Small Cap Value Report (Fri 19 Feb 2021) - Roubini on Bitcoin, TUNE
Good morning!
It's Friday, time to ponder things.
In my view, we are now in the final, manic, euphoric phase of a bull market. It feels *exactly* like 1999 to me. That means there's lots of money to be made, on mad speculations, and it's going to end really badly. Maybe not for a while though, nobody knows. In this type of market, my thoughts on company fundamentals just become irrelevant, as the hot money chases the increasingly silly speculations. Facts & figures go out of the window, as people chase stories.
There are two key things to remember in this type of market - (1) don't believe in the speculative stories, just sell them on for a profit to the greater fool, and (2) cash out of all the speculative junk before the crash happens, then walk away & don't look back.
When things are going well, it's worth pondering, how much money do you actually need? A word of warning here. I was sitting on about £x millions in 2007. Here I am 14 years later, and I'm still not quite back to flat. Why didn't I just cash out in 2007? Greed, and hubris. Simple as that. A big run of luck & success, in a bull market, led to me risking money I needed, to make more money I didn't need. A very harsh lesson. Let's not do that again. It's so difficult, and time consuming, to rebuild from a disastrous downturn.
Bitcoin is the mania of the moment. It's an absolutely classic financial bubble, hiding in plain sight. It ticks all the boxes that previous manias over centuries have done. Here is a brilliant demolition of it by Nouriel Roubini -
.
What he says is just brilliant, and it's quite obvious to me that sooner or later, Bitcoin & all the rest of these things, are likely to collapse. The danger is what damage that inevitable collapse does to the financial system, which is likely to end up containing a lot of leverage that fed the boom.
Or does it all just end up being picked up by the taxpayer, via QE? Who knows. This could all run & run, for many years. Nobody knows, the rules have all changed.
.
Jack's section
Focusrite (LON:TUNE)
Share price: 1,065p (+8.8%)
Shares in issue: 58,661,639
Market cap: £624.7m
Are we looking at one of the highest quality companies on AIM here? Focusrite (LON:TUNE) is a global music and audio products group that develops and markets proprietary hardware and software products. It trades under six established and rapidly growing brands: Focusrite, Focusrite Pro, Martin Audio, ADAM Audio, Novation and Ampify Music.
Its products are well regarded and are used by audio professionals and amateur musicians alike to enable the high-quality production of recorded and live sound.
Focusrite and Focusrite Pro offer audio interfaces and other products for recording. ADAM Audio are ‘precision innovators’ in professional monitoring and loudspeaker technology. Martin Audio design and manufacture sound systems, while Novation and Ampify products are used in the creation of electronic music.
The stock is superficially expensive, with a forecast PE ratio of 32.6x and a forecast dividend yield of 0.48%. But you might say Focusrite always looks expensive.
We looked at both Focusrite alongside Gear4music Holdings (LON:G4M) back in May last year in this post.
While G4M has rerated very strongly, TUNE has also handily beaten the market (and it looked expensive back then, too). What’s more, I can’t see any reason why these two companies wouldn’t continue to grow at above-average rates.
The company says that revenue, profits and cash are currently ahead and it is therefore likely that current market expectations for FY21 will be exceeded.
Demand has remained strong so far this financial year and revenue for the six months to 28 February 2021 is expected to be in excess of some £90m (H1 FY20: £49.9m). Healthy cash generation also means Focusrite has cleared all bank debt.
Very positive, but there are a couple of notes of caution thrown in as well.
Alongside the strong demand for TUNE products, there are supply chain issues due to an ongoing global shortage of semi-conductors and other components. A more detailed announcement will be made in late April 2021, alongside the half-year results.
Tim Carroll, Chief Executive commented:
We are delighted that consumer demand for Focusrite and ADAM products has remained very high. This has resulted in increased demand from the distributors and dealers, which has translated into strong sales momentum producing higher revenues, profits and cash generation in the first half of the financial year.
Conclusion
This is a sparkling update and many might be wondering why they do not own this share.
Valuation is a concern. Against a market of thousands of opportunities there could well be greater upside elsewhere. TUNE is not quite QARP (quality at a reasonable price), but it is certainly quality.
FY20’s revenue was £130m, with HY20 revenue of £49.9m. We have FY21 forecast revenue of £135m and TUNE has just confirmed HY 21 revenue of £90m so it could be set to blow those forecasts out of the water.
Assuming a simple doubling of HY revenue for the full-year, that gives revenue of £180m. Running with a 10% net profit margin, that would make for net profit of £18m and earnings per share of 30.7p. Against a share price of 1,065p, that makes for a forecast PE ratio of 34.7x.
But brokers are already anticipating better margins and higher EPS than this (at 31.8p), and it appears to be those expectations TUNE is confident of beating. Applying the forecast net profit margin of 14.8% to the higher revenue figure posited above, and you would end up with forecast EPS of 45.5p per share and a forecast PE ratio of 23.4x. That would be some beat, mind. If we just add 10% to the broker EPS forecast, that would give EPS of c35p and a forecast PE ratio of 30.4x.
The above is obviously a very broad spread of earnings estimates and I’m just playing around with some numbers at this stage. And, again, there is that question: is this just a temporary lockdown boost to trading? Maybe we’re all locked down and dusting off our neglected electric guitars, but secretly just waiting until we can rush back to the pub.
Either way, Focusrite is worth a look for its quality and trading momentum. It’s not a bargain though. The market is bad at appropriately valuing true quality and long term growth, and I understand why existing holders are very happy, but still I wonder if there are better opportunities out there in terms of valuation. The really great returns happen when you combine earnings growth with multiple expansion.
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
253 comments
Hey, that's a great article and incredibly humble re: Paul's comments on his journey.
I confess to having traded one of the bitcoin miners (ARB) myself a few times, luckily modestly profitable, though I'm unlikely to repeat it, for lack of courage after this read.
Note for Paul in case he missed it regards Saga (don’t think it anything to worry about)
https://bit.ly/3ujE4TX
Phuntt,
I changed my investment outlook about 10 years ago after reading various (slightly depressing) books such as "The End of Growth: Adapting to Our New Economic Reality - Richard Heinberg", "Limits to Growth - the club of Rome", "Long emergency - James Kunsler" and so some others...
Governments and fiat currencies have bad track records if you study history.
As for gold, believe it or not I don't particularly like it. However I think I understand it. Gold is pretty much like a gun. Completely worthless for 99.9% of us, with money better placed elsewhere. Until we actually need it...
Gold is a good inflation hedge (no inflation right now however but it is probably coming). Actually to be more specific, gold is a good "real negative rate of return on US longer term treasuries".
For me gold has taken the role of the fixed income (bonds). i.e. a defence against weakness in equities. Since 2008, equities & bonds have frequently moved together rather than moving in the opposite direction. When equities are weak, gold tends to go up. Gold's main role right now. When equities are strong gold can do anything...
Gold is a good protector of long term inflation. Counter intuitively, during deflation, gold loses value less quickly than other assets. Gold doesn't like a gradual reduction in the inflation rate however.
As a result I have 30% exposure to gold / precious metals now. Most would argue that I have far too much exposure to PMs, they may be right!
Hi Alpha, I was listening to someone during the week (can’t remember which podcast) who used the analogy of a portfolio where each of the constituents was a member of a rugby team, with gold being the star back who may do nothing or win the game. I don’t know whether that makes sense during so called “normal times” (do they ever exist?) but at the minute, it’s a no brainier for me to overexpose to gold. My team certainly needs a star player...
I did well last year Highland Gold Mining (LON:HGM) and Polymetal International (LON:POLY) during the rise, swing traded Polymetal International (LON:POLY) repeatedly during Q3/Q4 of 2020 and over the last week have adding exposure to Pan African Resources (LON:PAF) and Polymetal International (LON:POLY) and plan to add several other miners during the next week. Gold has been flirting with its 1776 base so I’m going slowly at the minute (it may well break lower) but the current macro environment only has one outcome as far as I’m concerned which is a very large break higher (just not sure when it’s coming). I dismissed it earlier last year but I starting to believe that the current Bitcoin fixation is having an effect on gold pricing (it’s becoming the bolt hole for those who want inflation protection rather than the traditional gold). Still, the break will come (either because BTC fails or inflation risk or because US markets crash or anyone of a hundred other reasons) and it will be large.
Hi Phuntt,
Yes I too held some of those stocks in the past, Highland Gold was a great stock before the take over...
Identifying gold mining companies with low AISC (All in Sustaining Cost) is wise, some (Centamin) will suffer badly if gold drops far enough. BTO for example has an AISC of just over $700, Barrick is around $1000. I don't see Gold going <=$1000/oz.
The quality Royalty companies in my opinion are the safest way to gain Gold/Silver exposure (other than vaulting metal). So Franco Nevada, Wheaton, Sandstorm, EMX Royalty Corp., Royal Gold. Ditto for base metals, see Altius Minerals (Canada) for example, this is one of my favorite long term investments.
