Bitcoin going nowhere

Stocks A to Z
#28

It lets you spot Webvan reasoning when it comes back, as it does from time to time

Webvan is a right concept, they even executed okay, just ahead of its time. Those who diss these failures have no idea about how capitalism works. All great success are build on previous failures. Those who don’t fail are those who don’t try anything. May be “sociapath” billionaires, who don’t try anything new, and don’t want young people to be creative, chart uncharted waters, discover new boundaries. For them the mid-west village is the world. LOL

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#29

I respect the opinions of “sages of this board” more than I do the drooling mobs who trade in Bitcoin.

Yeah sure, the same “drooling mob” adjective was used for Amazon, Apple’s of the world at some point. I am pretty sure you will come around and praise the value of Bitcoin and swear on its altar the moment it is owned by, sorry, legitimized by WEB and Berky.

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#30

kingran…

You just wrote “the value of Bitcoin.” What is that value please?

Then all of us who are in awe of your investment brilliance will know what to do.

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#31

You just wrote “the value of Bitcoin.” What is that value please?

Today it is $43,180.60

Your inability to accept that or why it is that I valued is entirely different. Like I said, I don’t understand the value of art, that doesn’t mean it has no value.

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#32

I think value investors need to accept that gold has value, even though it can’t be measured with intrinsic value. It’s an odd concept and I would never invest in it myself. If gold has value, why not bitcoin?

#33

I think value investors need to accept that gold has value, even though it can’t be measured with intrinsic value.
It’s an odd concept and I would never invest in it myself. If gold has value, why not bitcoin?

Things you can put your money into fall into two different categories.
Static capital assets, and investment assets.

Static capital assets like gold, bitcoin, and Beanie Babies have no income and can never support paying out a coupon.
Their market price is determined entirely by supply and demand.
It isn’t zero, and it can be a really big number, but it has nothing to do with investment value.

Purely financial investments have a true intrinsic value: the present value of all coupons that could be paid out, including any final liquidation value.
Importantly, their prices are determined by the the current consensus estimate of that number, plus or minus short term squiggles due to swings in fashionability.

So, there is no conflict if you remember to think of which category each thing is in.
Gold has substantial “static capital asset” value, but zero “purely financial investment” value.

Why is the distinction important?

Bitcoin and gold and diamonds have no intrinsic value in the investment sense, as they can never have the ability to pay a coupon.
But they do have substantial market value in the static capital asset sense.
With a smaller population of people wanting to hold it at any given price, the price will fall and stay at the new lower level.
Beanie Babies.

Investment assets with an intrinsic value aren’t like that.
With a smaller population of people wanting to hold it at any given price, the price will fall briefly and rebound (weakly) towards the consensus intrinsic value estimate.
The market price for a sack full of $1 bills will always hover around the number of bills in the sack, no matter how many or how few people are bidding on it.
Plus, of course, the natural expectation of an earning asset is that its real price will rise over time as it earns (minus coupons paid along the way) with or without rising demand.

So, to your question:
If gold has value, why not bitcoin?
Absolutely no reason. They’re in the same static capital goods category.
Neither one can ever have any intrinsic value in the investment sense, but as long as there is a marginal demand from people willing and able to pay the current price, the market price will hold up.
And, of course, the reverse.
The price can never rise due to rising intrinsic value over time as can happen with an investment asset:
price increases can come only from rising marginal demand relative to supply. More new fans.

Jim

45 Likes
#34

Static capital assets, and investment assets.

It is all same. Some people call themselves investors and tell others as “speculators” traders etc. The truth is both are putting money expecting to make more money.

What good is a factory? It is just static asset. Someone has to produce things and someone has to buy the things produced in it to make money.

Why a red colored, sugar water is of any value? Because people consume it, when they stop it, the color, name, the factories to produce it all meaningless.

People want to feel superior and more importantly look down on things they don’t understand. All these value investor, growth investor, trader, speculator, static asset, liquid asset, yada yada all are delusional.

For those claiming the sack of $1 bills value is same, just have to take one good look at what happened Russian currency. How quickly it lost value. A 16 sigma event. No way it can happen. The currency lost value. Bitcoin didn’t.

Go figure.

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#35

I’ve gotten quie enamored with the psychology and methodology of Saul’s board, particularly Saul himself, as to price/growth and/or…or maybe not “value” but profitability seems pretty much not acceptable. So it seems because the stocks in his portfolio have lately recorded significant losses that Cloudstrike’s gains during the same time aren’t much of a welcome discussion, and neither is their profitability. The reason seems to be somewhat managment’s both focus on the past and their sandbagging the future.

