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Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

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Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#151

Post by jest3r1 »

XR0CSWV3h3kZWg wrote: post #106
berberous wrote: post #26

Earlier quoted context omitted.

Here is Warren Buffet's similar argument against gold from his 2011 annual investor letter [0]. The argument also applies to Bitcoin and other assets that are driven more by speculation than productive income streams: "The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever…

Now that is well written! Current price of bitcoin is ~9.9k total supply is well over 17 million. lets call it 10k and 20 million. We're sitting at ~ 0.2 trillion. For that you could buy paypal, square, moneygram and Western Union and still have plenty left over. That's fairly surprising. Bitcoin alone is within striking distance of the market cap of visa.

I wonder if Bitcoin has more utility (potential) compared to gold though?

For example, if you purchase SaaS products with Bitcoin, you don't need to trust that the service provider or their merchant provider will handle your personally identifiable information with care (eg. billing info), because you didn't have to provide the information.

Perhaps there are other utility uses for Bitcoin that will eventually lead to demand based on something more than fear?

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#152

Post by stale2002 »

chiaro wrote: post #116
AndrewBissell wrote: post #103

Earlier quoted context omitted.

There's no point to a decentralized database like a blockchain when you run it from a handful of centralized chokepoints which are easily censored or pressured by political actors. You may as well just use a SQL database that everyone syncs up periodically. Bankcoins like Ripple are pointless. People buy treasury bills when they care more about return OF capital than return ON capital. Bitcoin and gold are also solid…

And yet, banks and financial institutions are vastly preferring blockchains that have been uniquely developed for their needs. There's very little appeal in simply accepting the transaction costs and times in bitcoin when you can spin up a version with whatever spec and interoperability you desire. If by 'return of capital' you mean a propensity for an asset to retain its value, bitcoin is utterly inappropriate. Even…

Well sure. Banks prefer blockchains because it provides the properties of a SQL database that everyone syncs up with. And this complicated, sql database by another name is vastly vastly preferable to the stuff that banks are doing now.

Yes, the fact that blockchains act as a public database is way way better than the outdated stuff that banks spend billions of dollars on. But it is still not the 'innovative' and interesting part of blockchains.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#153

Post by stale2002 »

galfarragem wrote: post #128
leereeves wrote: post #105

Earlier quoted context omitted.

> efficient and has cheap transaction costs I've heard differently. Vice: One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-mi... Average transaction fees have gone up substantially. https://bitinfocharts.com/comparison/bitcoin-transactionfees...

> Vice: One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week This and easy tax evasion (governments will hardly ever support it) are the two main factors that put me bearish on Bitcoin. Not on blockchain though.

People have been saying that governments are going to shut down bitcoin ever since it was invented. And yet here we are.

There are even conspiracy theories that the US government itself created bitcoin, for the same reason that the US navy labs invented Tor. To provide people in other countries with censorship resistent tools.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#154

Post by vzcx »

chiaro wrote: post #116
AndrewBissell wrote: post #103

Earlier quoted context omitted.

There's no point to a decentralized database like a blockchain when you run it from a handful of centralized chokepoints which are easily censored or pressured by political actors. You may as well just use a SQL database that everyone syncs up periodically. Bankcoins like Ripple are pointless. People buy treasury bills when they care more about return OF capital than return ON capital. Bitcoin and gold are also solid…

And yet, banks and financial institutions are vastly preferring blockchains that have been uniquely developed for their needs. There's very little appeal in simply accepting the transaction costs and times in bitcoin when you can spin up a version with whatever spec and interoperability you desire. If by 'return of capital' you mean a propensity for an asset to retain its value, bitcoin is utterly inappropriate. Even…

Their "preference" for "blockchain" is borne out of political necessity. I say this not to trivialize it, but to explain.

Banks are massive, massive institutions, and it is hard enough to coordinate people and resources within them, much less across them.

Back-office operations are indeed cumbersome and a major cost-center, and there is much value to be captured in simplifying all of it. If "blockchain" can serve a Schelling point to help get right people in these institutions to talk with one another so as to get on the same page, then there's a chance that some progress can be made towards solving these problems.

It's "blockchain" because "blockchain" is the new hotness, that's all. Any real world, inter-dealer distributed ledger will, in all practicality, be more like a cluster of SQL databases backing some kind of state-machine replication protocol than a cryptocurrency.

Happy BTC10k, by the way.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#155

Post by landryraccoon »

cesarb wrote: post #136
landryraccoon wrote: post #111

Earlier quoted context omitted.

People invest in USD? What does that mean? Currency speculators might arbitrage USD if they think the exchange rate is inaccurate but nobody holds USD because they think the value will go up long term. Holding fiat currency means you lose money constantly due to inflation.

Yes, people do invest in USD. I looked up a random dollar fund (BB Cambial Dólar LP Mil), and its total return over the last 5 years was 73.92%. That's AFAIK significantly more than the accumulated inflation in the same period.