Most of the Gold/Silver ETFs are sketchy at best in my opinion except for the solid "Sprott" funds. For example, see this article pertaining to Aberdeen Standard Physical Silver Shares ETF (SIVR)
-Alphaflight
Hi Pan African Resources (LON:PAF): has turned up on one of my screens today would you mind sharing what you see as the bull points other than the current fact mining on a run due to economies opening up and possible inflation hedge.
Regards Andy
Guys, just wanted to say thank you for an awesome thread. Particularly to JohnEustace for recommending “Promises, Promises” on the BBC. Listened to it this morning and just couldn’t stop. The conclusions I disagree with (dangerous lefty thinking that the way out is debt forgiveness is appealing but ultimately contrary to human nature and such an anathema to the established order that it can’t happen without a bloody revolution).
As always, Alphaflight has the best links (I’m sure I’ve told him that before somewhere) - his article on reverting to a gold backed money supply is also appealing but ultimately dangerous right wing thinking - I can’t imagine a world where we in the west agree to again work for a living coming to pass without an equally bloody revolution.
The whole thing has left me soul searching for the entire day and a few early conclusions:
1) I don’t currently hold any Bitcoin after having recently sold. While speculating may be worthwhile in the future, there is just no way I can see Bitcoin becoming an alternative to fiat or a viable store of value. The argument below quoted by Alphaflight from Alasdair Macleod “central banks don’t hold any Bitcoin” is impossible to dismiss. Whatever the monetary system is in the future, it will be based on something that nation states control. That might be gold, it might be a new form of fiat, it may be something else entirely but it isn’t going to be something where 95% of it is owned by 2% of the population unless those nation states are the 2%.
2) Inflation is coming and it is going to be big. What remains to be seen is what governments do about it. Do they let it run for a while to reflate then step in to try and control it? If they do, will they be able to? One of the conclusions from “promises, promises” (something I had already learned but failed to appreciate) is that what we think of as money is really debt. And debt is worthless if the debtor can’t pay. And disappears if he does...
3) My central thesis for investing since the Brexit divorce happened is that the UK is a great place to invest right now. My days thinking has led me to conclude that with such macro uncertainty there are risks I hadn’t appreciated. However, I might actually invest more because I’m not sure what the alternative is for any of us.
Hee hee! Interesting Phuntt. I've been bearish since approx 2016 and cautious for a few years before that....however my bearishness from a macro (and political perspective with rising 'populism' which is a sign of system dysfunction) was also when I decided that being fully invested was the least risky strategic route.
I disagree that debt forgiveness is dangerous lefty thinking. When practiced in the millennia before modern capitalism it was not socialist utopia driven. Jubilee was a way to ensure that society functioned, didn't revolt due to unbearable 'rents' placed upon the lowly and that after a short hiatus the king/chief/etc could collect his due at a suitable rate again as everyone came up to breath. Often the wealthy classes also had debts so whilst net losers in a jubilee they could offset some loss and overall stay whole (after all they didn't need to forego tangible assets and this was a tangible asset time). (TBC I'd suggest some caution at the moment as the environment is highly speculative and investors very sure they know how to make money)
To some extent magical central bank balance sheets could be viewed as a form and tool of modern jubilee. With QE restricted to financial market operations it's been a poor proxy to jubilee...but as we move away from monetary policy dominance to fiscal dominance we move to a new flavour of QE as espoused by the MMT crowd and we will have ongoing and more significant direct monetary financing of fiscal. A conventional route to fiscal balance requires an amount of austerity that is not feasible. In the 2010s we pretended austerity was viable but post covid and all the 'mad' new policy implemented we will no longer pretend.
I propose that occasional jubilee by political fiat may be a healthy thing for a capitalist society. It means that lenders and other asset rich 'extractors of rent' from the masses must assess the economic viability and burden of their actions rather than mere credit checking (which on the whole is a trend following dangerously endogenous risk management process that rewards those that borrow more but haven't gone bust...yet).
If you are into reading more then I recommend JK Galbraith's 'Money: Whence it came, where it went' https://www.amazon.co.uk/Money...
IMO JKG is a great chronicler and the beauty of this book is that illustrates without political or economic bias just how mad money has always been...and not very reliable.
Bitcoin believers and gold bugs suffer from a delusion that their talents and worth can be safely stored in an immutable thing. I have previously labelled this as millenarian thinking. It is magical thinking based on an extrapolation of some chosen facts. But history teaches that only productivity and forward movement really counts as guarantee of value retention through making new value.
At danger of sounding contradictory I actually have a decent exposure to gold at the moment not as I'm a bug but as I view there to be big dissonance in the pricing...I've had this since approx 2015/16 and my shift to fully invested bearishness...the payout was great in summer 2020 and I reduced somewhat and then the success of other things has reduced some more...I think I'll be adding to some gold-y positions soon as I think I can see the next leg of the surprise.
Don’t get me wrong - I agree that some level of debt forgiveness is necessary. It’s clear that the levels of debt currently being taken on just don’t make any sense if we plan to have a growing economy moving forward and we need a reset with our monetary system just as happened continually through financial history. The question is how to do it in the current environment.
To some extent we have already started. Very few of the government backed loans will ever be repaid, negative interest rates if they ever come could be viewed as a form of debt forgiveness, inflation without a corresponding interest rate rise could be seen as debt forgiveness by devaluing the currency (debt) in real terms. But all of these are an attempt to prolong the current financial system by reducing or managing but not eliminating the debt. I just don’t think it will be enough to keep the train on the tracks but maybe I’m incorrect.
The UK seems to be an outlier here. Back at the beginning of this chat, I pointed out that sterling is now above $1.40. We currently aren’t devaluing as fast as the US and it’s starting to show. What I don’t know is whether this will continue. Maybe I’m just assigning too importance to what might be a temporary movement. I would point out that historically whenever there has been a global economic reset the UK has devalued less than global peers. Maybe this is a continuation of this trend. My guess is however this will be addressed before long as reflation/ inflation will be extremely hard to achieve if import prices continue to fall and our exports become ever more expensive. This March 3rd budget just keeps taking on more and more importance in my mind.
The UK has many problems and weaknesses but we seem to have two things that have tended to help us forestall the death spiral often predicted for us (which has been evident in the most fervent anti-brexiters):
1) Adaptability
2) Stability
They may seem contrary but they are perhaps an outcome from our odd political and legal structure -> 5 year dictatorship but with real constitutional checks and balances. Our 'constitution' upsets a lot of people as they see a mess that could be tidied up...but the beauty and durability is in the mess.
I forecast that the UK will do okay through the 2020s. The Tories seem to be ditching the ridiculous austerity idea along with rest of world...aside from mercantilist Europe and China who both rely on us rather gauche anglos around the world to consume their excesses whilst moralising about out profligacy ;)
As long as the UK invests in itself and doesn't go crazy relative to others on the monetary financing then overseas capital and people will flow as we are 'safe' etc.
My dream is that the govt introduces a policy whereby they will underwrite bank credit losses for specified type of lending (SME, start-ups, renewables, environmental projects, farming productivity, local power gen, etc etc). The banks have balance sheet expansion potential and the country outside of Mayfair could do with a refresh.
Hi Racer78, investing is no guarantee of riches, but if you listen to the more sensible heads here, you will make money. I've been in and out of the market for about 25 years, with a big gap in the middle. I watched the 2008 big dip from the sidelines and have really only got back into the market about 2 years ago - just in the for the latest extraordinary twist. I've decided my strategy to be more disciplined in selection and generally to hold for the medium term; to look for quality, with a bit of room for growth, but don't overpay. Pay as much attention to the balance sheet as to the P and L (and if you struggle with that, use the analysis you get on here.) Those attributes seem to be what a high stock rank share looks like and it is clear that proportionately more higher stock rank shares do better. I now look to eke out fractional outperformance of the main indices month by month, compounding year by year, with the aim of getting wealthier slowly, rather than succumbing to FOMO and chasing everything that gets talked about, in the hope of hitting a ten bagger. That is something that can be hard to resist - it is difficult to see the some of the stocks on your watch list fly while your actual portfolio remains stubbornly stuck. Even if you do well you won't win with them all, you just hope to do a bit better than average.. Good luck!
The NSA certainly had the right people in place. Perhaps Satoshi was an NSA spook team:-)
As I say maths probably allows for a reversal of the SHA 256 encryption process so quantum computers aren't even required to compromise most of our online security.
Some Blockchain related crypto coins are very interesting, for example VeChain is used by BMW , KPMG and others to track things and ensure quality control, obviating the chances of counterfeits and so on. This is actually a real world application for blockchain tech that isn't based on hot air.
The proper Private Coins (Monero and Pirate Chain) look a lot like Satoshi's original decentralized and free from government control money. Governments will presumably look to ban these (however they don't need to be traded via exchanges so pretty difficult!). I wonder how many of the Bitcoiner brigade have bothered to read the original BTC white paper...not many I imagine.
