131–140 of 201 posts
This violates two simple, and obvious, tenets of investing: 1. Don't put all your eggs in one basket. 2. If it sounds too good to be true, it probably is.
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Apart from the fact that you're comparing the obsessive focus of a business plan to that of a portfolio, you realize that Berkshire owns NetJets, Dairy Queen, Borsheim's jewelry, insurance companies, and the Burlington Northern Railroad, right? "Obsessive focus on being awesome" is not a non-diversified investing strategy.
>"Obsessive focus on being awesome" is not a non-diversified investing strategy. I disagree. I think focusing on only owning/investing in "All-Stars" is a non-diversified investing strategy. "Berkshire's CEOs come in many forms. Some have MBAs; others never finished college. Some use budgets and are by-the-book types; others operate by the seat of their pants. Our team resembles a baseball squad composed of all-stars…
Only if you want to abuse the term "diversified investment strategy" to the point where it becomes meaningless.
When we say you should have a diverse portfolio it does not mean "diversely spread between good assets and crap assets". You should only buy good assets. But you should buy multiple good assets, largely to protect yourself from the fact that what you think is a good asset may in fact be crap.
Look, I understand you're trying to be contrarian here, but "diversify your assets" isn't a point that leaves a lot of room for contrarianism.
Bitcoin has aggravated the "layman talks out his ass about economics" problem again. 1. Gold is a proof of work system just like bitcoin. When someone accepts gold as payment for some other commodity or service they are doing so under the assumption that the value will be stable because it takes at least X amount of time/labor/ingenuity/money to "create" more gold by mining it. This is what backs non-consumption comm…
I am interested in bitcoin, though, because of the obvious fact that it has something that neither gold nor dollars, euros, etc. have - it can be used anonymously over the internet. So it's possible to see it becoming popular enough to be "money", which is something important you can't say about something that is merely scarce. (I have to admit that I don't think it's likely, though, and I think investing all of your savings in it is a terrible idea.)
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The purpose of diversification is in case your insight is wrong. In case bitcoin crashes faster than he's able to pull his money out, or in case demand slackens and prevents him from pulling his money out (being able to transform money from bitcoins to dollars is necessary until all the places he would spend money accept bitcoins too), being diversified would prevent him from losing everything.
I know nothing about Bitcoin. And I agree that you probably shouldn't put all your eggs in one basket. But that doesn't mean that wide diversification is the right strategy. I think some of the greatest successes have occurred because of an obsessive focus (e.g. Apple, Pixar, 37signals, Trader Joes, Chipotle, Berkshire Hathaway, top professional athletes).
But every transaction is public. Is there anything stopping the NSA (or Amazon, or me) from subscribing and adding up his current balance? Sure, it'll be linked to his bitcoin address, not his name, but that can't be all that hard to map, can it?
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If such silly thing as gold became money and paper printed by governments became money then a tool possessing qualities that bitcoin possess is bound to become money eventually. Only two real risks. Crypto weakness or Bitcoin 2.0 Gold is intrinsically similarly useless as bitcoin. We used it as money only because it was durable and rare. We used paper as money because strong, trustworthy entity declared that its supp…
>Gold is intrinsically similarly useless as bitcoin. That is incorrect on many levels. Gold has applications in MANY things. I bet the device you used to type out that comment has a bit of gold in it. The comparison to BitCoin and paper money makes more sense, but it doesn't. This is because BitCoin has no one backing it. If the dollar drops, well the US is backing it; and they will be forced to deal with the consequ…
Yes, but that's not what makes it so valuable. This was discussed elsewhere but copper, for example, has many more industrial uses than gold but because it's not this one special metal it isn't worth as much. Essentially, there are real applications for gold but those alone do not account for its high value.
He seems very impressed with the privacy: "In fact, nobody knows that he got it except me and him", "nobody can ... look at your account balance". But every transaction is public. Is there anything stopping the NSA (or Amazon, or me) from subscribing and adding up his current balance? Sure, it'll be linked to his bitcoin address, not his name, but that can't be all that hard to map, can it?
Posting a static bitcoin address on your website and saying "send money here" is not considered best practice.
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I don't know much about economics, but... Gold isn't really a non-consumption commodity. It's used in things like jewelry and compter circuits. In other words, it doesn't just work because everybody agreed that it's a good mechanism for trade. It works because it actually has underlying value. Or, at least, I can't rule out that possibility, because it DOES have underlying value.
But it has much less underlying value than other consumption commodities. Copper is more more useful than gold, for example.
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That gold is overinflated doesn't diminish the fact that it has a utility outside of it's use as a financial instrument.
True, but if you break down the value of gold then it's maybe a dollar an ounce from practical uses and 1500 dollars an ounce from the fact that it's a seven-thouand-year-old asset bubble. Or, to put it another way, suppose tomorrow I figure out a way to replace gold with some much cheaper tin-copper alloy in all its industrial applications. That's not gonna decrease the value of gold all that much. (Note that I don'…
I'm not so sure about that. Gold is used in jewelry because (a) it looks cooler than silver/tin/copper/etc.; and (b) because it is really rare.
So I'm proposing the chain is:
Looks good & rare -> Valuable
I think if you were missing either "looks good for jewelry" OR "rare", it wouldn't be valuable and it wouldn't work as a medium of exchange.
This is a historical perspective. These days you could also use:
Used in industrial applications & rare -> Valuable
but I doubt that would drive the value of it up to where my former hypothesis does, if it's right.
It seems to me that a key move to stabilizing bitcoin would be finding a high demand product that can only be purchased with bitcoin. That along with offering retailers incentives (aside from the "no fees" aspect). A group of heavily invested bitcoin owners would be wise to organize such efforts.