely to get higher), I am in other ways indeed a typical small investor - someone primarily investing in relatively boring and safe options so that I can have a comfortable retirement. And the total worth of my investments is not currently anything dramatically impressive, either - I just expect that by dint of working hard and saving diligently, it will eventually become moderately impressive.

All it really comes down to is getting a decent education, choosing a career strategically, working hard, and delaying gratification (by e.g. investing rather than spending). I don't deny I got a big boost from having involved parents who worked hard to give us decent educations and the necessary ingredients to succeed, but this isn't exactly being born with a silver spoon. Maybe a copper spoon.

[Lewkowski]

All it really comes down to is getting a decent education, choosing a career strategically, working hard, and delaying gratification (by e.g. investing rather than spending).

This one always puzzles me, why aren't you a conservative? The entire liberal ideology is based on people being slaves to circumstance and that's why the world needs to have more equal outcomes. You clearly get that *YOUR* actions have made you successful. Your choice to delay gratification. Your choice to keep your nose clean, work hard and prosper.

[GGT]

First off, you're wrong. In a person's normal life, with no inheritance, it's entirely possible to amass a decent amount of wealth on a 8% return. And it's not exactly hard to access mutual funds or ETFs, and hasn't been for decades.

I was saying that an 8% return only applies to investments made over a long period of time. Buying low/selling high, short term vs long term capital gains taxes, and tax codes by state can change a ROI by a couple of points, and effectively turn a 5% gain into a break-even, or even a loss.

Not to mention the financial crisis and housing bubble, where millions of people saw their 401K tank and/or their house values plummet (or mortgages go underwater). You can't talk about an 8% return as if it's a given. At best it's an average, and only over a long period of time.

I do recognize that past trends do not equal future results, and I have been assuming that stock yields in the coming decades will be lower than trend due to a variety of headwinds - the pace of technological development, demographic challenges, etc. But that doesn't mean that a prudent person can't still take advantage of a broadly diversified portfolio to dramatically increase their savings.

Again, getting caught up in the semantics, but it matters: there are plenty of 'prudent' people who work hard, delay self-gratification, live within their means, don't load up on debt....and still can't afford to take advantage of a broadly diversified portfolio. They're lucky to have a savings account with more than 2K (more than the national average btw), and they can't SAVE their way to what you call a "decent amount of wealth".

I don't deny that on an objective scale, I am indeed fortunate. Certainly I had the fantastic fortune to be born in the United States to reasonably well educated parents. But I think you overestimate the effect here. My parents, at their peak earning years, probably had a family income that edged up into the top quartile or quintile, though just barely. I grew up in a relatively nice upper-middle class neighborhood, though nothing particularly fancy (or a particularly good school district). My parents have nearly zero investments since my father worked for the government for most of his career (earning him an okay pension), and they never had enough money to save anything else. My grandparents were in a similar boat - there were certainly no windfall inheritance or anything.

What makes me fortunate (other than being an American citizen) was that my family was more or less functional and I got a decent (though not spectacular) primary and secondary education. This meant that I was able to attend a decent university, and by dint of being clever and working hard, I leveraged that into a great education that opened up some excellent career opportunities. Every cent I have invested has come from my earnings (or those of my wife), not some inheritance. Although my household income is certainly quite high on a percentile basis (and likely to get higher), I am in other ways indeed a typical small investor - someone primarily investing in relatively boring and safe options so that I can have a comfortable retirement. And the total worth of my investments is not currently anything dramatically impressive, either - I just expect that by dint of working hard and saving diligently, it will eventually become moderately impressive.

All it really comes down to is getting a decent education, choosing a career strategically, working hard, and delaying gratification (by e.g. investing rather than spending). I don't deny I got a big boost from having involved parents who worked hard to give us decent educations and the necessary ingredients to succeed, but this isn't exactly being born with a silver spoon. Maybe a copper spoon.

Taking exception to what you call "delaying gratification as investing rather than spending". For millions of families that means choosing a good school district, and *spending* more on housing by paying higher rent, or getting a bigger mortgage, which leaves them living paycheck-to-paycheck, with fewer savings. Not the kind of trades in the stock market or mutual funds or ETFs we're talking about, but it's still an *investment*.

In essence, we're not really talking about any changes or evolutions within markets, or the unlimited possibilities of capitalism, but the disappearing middle class. Yes, it's a real thing (not Fake News). While I appreciate your personal anecdotes wiggin, and share your unswayed faith in traditional *investing* methods, I think we're probably, most likely, a small sub-set that has a lot of political clout (ie wealth), basing success on past economic theories. But that doesn't necessarily mean we're good at making policies for the future

[Wraith]

Your argument comes down to bitcoin being like a real currency because it takes work to create new bitcoin. That's like saying the dollar is a real currency because it costs money for the Treasury to print dollars.

That was more explanation than argument, and that's not what it comes down to at all. Ask yourself, why do you value a dollar? I was drawing as many parallels as I could think of.

We both know that's not the case. There's no underlying economic system for bitcoin. You can't say "production of resource x has increased y%, thus bitcoin's value should rise a similar amount."

You don't say that "production of resource x has increased y%, thus the dollar's value should rise a similar amount" either. The value of any currency isn't nearly that simple.

This is a vehicle for speculation with a minute use that doesn't justify anywhere near bitcoin's current value. Eventually, the bubble will burst. Except unlike a real economy, there will be no bottom. There are no underlying fundamentals.

But there are underlying fundamentals. I gave you some of them above. I really don't have a lot of energy for this, and I'd prefer not to just repeat myself. Maybe it is overvalued right now, or maybe that's just the market's expectation of future value. I think it probably is overvalued, which is why I keep saying now is not the time to enter the market, but it's not worthless either.