Cardano's smart contracts look better than the current market leader Etherium from a programing perspective anyway.
Nevertheless, as Alasdair Macleod says in this excellent report:
"It is difficult to justify the existence of cryptocurrencies following the demise of fiat, except, perhaps, in the form of central bank digital currencies fully exchangeable into gold coin. In monetary terms, that would be little different from converting existing fiat into gold substitutes. But distribution of money in this form becomes radically different, removing commercial banks from being intermediaries between the central bank and the public.
...Central banks do not possess bitcoin, but they do possess gold. Their last resort is to replace their fiat money not with a bitcoin standard but with their gold reserves. Only then can their governments pay their essential bills in a post-fiat world."
Source
As I say maths probably allows for a reversal of the SHA 256 encryption process so quantum computers aren't even required to compromise most of our online security.
SHA-256 is a hashing algorithm, not an encryption algorithm. If breached you could theoretically divert transactions, but it's a pretty niche attack. More likely would be finding a way to attack the cryptography that protects the Bitcoin themselves, as held in wallets. You'd probably need quantum cryptography to do that and the resources to support that are, at the moment, only in state hands.
The main thing to note is that although Bitcoin is touted as anonymous that's probably no longer true. Financial cryptanalysts have been figuring out ways to track transactions for a decade now, it's doubtful if you can successfully push major transactions around anonymously any more.
Is that important? Well, maybe, especially if authorities decide Bitcoin profits are taxable. And until governments agree to accept taxes in Bitcoin - which is to say, never - then fiat currency will be needed.
But distribution of money in this form [CDBC] becomes radically different, removing commercial banks from being intermediaries between the central bank and the public.
Clearly if Central Banks directly accepted retail deposits then whenever there was a financial crisis everyone would move their money from their own banks to the Central Bank, even if the interest rate was punative. But that's such a stupid design it's unlikely any Central Bank will implement it. More likely commercial banks will be given a privileged role in distribution and storage of CDBC while the Central Bank runs the ledger.
The really interesting question is whether CDBCs will be exchangable peer to peer - which would make them functionally equivalent to cash. That's what the Chinese have done.
Fascinating topic. Happy to watch the whole thing unfold from a distance, though.
timarr
Is that important? Well, maybe, especially if authorities decide Bitcoin profits are taxable.
Just to reply to myself here: obviously Bitcoin profits are taxable.
HMRC treats Bitcoin as a security so CGT applies when and if you cash out, including if you buy an Altcoin using Bitcoin.
timarr
Just to reply to myself here: obviously Bitcoin profits are taxable.
I'm willing to bet tons of people don't know this. I'd put more money on this than I would put into bitcoin!
In fact I'm sure there will be loads of new investors / traders that won't realise it's down to them to initiate a tax return.
How will the taxman ever know?
Just in itself that is a fascinating concept timmar and as GloucesterBob says, how will HMRC ever know?
To form a taxable record this would involve creating implicit transactions :
These transactions would never however happen, as you would actually go from A to C with passing B.
If you subsequently sell the Altcoin to raise cash then there must be a record of sorts, although it might require an unexplained wealth order to find it.
If however you can in time use the Altcoin to buy goods or services, that would likely be invisible too?
How will the taxman ever know?
Ultimately, to realise profits, you have to cash out. In the UK any transaction over £6,500 has to be queried and potentially reported, which is well below the CGT threshold.
As and when it becomes possible to use crypto to make real world purchases then the tax regime will need to change. Regulators everywhere have been wondering how to do this for years, so it'll be interesting to see how they manage it - basically if you don't need to cash out then you don't realise CGT.
Frankly, I'd buy as many Teslas as I can before they figure out how to deal with this :-)
timarr
"Frankly, I'd buy as many Teslas as I can before they figure out how to deal with this :-)"
I'm pretty sure the depreciation on the Teslas would be a bigger hit than the CGT!
These transactions would never however happen, as you would actually go from A to C with passing B.
Well, that's the question, isn't it?
In reality you can probably trade in and out of Altcoins using Bitcoin with relatively little risk of being detected. It's once you convert back into sterling then the profits become visible.
Where banks aren't able to verify the source of funds they have a statuatory duty under money laundering rules to block access to your account and report the transaction. At which point you have to reveal how you made the money to the bank and they have to report it to HMRC - and if you don't declare the profits then you can expect a metaphorical knock on the door.
The decentralised nature and anonymity of Bitcoin mean that a certain amount of transactions can probably be hidden, but large scale frauds can be tracked. However, I doubt most of the people trading Bitcoin are doing it out of a libertarian fantasy of an unregulated financial system, they're doing it because they see it as a way of making money.
The main issue with tax will be cross-border - if I can spend my Bitcoin in (say) Bermuda to buy a house how would the UK authorities ever know?
timarr
Hi timarr,
SHA 256 (the hash function or cryptographic hash function I should say) generates a hash from the input data fed into it. This hash output looks random which of course it is not.
At present, we cannot get the inverse of this SHA 256 hash function. That is to say, the hash can’t be reversed using current mathematics (no inverse solution is known).
So to find the input data based on the output hash, currently the only option would be to use some sort of laborious “brute force” approach, trying random (2^256) guesses. This would take a long time! People point out that a quantum computer could one day perhaps do this very quickly.
More importantly however, the point I was trying to make was that mathematicians have yet to produce a solid proof that the SHA 256 hash function can’t be reversed. In other words it is quite feasible that there is a mathematical solution to simply get the inverse of the hash function. If this is the case then some nefarious character could turn our digital security (SSL/SSH et al) upside down rendering it pretty much useless. To be honest, I wouldn’t be surprised if someone at bletchley park / NSA has a known solution much like the Heartbleed vulnerability in openSSH that was exploited by the NSA.
"The main thing to note is that although Bitcoin is touted as anonymous that's probably no longer true. "
It is a well know fact that Bitcoin is not anonymous. The "Private Coins", and there are only two solid ones that I am aware of (Monero and Pirate Chain) are however anonymous. Other coins masquerading as private have been shown to have security holes (e.g Dash). Pirate Chain has better security features Vs Monero however Monero has a market cap 70 times larger rather interestingly. See comparison below.
Private Coins: Monero Vs Pirate Chain
Bitcoin is useless in terms of avoiding government control whereas these Private Coins are actually potentially very dangerous as they allow people to bypass any capital controls imposed by government and move wealth undetected even avoiding exchanges for trading. Impossible to tax and impossible to track. KYC and so on are an issue of course but then these Atomic Swap Contracts may mitigate some of those issues perhaps, I haven't bothered to look into the details. I predict the true Private Coins will be shortly outlawed once the powers that be realise what they represent...
The key thing to note about CBDCs is that they will have to be backed up by something tangible in order to get people to accept them. So the digital Russian Ruble could be 85% backed by gold plus Russia has a strong military to boot and little debt, so their CBDC could be a defacto gold standard. Ditto for China, they haven't printed money in the last 2 years (unlike the rest of us) and of course they are greedily stockpiling hard commodities right now, gold being one of them...
When a country is invaded, such as the Romans in Britain, part of their method of rule was to require taxes in their preferred currency. This forces the locals to cooperate to be able to pay the taxes, and is a large factor in establishing a currency. Which is further why Bitcoin will probably be banned in a few years, competing currencies will not be welcome.
C
.
Thanks Gromley,
I am trying to keep my eyes wide open and knowing I cannot pick the top or bottom and I am happy to be early and sit on my hands but I know it does not work for everyone.
Hi Paul
Any chance that in future that you don’t mention the dreaded B word?
I just don’t think SCVR is the place for a Bitcoin discussion.
I don’t hold and never have and at the moment can’t imagine I ever will.
I no would love to have heard other people’s views on Focusrite (LON:TUNE) which I don’t hold but am thinking of re-entering.
Thanks.
Regards
Michael
Given I hold all the stocks you mentioned in an earlier post and assuming we're looking for similar stuff I'll take you on as a distraction from Bitcoins. As a side I have decided to be a long term holder and try not to trade in and out which has worked out well for me since if I'd sold in the spring I doubt I would have got back in, certainly not in enough size.
The valuation of Focusrite (LON:TUNE) has been high for a while, high enough it's been the share I've been most likely to sell on valuation, although I haven't. The update certainly gives me renewed confidence to hold.
My only real concern is that they have to spend a significant amount on R & D and this seems perpetual. It could be seen as giving them an advantage over competitors too though.
So for me they're solid hold, but I'd struggle to buy at this price. I'd probably take a small position if they dropped 10% and go for it on 20%. Really with hindsight it was an amazing opportunity to buy them for under 500p last year (I didn't).
Interestingly I've only bought them twice, in 2017. They were a small position that I've never managed to add to (always too dear) but they've grown into a medium position. Take from that what you will!
Interesting point 2 - in 2017 I was looking closely at Focusrite (LON:TUNE) and Xp Power (LON:XPP) but couldn't face the price of tune and bought XP. I eventually capitulated and paid up for tune. They've both done very well for me although XP is a bigger position because I've topped up repeatedly when they've looked cheap, Tune's never looked cheap apart from arguably early 2020. It's controversial, but averaging down has worked well for me in many shares.