So it seems here we have a “value” focus that doesn’t allow financial value discussion as value is simply price and or…again or maybe not sales growth…but mostly managment forecasts of future growth. Thus the focus for this type of investing is primarily post quarter investor relations presentations and these better be euphoric or else all living hell will break loose on the Saul’s investment model.

So again, and I’m not sure this is much of a sustainable model…but of course many will argue that it is…the investment model on the Saul’s board that determines whether you should be in his stocks (those stocks that he lists repeatedly that are acceptable to promote) is 1) pulse raising forecasts and 2) price going parabolic at sometime, maybe in the past but at some point that can be accessed to post “my results back then were”…

…although the business itself has never made money and we have rising inflation that maybe makes possible, or not, profits in the far future that likely may be of less value? For me it is a reach but…

So my grasp of all this leads me to think that during periods of more demand than supply, when people can join together in ever growing groups, then prices of non earning “stuff” can go up at such a rate that complex intelligent human beings have huge social connection needs, crazy basic instincts to chase what is running, and a

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#36

I’ve gotten quie enamored with the psychology and methodology of Saul’s board, particularly Saul himself, as to price/growth and/or…or maybe not, “value” (something you are not allowed to discuss)— but profitable holdings discussions seems pretty much, actually absolutely, not acceptable. So it seems because the stocks in his portfolio have lately recorded significant losses that Cloudstrike’s gains during the same time aren’t much of a welcome discussion, and neither is profitability. The reason stated, but I’m doubtful it is genuine, seems to be somewhat managment’s focus on the past and their sandbagging the future.

So it seems here we have a buy/sell stock focus that doesn’t allow financial value discussion as methodology, that to buy/sell is simply price movement (today or in the past) and or…again or maybe not sales growth…but mostly managment forecasts of future sales (but not profits) growth. Thus the focus for this type of investing is primarily post quarter investor relations presentations — and these better be euphoric or else all living hell will break loose on the Saul’s discussions. Posters get slung off the board, and sometimes kicked off MF entirely (those likes evidently are value to MF), for discussion outside the box.

So again, and I’m not sure this is much of a sustainable model…but of course many will argue that it is…the investment model on the Saul’s board that determines whether you should be in his stocks (those stocks that he lists repeatedly that are acceptable to promote…that also change in dramatic fashion) is 1) pulse raising management forecasts; and 2) price going parabolic at sometime, maybe in the past, but at some point that can be accessed such as to post “my results back then were”…

…although the business itself has never made money and we have rising inflation that maybe makes possible, or maybe/probably not, profits in the far future that likely may be of less value? For me it is a reach but…

So my grasp of all this leads me to think that during periods of more demand than supply, when people can join together in ever growing groups, then prices of non earning “stuff” can go up at such a rate that complex intelligent human beings default to all kinds of basic instincts. We have huge social connection desires, crazy basic instincts to chase what is running, and a competitive envy that makes us post things like past resuts that have absolutely nothing to do with reality or the future.

Anyway the likes seem to be trending down. When something is valued on supply/demand? Well, I’d focus on the likes as much as euphoric management forecasts and/or parabolic (today or yesterday) stock prices.

Well, at least that’s my view.

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#37

First post accidental pre-finish delivery.

#38

If gold has value, why not bitcoin?
Absolutely no reason. …

Sign of the times:
I just got an ad for crypto-backed loan from an apparently reputable FCA-regulated UK mortgage broker.
“six, seven and eight figure finance” “wherever you are based and wherever you want to use the funds”

Jim

1 Like
#39

<<Sign of the times:
I just got an ad for crypto-backed loan from an apparently reputable FCA-regulated UK mortgage broker.
“six, seven and eight figure finance” “wherever you are based and wherever you want to use the funds”

That’s how bitcoin injects money into the economy, not much different from QE. And it’s a problem that academics and governments need to have a serious discussion: should it be allowed and what’re the consequences?

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#40

<<Sign of the times:
I just got an ad for crypto-backed loan…
…
That’s how bitcoin injects money into the economy, not much different from QE.

No doubt—though in reality, ANY loan does that.
It’s the creation of the loan that matters, not the item used as security.

Whenever world creates more “assets” against which entities will lend faster than it creates actual value from goods and services, it is likely to be stimulative.
That’s why housing bubbles are so pernicious. Banks never seem to learn that house prices can be cyclical.
They don’t see the pool of “assets” rising faster than the size of the underlying reality.

