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Thread: The Stock/Investment Thread

  1. #451
    Has anyone tried out cryptocurrency investments?

    Bitcoin just hit an all time high and is getting quite close to $6k. Many are projecting well over $10k next year.

  2. #452
    The risks are extremely high (legal, technical, political). The potential benefits aren't nearly high enough to offset those risks.
    Hope is the denial of reality

  3. #453
    I made a very large chunk of money off them, still holding a good bit of it because I expect it to keep going up, though I think the time window for crazy gains has already passed. Don't buy into it right now though; it just shot up recently, and there's always a round of profit taking right after big gains, which causes a dip in prices. Also, be very careful about what exchange you use if you do decide to get into cryptocurrencies - I'd recommend Coinbase, as they're painfully above board.

    I'm liking the potential for Ethereum a bit more than Bitcoin right now, but Ethereum's coming switch to a proof-of-stake system adds a fair amount of uncertainty.

    There are some cryptocurrency mutual funds around too if you're not sure about bitcoin specifically, but I've never looked into them much.

  4. #454
    I invested quite a bit into Antshares in June (now rebranded to NEO). I made a good amount from Waltonchain as well.

    Wondering now how far BTC will go on this run and when the altcoins will make a comeback.

  5. #455
    Crypto has done pretty good for me this year. It's still well behind my stock investments in total earnings, but still worth having gone into it.

  6. #456
    I guess I view cryptocurrencies as akin to forex trading, but even riskier - given very public problems with e.g. ethereum (forking etc.), long term convertibility, exchange collapses, etc. Obviously not all cryptocurrencies are equal, and the best ones might become on par with forex trading in terms of risk, but that's still very risky, especially when there's no underlying economic principles on which to base one's trading (as there is, at least theoretically, with forex). It's essentially naked gambling; at least when I buy stocks or bonds there's an underlying asset to work with.

    I have no doubt that in some circumstances the return on cryptocurrencies has been outlandishly large, but there are no free lunches.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  7. #457
    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.
    Last edited by Wraith; 10-16-2017 at 04:10 PM.

  8. #458
    Quote Originally Posted by Tylor View Post
    I invested quite a bit into Antshares in June (now rebranded to NEO). I made a good amount from Waltonchain as well.

    Wondering now how far BTC will go on this run and when the altcoins will make a comeback.
    Not familiar with Waltonchain, could you explain it?

  9. #459
    Quote Originally Posted by Wraith View Post
    Not familiar with Waltonchain, could you explain it?
    Reddit would explain it better than I could: https://www.reddit.com/r/waltonchain...this_for_more/

    I'm not convinced of its longevity yet, but it has had a great pump up(after receiving some government funding) since I first bought it and truthfully that is what I care about most .

    BTC has been jumping upwards to $6k because of the upcoming fork on November 17th: https://coinsalad.com/2x/countdown

    The last fork granted BTC holders an equal amount of BCH and bitcoin cash(BCH), essentially "free money". Last fork, BTC crashed just before due to uncertainty iirc. Then BCH pumped afterwards giving huge gains to BCH holders. It seems like traders are hoping for a similar outcome with this next fork...but who knows what will happen. The current thought is that altcoins will come back from the current dip as capital stops moving into BTC for the upcoming fork after November 17th and moves from BTC/new BTC fork back to alts.

  10. #460
    Quote Originally Posted by Wraith View Post
    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?
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  11. #461
    Quote Originally Posted by Aimless View Post
    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.
    Last edited by Wraith; 10-16-2017 at 09:52 PM.

  12. #462
    Quote Originally Posted by Tylor View Post
    The last fork granted BTC holders an equal amount of BCH and bitcoin cash(BCH), essentially "free money". Last fork, BTC crashed just before due to uncertainty iirc. Then BCH pumped afterwards giving huge gains to BCH holders. It seems like traders are hoping for a similar outcome with this next fork...but who knows what will happen. The current thought is that altcoins will come back from the current dip as capital stops moving into BTC for the upcoming fork after November 17th and moves from BTC/new BTC fork back to alts.
    I think I lost track of SegWit2X. It looks like support for it has fallen off a lot since last I'd heard. I wonder how many miners dropping their support for it are cynically doing it just to make money off the altcoin generated.