> invest in USD

I think that's kind of an abuse of the term "invest". If you read their prospectus it's clear that they are looking for foreign currency arbitrage opportunities:

> The applications of the FIs must have at least 80% of their PL represented by assets directly related or synthesized via derivatives to the variation of the North American. The applications, together with those of the FIs invested in assets or of public or private issuers, other than the UF, and assets traded abroad, are limited to 50% of PL. The FIs will be able to operate in derivative markets with the sole purpose of protecting positions held in cash until the such limits, provided that they are referenced in assets and / or financial indicators aligned to your goal. The fund may invest in FIs which apply a maximum of 10% of financial assets traded abroad.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#156

Post by landryraccoon »

longerthoughts wrote: post #146
landryraccoon wrote: post #111

Earlier quoted context omitted.

People invest in USD? What does that mean? Currency speculators might arbitrage USD if they think the exchange rate is inaccurate but nobody holds USD because they think the value will go up long term. Holding fiat currency means you lose money constantly due to inflation.

Pretty sure the point was to highlight that people hold faith in the value of USD as a currency in spite of its youth, not to discuss its merits as a long-term investment. >nobody holds USD because they think the value will go up long term People can and do implicitly invest in USD. For example, I might use an FX hedge on a foreign investment to protect against foreign currency volatility in favor of exposure to USD…

> I might use an FX hedge on a foreign investment to protect against foreign currency volatility

I sort of think that's an abuse of the term "invest". Sure you're investing in some kind of instrument that is highly affected by the value of the USD, but you're not really investing in USD. You're not long USD by holding that investment. By that metric people who short Bitcoin or Bitcoin exchanges are also "investing" in bitcoin.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#157

Post by alejohausner »

alejohausner wrote: post #123
akozak wrote: post #22

Earlier quoted context omitted.

I'm no financial advisor, but I'd fire the person who recommended I buy gold as a long term investment.

Actually gold is a very good long term investment. Here are some year-end closing prices: Year gold S&P500 1972: 64 118 2015: 1060 2044 Ratio: 16.5 17.3 True, gold does not have a yield, but it has gone up a lot over the years.

It's not cherry picked, and the S&P prices have been adjusted for dividends. I'm pretty sure that if you pick two other intervals, both assets will perform equally well.

Edit: yes, there is some selection bias in my intervals:

1970s: gold beats SP500 by a mile

1980s: gold stagnates, SP500 soars

1990s: same as 80s

2000s: see 1970s

2010s: so far, SP500 is ahead.

Conclusion: you need a VERY long investment horizon to compare these two assets.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#158

Post by derenrich »

jorblumesea wrote: post #60
non_sequitur wrote: post #11

“Bitcoin has no underlying rate of return,” said Bogle, 88, who started the first index fund in 1976. “You know bonds have an interest coupon, stocks have earnings and dividends, gold has nothing. There is nothing to support bitcoin except the hope that you will sell it to someone for more than you paid for it.” Didnt quite understand this quote - is he down on gold too?

Gold has practical uses in industrial applications and electronics. It also has a floor, which is the cost to mine and ship. Gold has a minimum theoretical value although I'm unsure off the top of my head how low that might be. Bitcoin's only value is what people will pay for it and has nothing backing it up. It's not really comparable.

Gold's price floor is not the cost of production. It's more like its industrial value.

The speculative value is well out of line with its use value.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#159

Post by dsacco »

landryraccoon wrote: post #111
dsacco wrote: post #95

Earlier quoted context omitted.

> I will happily invest in Bitcoin when its history as a store of value and a medium of exchange is measured in millennia. So is USD out for you too, then? It's not even 300 years old yet. If you mean fiat currency in general, that's also out, as we haven't had that for multiple millennia yet either.

People invest in USD? What does that mean? Currency speculators might arbitrage USD if they think the exchange rate is inaccurate but nobody holds USD because they think the value will go up long term. Holding fiat currency means you lose money constantly due to inflation.

It means they prefer an investment which is relatively stable. I’m not talking about forex arb, I’m talking about investing in treasury bonds or USD ETFs.

Consider that it is very possible to invest in a financial security to reduce risk and hedge losses, not just to get a return on the capital itself. Investing encompasses a lot more than just literal value investing; this isn’t an abuse of terminology, your usage here is rather limited.

Re: Vanguard Founder Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

#160

Post by dsacco »

landryraccoon wrote: post #156
longerthoughts wrote: post #146

Earlier quoted context omitted.

Pretty sure the point was to highlight that people hold faith in the value of USD as a currency in spite of its youth, not to discuss its merits as a long-term investment. >nobody holds USD because they think the value will go up long term People can and do implicitly invest in USD. For example, I might use an FX hedge on a foreign investment to protect against foreign currency volatility in favor of exposure to USD…

> I might use an FX hedge on a foreign investment to protect against foreign currency volatility I sort of think that's an abuse of the term "invest". Sure you're investing in some kind of instrument that is highly affected by the value of the USD, but you're not really investing in USD. You're not long USD by holding that investment. By that metric people who short Bitcoin or Bitcoin exchanges are also "investing" i…

You are long USD if you believe USD will remain relatively stable while many other securities actually diminish in value for various reasons. Even if the investor is not ultimately correct, this qualifies as investing.

Investing involves risk management, not just positive returns, and hedging a long position with a position in something like USD is not comparable to shorting.

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