Edited to add that if I was sitting on a lot of cash it wouldn't take a lot to persuade me to take a small position in Focusrite (LON:TUNE)
Some of my best returns have come from the shares I've stretched my valuations on to buy at a price I'm verging on uncomfortable with e.g. Focusrite (LON:TUNE) & Bioventix (LON:BVXP) - I'm thinking of PE's in the high 20's which many wouldn't consider expensive.
I think we will have collectively got it out of our system now; roll on Monday for SLP.
Thanks for the thoughts Paul and commentators below. I have been a bit of a gold and bitcoin bug for a few years now, but I have softened on bitcoin recently (I still hold - and am skimming on the way up).
In the long term I don't think that bitcoin has a future. And that's for one reason: it's man-made. No matter how good bitcoin looks now, or how much support it has, at some point something better will come along, or the compute will migrate to a different coin, or some black swan will cause a change in people's preferences. Man made things are usually temporal (with a few exceptions that last a long long time - the bible, some works of art, etc). Gold, on the other hand, is permanent, and for that reason alone is the better safe haven asset in my view.
It is also worth pointing out the fragility of the internet which we take for granted nowadays. It is entirely possible to "switch off" the internet. Just look at Myanmar coup recently. If this was to happen on a larger scale, or in our country for whatever reason, bitcoin ceases to be tradeable.
If you want to know more about bitcoin, read a copy of the bitcoin standard.
Its a store of value rather than a currency.
More companies will be moving their cash balances into bitcoin to save their cash being devalued by government money printing.
Theres more criminals in fiat than there is in bitcoin, just look at HSBC and their dodgy dealings :-)
Roubini is an establishment elite shill. He would prefer the infinitely manipulatable fiat currencies controlled by those who pay his wages. I think Paul you will probably come to regret describing his argument as brilliant, I see it as anything but, as he does not appear to have opened his mind. For a brilliantly articulated other side of the coin I recommend listening to this https://episodes.castos.com/5f...
"Roubini is an establishment elite shill"
TBH I'm not a fan of Roubini's perma Cassandra style. Like a lot of these profile macro strategist guys he's always hamming up the chance of disaster. I agree disaster potential is usually ever present and the end cost of complacency can be crushing but I don't like the broken clock approach. However, lots of people are willing to pay $$$s for the infotainment (the best Cassandra's are in fact an element of disaster porn).
HOWEVER to dismiss him as an establishment elite shill is daft.
In what version of the world is Bitcoin not a tool and beneficial to a narrow techno-financial elite?
"Roubini is an establishment elite shill"
TBH I'm not a fan of Roubini's perma Cassandra style. Like a lot of these profile macro strategist guys he's always hamming up the chance of disaster. I agree disaster potential is usually ever present and the end cost of complacency can be crushing but I don't like the broken clock approach. However, lots of people are willing to pay $$$s for the infotainment (the best Cassandra's are in fact an element of disaster porn).
HOWEVER to dismiss him as an establishment elite shill is daft.
In what version of the world is Bitcoin not a tool and beneficial to a narrow techno-financial elite?
For anyone who wants to understand the technology behind bitcoin, I would recommend the Oxford Blockchain Strategy Programme. There are myriad practical applications of this technology including bank settlement systems and land registries. Sadly, bitcoin is a 'showcase' and not a practical alternative currency or store of value. In that respect, I agree with Roubini and fully expect an ultimate collapse in the price.
The course details are here:
https://esmelearning.com/pages...
I am very interested in a profitable application of Blue ckchsin from a listed business. That's where I think the money is. I'm certainly going to have a read of that programme.
*Blockchain
Which English accent would you have the man learn? Geordie? Scouse? Queen’s English? Your comment is really stupid.
yes what a stupid comment.
Sigh, It's fine, I was expecting such a comment. How boring & predictable.
better be boring than stupid.
Paul, I agree with what you have written I see similarities between 1999/2000 and now, some anecdotal things I have been noting are; sorry for the length of the post.
1. In 1999/2000 we saw value orientated fund mangers being forced to alter their strategies or in the cases of Tony Dye (sacked), Julian Robertson (close) and even Barrons saying Warren Buffett "the old man was out of touch with the shiny new internet economy"
Now- We are seeing value orientated fund mangers being replaced by growth manager at various investment trusts eg Keystone IT, European IT, Edinburgh IT. Again we see stories of how Warren Buffett has lost his touch.
2. In 1999 we saw QCOM rise about 25x in 1999 alone and it has taken about 20 years for the share price to reach that level again. QCOM bull case was they would earn royalties from every mobile phone sold. There have been many patent and license challenges over the years. Not forgetting analyst falling over themselves to out more an more ridiculous price targets.
Now - $TSLA - We hear they are not a car company but a tech company and will license their battery technology or their autonomous driving technology, create a fleet of autonoumus driving taxis with to others etc Cathie Wood said those taxis could translate to software as a service type margins around 80%, creating the space for Tesla to reach $7,000 per share. Typical margins on selling a car are around 25% to 30%, she said.
3. In the late 90s we had day traders who were making money was 'easy! Now we have the same thing just the trading is done on a handheld device rather than a desktop. Penny stocks going crazy - Does anyone remember Baltimore technologies in the UK - it was in sub £1 going all the way to £140 and into the FTSE 100
5. Bitcoin - I see the price and the FOMO when people see banks, Paypal, Musk, Druckenmiller, Paul Tudor Jones etc getting involved - I do hear from lots of commentators that it is the younger generation who are the buyers, I don't know. I do know that governments will not give up control of money to something they cannot control. I look at it in a similar way to how precious metal mining companies end up sharing the spoils countries they work in. Where is the most bitcoin mining mined.. China, Russia...
Very good summary Albm7,
I think there are many other parallels too.
Perhaps the strongest one for me though is the number of people who could/ can see the bubble building (and like you I'm not particularly talking about crypto/bitcoin).
I particularly remember a conversation I had in 1999 with an investing friend telling me that he was going to ride the boom for another six months or so and cash out before everything collapsed.
From memory I think he was in late and out early, but certainly did better than my stance of just not playing the madness at all - I was well compensated however in the early noughties.
Personally I still don't feel brave/smart enough to really exploit the current market but I've been prepared to buy some trash that I would ordinarily steer clear of. Meanwhile a lot of stocks that I would have bought back in the 90s, because they should be going up, remain on my watchlist.
Even those that truly believe in the new paradigm inferred by some investments, should IMHO remain alert to the possibility and looking for the signs that the wheel's might come off.
Didn't Neil Woodford make his reputation by avoiding the dotcom shares and staying in the value shares that subsequently recovered?
Hi Gromley
Maybe I am just nervous from last year, having got the 2 smaller accounts I am responsible for (mine and my sisters) back to positive territory, but still being about 10% down on mum's from 02 Jan 2020 (Stocko's Folio Peak). I guess this is part that I have been willing to make more risks with mine and my sisters as we are both working and a number of years to go, mum's is her pension (ISA not SIPP) so there is nothing else hence it was total cash earlier last year, and the early forays back were the wrong choices...
But I would say that I am sitting about 20% cash currently across the three. I have cashed out some profits, and it feels like I should have done more given the last week's ups and downs, such as watching Creightons (LON:CRL), Begbies Traynor (LON:BEG) and Premier Foods (LON:PFD) come down.
It is probably something to think about over the weekend about "sleeping at night" and missing some of the upside, verses getting back from work and reading this after 18:00 and seeing the whole lot having gone down by 5% and going WTF??? Then knowing that I cannot even go on the following day either...
Tommy
Hi Tommy,
There are many different ways to play the market and I think the trick is to find one that works and works for you (available time, emotional responses, skillset etc. etc.)
One thing that didn't seem to come across in your post was that you are quite self-critical with regards your performance; that is a pretty good thing imho, so long as you don't over do it!
You are benchmarking (for this purpose) against 2-Jan-2020 and come across as disappointed to still be down 10% on your mum's account, whilst in 'positive territory' for the two accounts where you are less risk averse.
Here are some stats that you might find interesting then.
I have looked at performance between 2-Jan-20 (your benchmark), 23-Mar-20 (pretty much the UK market bottom and 19-Feb-21 (today obvs!) for the following indexes :
I could not find this one on Stockopedia, so the data is from elsewhere. I have seen various small cap 'indexes' discussed in the round so I cannot expand to far on this.
Here are the results.
So if you are down by 10%, you are pretty much inline with the two 'main' indices (although the index performance does not include dividends.)
You are a little behind the more UK focussed 250, but not worrying so I would say ; even those that will beat the market in the long-term will not do so in every phase.
I will not comment at this stage as to why the more UK focussed index has beaten the other two - too complex for now.