Besides, there’s a saying that every decent bubble involves someone creating a new kind of “money”.
So in that sense it’s nothing new.

I thought the best “bon mot” was from John Oliver:
Cryptocurrency: Everything you don’t understand about money, combined with everything you don’t understand about computers.

Jim

26 Likes
#41

<<No doubt—though in reality, ANY loan does that.
It’s the creation of the loan that matters, not the item used as security.>>

Yes, and now there’re extra trillions of security to make loans.

#42

If bitcoin price crash, bad loans secured by bitcoin could also cause financial crisis. There’s nothing good to the society other than those who ‘created’, that probably is the main reason Buffett and Munger are so against it.

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#43

Bitcoin passes the “duck test” for gold, it looks and feels just like gold.

Bitcoin fails the “duck test” for gold, it looks and feels nothing like gold.

FTFY

Rob

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#44

All you have to understand is, the market cap of Bitcoin is $900 B, bigger than Berkshire. So there are lot of people understand it, and we don’t.

Extending your concept, since the net worth of the real estate in US is $35 T ($35000 B), perhaps you should trade your bitcoin reserves for houses for a big boost in your investment value.

R:

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#45

I think the fundamental question is whether any entity other than the government is allowed to issue currency or pseudo-currency like bitcoin.

Sure. One example is frequent flier miles. They can be exchanged or sold on the open market. Maybe a better example is cell phone minutes which are used like currency in some developing nations because they are easier and safer to use than cash.

Of course the biggest example relevant to people on this board is shares of stock. These are issued by private companies who can also “unissue” (retire) them. Companies especially in Si Valley use shares of stock like their own private currency, paying wages and for other things companies need with them, or even better, with just the written promise of them in the future (warrants).

Pretty much there are myriads of things issued by myriads of kinds of organizations that look like private money. But not many of them are more obvious or more highly capitalized that stonk.

R:

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#46

Jim:
How much wealth will thereby have been created? None.

You can replace the word “Bitcoin” with any other static asset and get the same result: gold, Rembrandts, diamonds, Beanie Babies.

So what is the source of value creation that distinguishes it from other appreciating assets?

If I dig gold out of the ground and refine it, have I created value?

If I dig iron out of the ground and refine it, have a I created value?

If I take the iron an wrought a nice table from it have I created value?

If I take the table from where it was built to a retail store have I created value?

If I take the table from the store to where a customer wants it after buying it have I created value?

Ultimately it seems to me that appreciation of assets is virtually the only source of value creation. If I grow enough corn to feed a country I have created value, but if I then grow 3X as much corn as the world can eat I have not. If I wrought steel into a Tesla I have created more value than if I wrought it into a Trabant. If I refurbish a house and sell it for more than I bought it for I have created value.

If I buy a painting for one price and bring it to an auction where it commands a higher price I have created value.

I don’t think you can meaningfully judge some difference between an increasing demand for bitcoin vs an increasing demand for computers in their role in indicating the creation of value.

But maybe you can, I would love to learn.

R:

PS I don’t value bitcoin at all either, that’s not the point. The point is value is not some purely subjective thing that I can reject or accept as it pleases me.

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#47

Things you can put your money into fall into two different categories.
Static capital assets, and investment assets.

I don’t think it is easy, or in principle possible to distinguish these two.

If I build an empty building on some land I own, it looks like a static asset. If I rent the building out, it now seems like a dynamic asset. If I tear the building down, uh oh, a static asset again. If I grow cash crops on it, we are dynamic again.

Anything I hold as a static asset can be rented out to make it dynamic. I supply rich people with rotating original masterpieces on their walls for a monthly fee, my van gogh just became dynamic! Someone wants to start a business, I don’t have any cash but I rent him a ton of gold, my gold just became dynamic.

I own a working factory which pays me rent in perpetuity. I place it in a trust and write a trust document that states that this building and all the income it produces will be stored in a specified way and cannot be unlocked and received by anybody until this piece of paper is sold to someone on or after 2057 May 11. Is that trust document a static asset?

This may seem trivial, but honestly it is hard to escape the sense that value is independent of whether it comes from a static or a dynamic asset. That the gold mine, yielding 1 tonne of gold per year is only a valuable dynamic asset because gold is a valuable static asset. That the output of a factory may be static assets but the factor itself is a dynamic asset with investment value that derives completely from the static non-investment value of its outputs.

R:

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