    There's also the Bitcoin Gold split coming on Oct 25, but I'm not optimistic about that one generating much of value.

  13. #463
    Quote Originally Posted by Wraith View Post
    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.

  14. #464
    Hindsight is 20:20. Has the value of bitcoin increased because of any objective reason such as greater adoption, widespread usage, etc?

    It seems like something akin to gold; people buy it for psychological reasons more than anything else. People may be making a ton of money in bitcoin, but I can safely sleep at night because it's never made enough sense as an actual store of value. The price increase feels arbitrary. But I acknowledge I may be missing something.

  15. #465
    Quote Originally Posted by Wraith View Post
    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.
    Last edited by wiggin; 10-29-2017 at 02:53 PM.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  16. #466
    Correction wiggin, it's ALL speculation. While I applaud your efforts to get "moderately wealthy" thru hard work, frugal living, and prudent investing......you've also said you want to have 5 million in income-producing assets before you retire. There's some missing pieces there, especially the "insulating" part. Before the Great Recession and the Financial Meltdown, plenty of folks had that mind-set, too. Oops?

  17. #467
    Right GGT, speculation that averages 8% growth over the span of a century.
    Hope is the denial of reality

  18. #468
    Quote Originally Posted by GGT View Post
    Correction wiggin, it's ALL speculation. While I applaud your efforts to get "moderately wealthy" thru hard work, frugal living, and prudent investing......you've also said you want to have 5 million in income-producing assets before you retire. There's some missing pieces there, especially the "insulating" part. Before the Great Recession and the Financial Meltdown, plenty of folks had that mind-set, too. Oops?
    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.
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  19. #469
    Btw GGT I believe you might enjoy reading both Fooled by Randomness and Antifragile. The latter is much more obnoxious but his treatment of the subject is interesting and will, I think, resonate with you. The former is a better read but less rigorous and substantial. peace
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  20. #470
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    Quote Originally Posted by Dreadnaught View Post
    Actually, pardon the double post, but my own dilemma-

    Due to an unfortunate death in the family, I was left a bit of money a few years ago. This money is currently invested in the stock market, so basically I got possession of a few mutual funds. If I sell all of this, I could pay-down 80% of my mortgage. Obviously, I would still have some other cash and investments but substantially less than right now.

    I'm tempted to pay-off as much of the mortgage as I can, then skim the budget a bit over the next few years to pay the whole thing down. My hangup is that it would take me a few decades to make-up this money, and I wonder if it's best kept invested with a long-term horizon in diverse assets. That said, with the status quo I am basically betting on a long-term stock market return in excess of 4% while still paying interest on a mortgage. On the flip side, selling the assets and paying-down the mortgage is doubling-down on the real estate market.

    My gut tells me to not pay-off the mortgage, but I just hate hate hate debt.
    Well, the fun thing about an early paid off mortgage is that it gives you a lot of freedom. The money you need to get coming in to keep you going is an amount significantly lower. We decided to pay off our first mortgage and we did so in 15 years, when we moved we decided to pay off again and paid down the whole thing in 8 years. The third time round we got to keep the old appartment we lived in and buy a new one with a mortgage which we think we can pay off in 4, 5 years tops. We never regretted doing things this way. Also, I am one of those people who thinks we work to live, not live to work. Hence the 20 hour a week contract and the over 100 free days a year (not counting weekends) .

    Which I get to spend in a little vacation home I also own in Istanbul, paid from money we had in a bank account between mortgages 1 and 2.

    I also hate debt. And maybe I could have had a lot more if I'd been more aggressive in my investments. But all in all I am totally happy with where my approach got me.
    Greece shows us that there is a kind of politician worse than the ones that break their election promises; the ones that keep their election promises.