Where you are 'lagging badly behind' is against the Small Cap index. To be honest, though I would not sweat that too much. Investing in largely speculative carp, is generally not recommended for those currently drawing pension income and secondly if there is froth in valuations, as a many of us suspect , then this is almost certainly where it sits. It would also be most likely where any sharp future pullbacks might come from.
I don't want to ramble further into what might seem like advice.
I will just say though that the performance you recount seems to me to be perfectly acceptable, so be careful about making any changes to what you are doing. Learning and tweaking is a good thing, but be cautious of falling for performance envy and chasing yesterday's story just as it peaks.
My twitter feed is currently full of people declaring All-Time-Portfolio-Highs ; quite a few of those will be much quieter if they suffer a major pullback. (To avoid offending any twitter-friends, there are some who I think do accurately report their failures).
Thinking over the weekend is a great thing - especially right now when there is nothing better to do with weekends, but maybe you want to spend several weekends!!
No hurry to tweak IMHO, you seem to be doing fine,
HTH.
Bitcoin is a new(ish) blank canvas upon which people can intellectualise and extrapolate upon at will. If it is either an unique currency or a store of value then it must be judged in its own terms and cannot really borrow the lessons of history.
As I was in tech start-up land late Noughties and into 2010s in UK, US and Germany I came across early Bitcoin enthusiasts keen to argue financial matters with me an old (to them) financial market guy. It coincided with my own attempts to understand 'money' as the GFC unfolded. The tech bitcoin believers tended to be implicit fans of the Austrian Economics school and desperate for a hard currency store of value. A fallacy IMO...
Fortunately, I had been lucky enough to read a lesser known but absolutely great JK Galbraith book "Money: Whence it came, where it went". An absolute blinder IMO as it busts in super simple format many myths about what money is. Its been over decade since I read and i can't remember the exact numbers but in the 1800s the US was effectively a multi-currency zone with 100s of ersatz local currencies. For sure gold was king...but if the eastern bankers weren't happy to lend it to roughyins in the centre and west of the continent then they just made up their own. So why didn't this lead to Venezuela, Zim, Weimar, etc...I don't know for sure but I think it came down the combination of US's great natural resource bounty and phenomenal underlying productivity.
Then (back to modern time) the GFC brought it home to me that money is not and has never really been real....and its important to note that credit is usually fairly indistinguishable from money particularly when it comes to govts and banks (us lesser beings need to be careful of the distinction between the two quantities if we want to avoid poverty). Since then we have been living this fact in greater and greater clarity....
Some people state we must have a bust (deflationary and/or inflationary) to cleanse the system and reset value by which they really mean the sanctity of money....which really equates to the haves are okay but screw the plebs...and that is why bar a coup by the 'elite' we are not going this route. Overall, what MMT teaches has a lot of truth to it. I doubt its all true but we are going to travel that road and discover its flaws first hand.
This is likely a road that makes it clear that money is not a store of value but an instrument for transaction and consumption. A store of value is something that produces cash that keeps up with your need to consume/transact.
For inexplicable reasons, beyond mere very long history and cross cultural acceptance, gold is the only immutable and indestructible non productive store of value to date. I'm not saying its great by any means....but that's a helluva of a lot for Bitcoin to achieve in just over a decade.
The burden of proof is huge for bitcoin. As an established asset a true global economic crisis will test its mettle (no we haven't had one yet!) or true economic boom (perversely enough...and no we haven't had that either!).
My money is on Bitcoin fail....but hey I'm certainly not smart enough to work out the counter case.
I wrote this a month ago or so....
https://mojomogoz.medium.com/b...
Its how it plays IMO.
mojo out
Great article on medium. Thanks for sharing.
PS we are relentlessly drawn to Millenarian cults (https://en.wikipedia.org/wiki/...) ...I believe Bitcoin is one. They are common place and I'd give you Thatcherism or Blairism as more prosaic examples. Social media and 24/7 blah-news leaves us swimming in them
I cannot disagree that bitcoin is a milenarian cult. I don't think that negates its premise (which is arguably to one degree is subject to individual interpretation , and to another degree subject to societal acceptance), but it certainly makes it more religious which in turn makes it more divisive.
There are plenty of points made today concerning governments and why would they lose control of the money supply. I think that is first order thinking.
Indulge me as a btc bull, but governments want tax and tax is paid with fiat. Government spending is made with fiat. What receivers of government spending then do with that spending is up to them, keep in fiat or convert. We need to pay taxes. We can be paid in btc or whatever - it doesn't matter - the tech enables us to convert back to fiat to pay our taxes at a fractional cost of the incumbent system. Fiat and crypto will live in parallel until fiat becomes CBDC (central bank digital currency - digital fiat) and then it will be just another investment / payment choice. The point is co-existence is a scenario that people dont talk about but it is the likely scenario. It does not have to be so binary.
Hi pieRsquared, I don't have a horse in the race re BTC. Over the years I have held exposure in financial spread betting accounts. This is not a serious place for me and is really a tool I use to experiment and speculate short-ish term and blow off a bit of edgy and flaky steam without damaging longer term 'real' investments (where I tend to be long horizon and somewhat contrarian, which doesn't mean value). I'm currently long US deep value, US regional banks, FT100, gold, silver and ethereum and short Tesla. TBC all those positions align with my fundamental view except ether, but I'm playing short term in sb account.
This is all rather casual and seat of the pants stuff...why ether as crypto? I think it can enjoy a period of sort of narrative overflow and underpin from BTC. Its smaller and less liquid and a little fire under it can burn hard. There are likely BTC speculators who will look to redeploy some gains and I see a little bit of relativity play in that although ether is up hugely recently too its graphically different from BTC and I believe will look to overlay the same pattern and so see a significant leg up in ether. Then there's the general speculative heat in US around a number of areas where its the same speculative crowd ($GME illustrates a bit). But hey its very speculative and my reasons are pretty weak. If I'm lucky I'll bag a bit more play coin.
My greatest feeling for Bitcoin is indifference! I think it's an uninteresting distraction from an investment perspective. I don't believe I have any durable and verifiable way to assess what it is. I could decide to agree with some supporting narratives but IMO scepticism is ultimately prudent. If it arrives at $1m and is universally acclaimed as the best currency/store of value in a digital age I won't look back with regret.
Note that at current price BTC is 5% the value of the US Treasury market so at $1m a coin its a mere $1tr short of the $21tr UST market! Possible and I believe I will make money in other markets and instruments I can tangibly understand better in such a remarkable occurrence....remarkable as at this level BTC is clearly an international geopolitical issue and an important input to policy making and our world from a power perspective is turned upside down.
Govts will never let you pay your taxes in anything other than their currency as to allow anything else is a surefire way to devalue their currencies and lose control of their ability to implement economic and social policy. In such a world BTCers will be the enemy of the ordinary people as their schools, hospitals, policing will be falling apart. MMTers are correct in their assertion that govt, tax and sovereign currency are intrinsically linked and dependent upon each other. I listen to wealthy profile financial people bang on about BTC and how its their protection from bad government and hear people indifferent to what happens to the 'little people'. Really they envision a Mad Max world where they have been clever enough to protect their assets...that just won't work out well from them...particularly as its another bunch of elites that have all the big guns.
I believe that the narratives from BTC enthusiasts are really quite fantastical. But we live in a moment where fantasy dominates (eg all the hit spec stocks going vertical).
There is further discussion on this page re the long term debasement of fiat. I think this is a nonsensical perspective. The world is not perfect, however if you are pleb you are unequivocally better off today in myriad ways than say 120 years ago when the money was real (although not nearly as real as we abbreviate in history...see prior comment re US have 100s of independent currencies in 1800s). Destroying the narrow held wealth old wealth has been a powerful explanation for the rise of the economic importance and freedom of common man (starting back centuries ago). Its a strange fetish that believes we progress by going backwards. Like you and others I see a lot of problems with current money-credit...but that's always the story whether the money is pure fiat or pure-hard. Its never really about the money but we fixate on that as the thing that we can measure and blame.
Crypto enthusiasts seem to me to be just a new rather wing nut flavour of hard currency enthusiasts (a hard currency world is possible...but you better believe your wealth would not be 'safe' in it as there would need to be very significant and direct redistribution of that wealth in anything approaching a free and liberal-ish society).
My view: In the end BTC at anything beyond speculative insignificance (approx now and lower) is a threat to the interests of the 'common man'....and so will get its arse kicked. If you have meaningful BTC profits then bag a significant portion of them before a bunch of other people decide to do it (which is usually all at once on the way down) and redeploy into productive assets. Even the most enthusiastic BTCer must acknowledge there is always a chance of a significant devaluation relative to fiat ;) It may come at $500k and not $55k...no one knows (no you don't!).
I was in some ERC-20 coins but have recently sold, switching into ALTS that i think have more of a chance. The eth vision is so big and whilst it can't be ruled out I see the DeFi bubble that's happening now as the first thing likely to pop. It will then come back stronger (but differently) - the whole premise has legs as I think all fin assets will get tokenised eventually and the openness these systems provide beat the opaque incumbents hands down.
I agree that fantasy is in abundance - everywhere except UK small / mid caps. The fiat debasement argument is valid (your standard of living improvement notwithstanding), fiat systems such as those we have now have never survived this long before.
My view is digital fiat and digital crypto will coexist and investment choices will just get more varied and esoteric.
DeFi is a loose part of my speculation in ether as I see the general DeFI narrative as quite durable and plausible as it can improve infrastructure that is creaky or not up to the times. I would parallel it as the 2020s version of 1980s financial deregulation (which was highly disruptive in terms of winnowing winners and losers). However, this is a weakly held view and the issue for DeFi is also that it must not threaten the system status quo. So it has to kneel and bow to the authorities and big players in general. My mind is open to how to benefit from this but I know I wont be early or insightful on that. However, I'd put it to you that its likely to be seen as good for securely established and funded conventional banks that ensure they are not losers/extreme laggards in the 'new deregulation'.
As a roughly related tangent I think one of the most bogus ideas is that banks are going to be disintermediated by fintech innovation. Banks were deep in a hole due to 2008 and have been climbing out slowly (with difficulty in places were austerity has been a policy). This has lead to general narratives about their demise but the franchise to create large scale private credit that govts can easily see and influence, and increasingly control through this coming decade for recovery and policy reasons as we've already had a hint of during covid, will prove one of the most durable and still profitable as long as our societies function in fashion similar to now with broad economic participation.
I think you are joking re UK small/mid cap stocks? There's been plenty fantasy in this market IMO. I think people think that taking risk always pays, particularly for narrative rather than 'value' or cash-flow stocks....and as liquidity stays reasonably elevated in speculative issues one can usually exit if necessary. A lot of people making profits on stocks that they are not fundamentally correct on and/or that will be failed businesses. Good time are rolling! I want to know what the exits are in on all my stocks or see that i can avoid rushing for an exit in a panic as it will be okay. I can't tell you when but exits will get crowded. I'm willing to carry a bit of crowded exit risk but not too much. There are many high profile names on FinTwit that they and their followers will need to have superb macro risk timing to ensure they aren't fatally wounded.
Bah humbug.
Ciao for now
Pretty much agree with all that, although I see less fantasy in uk small/mid caps than elsewhere. I try to run an index (S&P) risk reversal (short call long put) as my exit / hedge and live with the correlation risk to my longs.
As I am sure you know the Fed put has created the risk always pays attitude you mention, and now with rates so low, the inflation threat, stimulus checks....people feel they have no choice.. is a Schumpeter style crack-up-boom on its way or already happening?!
Hello again. I sort of answered you too unknowingly in replying to Phuntt.
I agree that crack-up boom may be in play. However, my market spidey senses are tingling on just how many people are now signed up to the inflation is inevitable and it's going to play out now in unstoppable juggernaught fashion and at least reflate the system and perhaps hyper inflate.
The crack up boom 'theory' I believe applies to much more closed and non globalised financial markets than we have today and where physical product and services dominated over financial markets. This is no longer the case. So my worry is about the crack up boom being rather sloppy and in effect some variation of classic EM crisis happening. Why?
The narrative is US is screwed and must inflate to survive -> weak $ -> positive global inflation and risk appetite as US stimulates itself and weak USD stimulates everything else. But this a shift to a new paradigm very quickly. Its assumed that the US is the weak link in this due to its 'vulnerabilities'. This is intellectual joke. The US is the only significant industrial country on earth that could embrace autarky and be roughly okay compared to its prior existence as it has all the resources and abilities within its borders to support...
The rest of this world is hugely reliant in each other and ultimately the massive 'over extended' US end market...
As the inflation surges and ricochets as part of the crack up boom cracks and stresses open up this will not be manageable by many weak systems (global and local) -> this is likely on balance to create tighteness and dysfunction through financial markets. The system plumbing means this causes USD strengthening....this is contra to the crack up boom.
I too believe that significant and durable inflation is coming...but I think the trajectory to it will be quite rough.
The strengthening USD theory is I believe currently called the 'Dollar Milkshake' (not sure why). Have you read Disunited Nations by Zeihan (you sound like you have)?
I have read Zeihan. Good book with some good perspectives though he’s a bit of a drama queen. But I do have my own views ;) For example, I realised in the late Noughties and early 2010s whilst travelling in Asia and EMs a lot that no empire rises unless the natural resources are within its borders or very near abroad. Once you are established and dominant you can trade and exist beyond your local means without being too vulnerable to attack!
At that time I concluded that Brazil and/or a latam confederation would probably be the dominant power some point later this century. I do not think China can sustain it as it’s too vulnerable ultimately across too many factors. Zeihan is interesting in pointing out the relative geographic strength of Argentina relative to Brazil and neighbours. I know both countries well and I see his point! Argentina for all its ailments has some real dynamism beyond the state. (Zeihan's analysis of natural geography re waterways, nature of land etc whilst I knew already...think Japan and its history...I didn't weigh enough -> maybe Argentina is the blessed place).
I know the milkshake well. I’d say it probably originates in the eurodollar work of Jeff Snider. Overall I think the milkshake theory is wrong as the shortage of dollars is not structural but a passing blip in the system (but as people think money is real and dominant they focus on it and endow it with more power than it deserves). Dollar shortage is perversely most acute in the USA with the massive fiscal deficit and net international investment position it had (NIIP is >50% of GDP and is unprecedented at such scale...it means that foreigners own US...they may be short of liquid dollars at points but that then blows rapidly into a US domestic problem when they sell assets for dollars...and that’s what happened in March 2020 -> the Fed knows this now and won’t let it run again)
So this invalidates the milkshake theory. However it doesn’t mean that we cannot have strong nominal and hopefully real growth with inflationary pressures. The efficient, rich and important US economy handles this but less balanced and robust ones might have a fail (eg India, China, Argentina, N Africa, ME etc).
I do believe we will have a weak dollar for a sustained period but I think people are plotting too straight a line on that. This is reflection of our times where market participants think trends go in straight lines
(Edit: Just corrected a lot of the above...did it on phone and when I re-read i realised quite a lot of typo gibberish)
Read the final edit so no gibberish encountered. Your perspective on USD shortage being most acute in the US is very interesting, one that doesn't get much airtime. The proponents of the milkshake seem to acknowledge a structural decline of the dollar but are happy to bet on an interim, vicious squeeze. I suppose if you can tackle this with the right leverage/structure then the gains could offset timing issues. Thanks for your very full and thought provoking replies.
If you haven't read it yet I recommend "Promises, Promises, A History of Debt" by David Graeber. Available as a podcast series on BBC Sounds
Yeah, very good. You mean Debt: First 5000 Years on which the radio show was based https://www.amazon.co.uk/Debt-... - the radio show good too.
I don't agree with it all but there is some interesting historical, sociological and anthropological things re money and debt. Most people think we went barter - money - debt...but the anthropological evidence is for credit first and barter only happens where there is no trust (conflicting tribes or perhaps in prison).
My favourite book by Graebar was The Utopia of Rules. It was really a long angry rant about how difficult it was to deal with bureaucracy around his ailing mother's life, needs and legacy and a claim that bureaucracy is a form of oppression with a democracy to allow elites to retain control. A bit of the deep end rage-mad but some good points
You make a good point about bureaucracy and oppression, I was having a conversation with a friend whos a poloitical scientist about tax. I personally pay, income tax, NI, corporation tax, VAT, car tax, parking permit, parking fines which is a form of tax, TV licence, Council tax, probably due some capital gains tax and when I die I'll owe inheritance tax. There is also probably a few more I'm forgeting.
I thought the reason we pay so many different types of taxes was to give people jobs and increase the amount of civil servants, but apparently its to mask how much tax we pay and for control via bureaucracy
we are so far from small caps today ;)
This is my first post here. I am an old City hand and have been inspired by two ex colleagues posting in the last week. Hi, Trevor and Jeremy.
On a quiet afternoon can i bring Premier Miton to your attention? Premier Miton (LON:PMI)
Current eps forecasts for Sept 21 and Sept 22 are 12.7p and 15.6p. Liberum in their note available on ResearchTree have Sept 2023 numbers at 18.2p of earnings and 12.8p of dividend. So for that year, a p/e of 8x and yield of 8.8% with £64m of cash on the balance sheet (IF their forecasts are correct). The current mkt cap is £223m.
They have had a rough couple of years as their some of their more "value" based styles underperformed and their were fund outflows.
Other areas performed very well, see Premier Miton European Opps, up 76% over 3 years and Premier Miton UK Growth, up over 53% despite only having the UK to invest in. As a comparator, Fundsmith is up 58% despite having the whole world to choose from.
They are launching a Global Smaller Companies fund for Alan Rowsell who successfully ran a £1.2bn global smaller cos fund for Aberdeen Standard Life. They have also recruited a fixed interest team from Merian.
For share price performance i suspect the important thing is that they now have inflows even before the launch of any new funds. This is the first time for nearly 2 years.