  21. #471
    Quote Originally Posted by wiggin View Post
    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.

  22. #472
    Quote Originally Posted by Hazir View Post
    Well, the fun thing about an early paid off mortgage is that it gives you a lot of freedom. The money you need to get coming in to keep you going is an amount significantly lower. We decided to pay off our first mortgage and we did so in 15 years, when we moved we decided to pay off again and paid down the whole thing in 8 years. The third time round we got to keep the old appartment we lived in and buy a new one with a mortgage which we think we can pay off in 4, 5 years tops. We never regretted doing things this way. Also, I am one of those people who thinks we work to live, not live to work. Hence the 20 hour a week contract and the over 100 free days a year (not counting weekends) .

    Which I get to spend in a little vacation home I also own in Istanbul, paid from money we had in a bank account between mortgages 1 and 2.

    I also hate debt. And maybe I could have had a lot more if I'd been more aggressive in my investments. But all in all I am totally happy with where my approach got me.
    Funny that you brought that post up, it was so long ago. I ended up not paying it off, putting it into a vacation home for the family, having total life breakdown and then selling the vacation home. I now have enough cash to pay off the mortgage totally, but I've been investing it fairly conservatively and slowly and enjoying the security and dividends. The dividend rates are generally greater than the mortgage rates I'm paying on my main home.

    I've come to feel that home ownership should be kept at a very small percentage of assets; I ignored far too many of my own alarm bells and I'm very lucky I was able to get out of this vacation home quickly. Liquidity is an asset on its own. If something happens to a family member or myself, I have a cushion far deeper than most people and that gives me comfort. I also don't have the luxury of a work schedule like you

  23. #473
    Quote Originally Posted by Wraith View Post
    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.
    Hope is the denial of reality

  24. #474
    Quote Originally Posted by Loki View Post
    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



    Quote Originally Posted by Aimless View Post
    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.

  25. #475
    Quote Originally Posted by Loki View Post
    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.
    Last edited by Wraith; 10-31-2017 at 07:26 AM.

  26. #476
    Quote Originally Posted by Wraith View Post
    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.



    Quote Originally Posted by GGT View Post
    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.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  27. #477
    Quote Originally Posted by wiggin View Post

    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.

  28. #478
    The idea that hard work is generally rewarded is not necessarily inconsistent with the idea that some people have such a substantial advantage or disadvantage that hard work will make a minimal difference. Incidentally, the GOP position on social issues and now on Trump makes it all but impossible for classical liberals with high education or those who live in urban areas to support the party.
    Hope is the denial of reality

  29. #479
    Quote Originally Posted by wiggin View Post
    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

  30. #480


    Bought at 4 usd, now 170 usd. Will go to $1k by the end of the year.

    For those that say there aren't currencies that support dividend payments, that is exactly what NEO and some other currencies like VEN are. Both have different use cases, however. I don't have the same writing skills that you guys have to put together a massive wall of text and have it still be coherent, but I will say I am fully confident this kind of technology is the next step in our evolution as a species. Much like automobiles, the internet, and trains have completely changed the way we live, blockchain will as well by bringing decentralization of information and the power of a trustless network. I studied CS and software in Uni so I at least have some basis of knowledge to more quickly understand why this technology is so incredible, but I do urge you guys to look into it and follow the rabbit of hole the crypto world if you have any kind of interest. Cryptocurrencies are far more than just currencies. A great example would be storing everyone's digital identity on the blockchain. Because of it's decentralization and the way blockchain works, you will be the sole owner of you digital information. Social security, finances, medical information, your properties and assets, all tied to your digital identity and you can choose to share parts of it with whomever you want (Look up Ontology on the Neo platform). This tech is here to stay and is too powerful to ignore. The first adopters will pave way to the next frontier of technology. Smart cities, digital identities, trustless financial systems...

    It is truly fascinating and I am excited to see what is in store for us in the next couple of years.

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