On most valuation measures they stand far lower than any other quoted group.
As people notice the performance and flows, could this re-rate to a p/e of 15x (about half way between Jupiter and Polar)?
On 15.6p for Sept 2022 that would be a 234p share price.
Or with over £12bn of Funds under mgmt and a current EV of only £187m, if it doesn't re-rate, it could be a tasty morsel for a bidder.
Obviously i should declare that i hold some.
Hi Chris,
Welcome. I can assure you that your comments on Premier Miton (LON:PMI) are most welcome. It seems that the majority of todays posts have been about Bitcoin and not small caps. I have had to keep checking I haven't somehow inadvertently gone to the wrong page on Stocko today.
I just hope Monday brings a return to normality and we can get back to talking about small-caps.
BTW, I returned to Anglo Asian Mining (LON:AAZ) today after a small foray last year. Looks to be some decent upside potential and I am looking to move a bit more towards some gold stocks in anticipation of them coming back up following their awful last 5 months or so. I know Paul doesn't cover these in the daily small cap report. Also to provide a bit of hedging in case there is a bit of a bump in the near future.
Best wishes to all.
Your post is what this site is all about or should be ( a bitcoin belongs elsewhere believer ) . Your experience should be shared so i thank you for your first post and look forward greatly to your further comments.
Last comment from me regarding Bitcoin first time I invested was through buying future production from a crypto miner genesis mining Like I said in my first post sold my Bitcoin when the price of Bitcoin went over $ 20k it carried on mining and paying me small amounts which I sold again when it got to $10k going by the rise over the last 6 months maybe a mistake but I made money so was happy
Like I said after looking at it again came to the conclusion that what ever I thought a significant amount of younger tech savvy people under 40 say but also older did see it as a store of value in the same way as others see gold so had another look bought a small amount then bought some shares in ARB and MODE the rise in ARB took me by surprise and I sold enough that I am well in profit so will let the rest run like I said in earlier posts taking a small position in something like this 1-2% of portfolio you have limited downside and a possible large upside
Not looking to change anyone’s opinion and there are 2 sides to every discussion and for those who want to call it a tulip type craze fair enough
if you want to buy some have a look at the Mode app very user friendly there are plenty of other options
Do your own research and where shares like ARB and the price of Bitcoin have risen so fast there will be high volatility so in my opinion you should only invest a small % and only what you can afford to loose
Good luck to everyone in their investing and have a good weekend
I will be waking Monday morning hoping for results to live up to my expectations from SLP
“You either get it or you don’t”
A rather annoying phrase often said by those who would have us believe that the only reason you have a different opinion is that you don’t “get it”. The implication is typically that you are either too stupid or too ignorant to come to the “right” conclusion.
Whenever I see that phrase, I’m left wondering why it should not be perfectly possible and reasonable to reach a different opinion having listened to the arguments unless it is a topic of very little complexity.
It need not be a binary thing either. On a macro basis, Bitcoin may not be something of value and could be just a bubble. However, at the same time, on a personal level, it could be quite rational to put money into it even if that’s true, as long as there are enough “believers” aka people who do “get it” to keep on forcing the price up, as long as you can get out before the believers lose the faith.
I’ve generally tried to read a lot of the arguments made by the Bitcoin enthusiasts and also the links. But clearly I am too stupid and still too ignorant to “get it” because I have failed to arrive at the conclusion that Bitcoin is an investment rather than just a speculation. I clearly need to be consigned to the remedial class where tulip is a four letter word.
If it's any consolation I think I "get it" but worry about what I am missing! Discussions such as these are fascinating, especially as I guess most people here are probably more thoughtful by nature on matters of risk / reward than those not interested in investment.
Re bitcoin. Some time ago I heard some guy from Goldman Sachs (IIRC) say that they would trade in frozen locusts if there was a market for it. Bitcoin. Frozen locusts. See what I'm saying here?
I see two things. Low opinions of GS and BTC! And why not?!
Combining the crypto-currency and accent themes, I find it hard to believe that anyone would invest in an asset that can be pronounced dodgycoin.
Well slow day on the market, but Paul has kicked off Friday Debate Club very successfully.
My thanks to all who have contributed today; I have really enjoyed so many thought provoking and informative posts, on what is otherwise a dreary day in Lockdown.
Let’s do this again sometime ;)
Considering the majority of conversation is geared towards Bitcoin today, there's been a timely launch of "Cryptopedia" by Gemini. It states it's a "free educational platform that provides open-access, high-quality crypto education to the world." I'll leave my commentary there! Here's the link.
I see Paul’s original commentary was posted at 3:21am. Given the nature of today’s thread, a possible case of “the early bird opening a can of worms?”
To me, there are two simple possibilities with Bitcoin. 1) It's a crazy bubble and worth nothing; 2) It's going to be a global safe-haven asset.
Up until recently I was in the worthless bubble camp. It doesn't meet the three tests for a genuine currency. But if it was a bubble, wouldn't it have bit the dust by now, after 11yrs - for example dying out after the previous melt-up in 2017?
It appears to me that scenario 2 is what's playing out in front of our eyes. Respected institutional investors and payment platforms are adopting it. If we assume scenario 2 is correct, the market cap of Bitcoin had to increase substantially, to give it global reach. With supply fixed, this means the price had to go up a lot. Anything that goes up so far, so quickly, will also have massive volatility.
If it does become an established global asset, this volatility should gradually reduce, as it becomes mature. And I think it's natural place, if it does succeed, it to become a low volatility defensive asset similar to gold, which anyone can buy quite easily through their ISA. That's how I think about it.
Disclosure: I bought Bitcoin last summer as the chart looked amazing, trimmed a third off my position recently, but plan to let the rest run further. I genuinely have no attachment to Bitcoin itself - for one I think the energy consumption is indefensible - and will gladly dump it all if the positive scenario begins to fall away.
I think bitcoin is going to $100,000. Currently at all time highs of just before £53K. If I am right I see Argo Blockchain (LON:ARB) at well over £12. Bubbles can go for years and the evidence suggests that there is a stack of cash on the sidelines to feed the frenzy. But I am not interested in buying much at the moment....except as a trade/punt. A lot of stocks "feel" expensive and novices are chasing rubbish.
Look at dawg stock Path Investments (LON:PATH) yesterday. Heavily bought yesterday at up to 1p on various speculation. Today announces a large placing at 0.25. A lot of burnt fingers. Stick to quality. Treat punting as exactly that. All just imo.
Chris
Re Bitcoin
‘If it was a bubble, wouldn’t it have bit the dust by now, after 11 years.’
A fair enough proposition. I think one of the things about bubbles is just how long they can go on for, eg Japan stock market in the 80s/90s, Tesla (have you ever heard of a huge large cap company being on a PE, a couple of weeks back when I looked, of 1300?), the Dot.com boom, etc. I remember in my younger days a radio stock market fund analyst, regularly explaining why the market was terrifically over valued and therefore best to avoid the market, he would come back year after year explaining how wrong he had been, but would repeat the advice...
Personally I would be more relaxed about the Bitcoin proposition if it was the only crypto-currency, but as their are 100s of them, many also hitting £Bn valuations, and new ones being produced every year... where does this end?
I bought bitcoin in 2017 for a bit of a punt, sold at a profit and watched it tank a few months later.
The reason I bought was because it has some merits (and I knew people will follow herd behaviour anyway) and the reason I sold is because I kept asking myself, sure it can have some value, however, what about when the price falls tomorrow or someone wants to spend their bitcoin?
The answer to that is the same as any other currency, except - hypothetically - only if you were being paid in £ and had to shop at a € (I.e. like bitcoin) supermarket.
For obvious reasons you become more worried about the exchange rate and who is buying and selling £ or € than you do on the actual price of my pint of milk. (Sidebar: I have a friend who has this actual problem and he watches this exchange rate every day.)
Then I could imagine, what if everyone was on Bitcoin? Maybe then it would work?
Well how would I get a mortgage? What would be the interest rate and what benchmark is it tied to and what is the risk free? In busy London, do I pay the same interest rate as someone on a beach in the Caribbean where the economy is very different?
What about a savings rate? Would a bank give me interest on my bitcoin? If not, why would I keep it with them and if they do is it the same as in the Caribbean? Financial markets and capital allocation are extremely important in the modern world for productivity, it isn't just about barter like people would do centuries ago and it would be a backward step to try.
All of a sudden it begins to unravel and the price movements begin to look a lot like exuberance of a false dream that would never practically work.
The Euro actually has similar problems on a smaller scale as Greece and Italy could really do with reducing the value of their currency to be more economically competitive. However, Euro nations do have their own borrowing rates and even that has created issues itself in the past but that will open a whole other discussion.
Gold is actually no different too at times and it has a constant value so should hedge inflation but also has convexity in the sense that people might just not want to hold it and it could be worthless if people really didn't want it - although it does have some practical use.
Long story short, Bitcoin is likely a bit like gold in that it will never go away and people will give it some value but it is certainly ridiculously and speculatively priced, and impractical in today's world as a real store of value for the very long term or as a payment method other than as a basic movement of funds but you don't need bitcoin itself for that, just the POC set up and banks are already building and using that technology.
Anyone interested in buying some tulips?
Hi kbkb re Tulips Black only please, according to my shoe shine boy they are the ones in demand
I'd like a black ostrich egg to match the tulip please.
"In Britain, adult ostriches were being bought for £10,000. Today they are going for £70, according to Walter Murrey, managing director of the largest ostrich farm in Britain, Kezie Ltd. There were cases of illegal pyramid schemes that were subsequently closed by the Department for Trade and Industry."
https://www.nytimes.com/2001/08/18/your-money/IHT-the-manias-over-but-ostrich-products-still-cant-get-off-the.html
Anyone interested in buying some tulips?
Interesting that you say that, my mind was pondering in the direction too.
One interesting quote from Wikipedia on Tulip mania
Not seriously suggesting a parallel although the Covid responses have contributed to the rise of Robinhood traders and the like.
Renold -(RNO). Paul, on the very good Stockslam webcast, you suggested Renold might make 4p. In H1 they reported c.1p and in January guided towards similar H2 profits. Has your calculation confused operating profit with PBT? FY operating profit of c.£11.5m would suggest EPS of c.2p. Happy if I am wrong.
For what it is worth I don't and never have invested in Bitcoin. I cannot see any value in it at all. But it is also fair to say I don't understand it, but I don't see how it can survive any real scrutiny. It is a transfer of value but only if the other side want it and are prepared to accept it, pretty limited. Yes I know Tesla bought some but to be honest I paid £50k for a long range Tesla which they said did 350 miles, cobblers!! It does about 250. I don't mind because I like the car but like anyone else bite me once I smile, try again forget it. That is to say it may have value in the future but not necessarily now, so that is speculation. Great it is secure, not sure that gives it value. The pound in my wallet could be stolen that doesn't give it value or detract value. The network effect is to be seen, at the moment it is fairly limited I would argue. Look I don't know but I would venture it unlikely it will thrive. Be interested to see what happens when they shove a Carbon tax on it from what Roubini is saying. This idea that because Institutions are looking gives it value is also not true. I have worked for these companies and if something goes from pretty much nothing to £50000 well you would be a fool not to look at it. But on looking I suspect they won't see much.
Paul thanks for your interesting reflection on state of the market. From your, and other Stockopedia subscribers', memory what did well post the dotcom crash? Was there a switch to more value style investing? Or did everything do badly?! I'd appreciate the historical lesson as someone who only started investing proper in 2014.
]'Interesting question, and I'm obviously too young to remember myself, piecing together what I've read from the landlord, I seem to recall that while shares were going mad, Paul, was for the most part, with a few exceptions, buying bricks retailers and other solid but boring companies that the market rated very lowly, when there was a dash from the trash many of these rerated, I'm thinking of newlook for example, which at the time was a fast growing retailer, for sale at pe's of sub 10, that company who make the kit that prints on tiles, who's name escapes me at the moment, other retailers like Deb etc that the market cruely ignored. No doubt the older and wiser landlord has a better memory than me of these events and can tell you a bit more of what happened. My one regret is not selectively investing in the quality .com's after the crash, it was clear even then that google, amazon, apple would do well long term, especially Amazon of those 3, but the market threw the baby out with the bathwater, I expect the same thing will happen again. Then some companies were undervalued and others ridiculously over valued, the market the imploded lots of shares and reduced the valuations on others, while the under valued stuff recovered. With hindsight the thing to have done would have been to be in the undervalued stuff and when it recovered move into the quality .com's.
Another thing that happened is that a lot of companies where left with more cash than their market caps, the landlord highlighted some of these can campaigned for them to be sold or cash returned to shareholders, a most amusing time, indeed, errr I'm told .....
To be honest the reason I don't remember is not because I was too young to have been about, but rather too old, and my memory is failing !
In summary, I've been reading Paul's stuff for over 20 years dating back to the motley fool,
surely can't be right ? I demand a recount !
K
Focusrite (LON:TUNE) I bought at 250p back in 2017 and looking back at the Stockopedia PDF of the stock report for June 21st the PE was around 21. (Stocks like £TUNE going for a song (pun intended) for a PE of 21; those were the days) I sold in October for a small loss. I think my over active phase was kicking in where if something didn’t happen quickly I sold out and that has cost me dear.
On the panel on the right Stockopedia has Focusrite on a PE (TTM) of 51.43 but I have no idea where they get that from. Sharepad shows a TTM of 29.8 and a forecast PE of 30.8, which I assume will be below 30 on today’s TU.
Every time I have looked at the stock price anchoring (is that one of the most dangerous cognitive biases in investing?) has prevented me from pushing the buy button.
Focusrite (LON:TUNE), Treatt (LON:TET), Somero Enterprises Inc (LON:SOM) and Xp Power (LON:XPP) are four stocks that I have held in the past and that I am still waiting for an entry point to get back in. I wonder if it will ever come? I think Focusrite on a PE below 30 does look very good value.
As an aside why do management so often of many companies, not just Focusrite, have to be so cryptic.
They wrote this morning
“Overall, revenue, profits and cash for the Group are currently ahead of where the Board would expect them to be at this stage of the financial year”
But they don’t say where they previously expected profits and cash to be. So the phrase by itself is meaningless unless we know what the expectations were. Ahh makes me cross.
Regards
Michael.
I hold Bitcoin. I wrote the following in December to help a friend who was struggling to "get it". Feel free to pick it apart.
What Value Trust? The Value of Bitcoin (BTC)
Ostensibly bitcoin has the following salient characteristics:
Whilst these characteristics are not innovations of themselves, BTC incorporates all of them synergistically at minimal cost [1]. Although there are other digital assets that also boast these credentials, none of them compares to BTC in scale and strength of adoption such that the first-mover advantage enjoyed by BTC has developed a self-reinforcing momentum.
There are well documented attempts to ascribe fair value to BTC from mining costs to ‘stock-to-flow’ modelling concepts and ‘network-value-to-transaction’ methods. All of these have merit in that they address characteristics of supply/demand and use or throughput that any form of money should possess, yet as models they are flawed by their inputs and inflexibility. The ideal form of money is one which can be both readily exchanged whist also holding its value. The world’s reserve currency has triumphed as a means of exchange but as a store of wealth the US Dollar has failed dismally, along with all fiat currencies. Gold is performing well as a store of wealth but is expensive to hold and unwieldly to transfer. BTC is currently proving to be a more volatile, junior, digital version of gold, yet is far easier to transact with (and is getting easier and faster, all the time). Widespread adoption should dampen its volatility. BTC is far more accessible than gold to the average person.
Any decision relating to money is a relative value decision and BTC is no different. It is subject to macro-economic forces like any asset, but does also solve two problems efficiently that no other form of money has hitherto been able to. These are both problems relating to trust. BTC’s fixed supply assures its status as the antithesis to the abuses of fiat money. BTC’s secure, distributed nature solves the problem of trust when transacting with unknown counterparties online.
The essential question here is, what value is trust?
The world currently suffers a huge trust deficit. The weaknesses of our political systems have never been more exposed than they have been in 2020. The reliance on central bank balance sheet expansion and the imposition of government diktat to determine allocation of capital has also revealed how vulnerable our democratic rights are. Failing politicians enabled by unelected central bankers is one significant part of the problem. ‘Free’ (mis)information on the internet is now another significant part of the problem. BTC stands as a beacon of trust amongst these issues, as these themes play to its strengths.
With the market cap of BTC currently about $500b, what is the value proposition? There are a number of arguments to be found along the following lines:
All of these propositions envisage payoffs you would normally only associate with speculative, low probability option trades. Interestingly enough… take a look at a chart of the VIX side by side with BTC and you will see strikingly similar characteristics.
It takes the same imagination to envisage any of these events happening as it probably took in 1675 to envisage the muddy and boggy swamps by River Tyburn becoming Mayfair. We live in crazy times. Accordingly, price your exposure as option premium and… hodl.
--------------------------------------------------------------------------------------------------------------------------------------
Basic BTC Primer
In its simplest form, bitcoin is a statement of truth recorded digitally. In theory this truth is unalterable (it has not been hacked and in reality can’t be hacked) and in practice over 12 years of existence and growing use this has proven to be true. The more widely it is used and the longer it exists, the more this truth holds. This network effect is enabled by its design (its computer code and its distributed structure) and is borne and strengthened by its growing adoption. The network effect not only reinforces its security but confers utility: digital transactions are enabled without needing to trust your counterparty thanks to the distributed nature of the protocol. Transaction costs are minute in comparison to the costs associated with fiat currency transfer/exchange. By holding your own bitcoin, either in cold storage (offline memory chip) or paper wallet (a physical, paper record of your public and private keys – the data which proves you own this ‘truth’) you are swapping the risk of a bank-run or state confiscation for one of your own competence in securing and safeguarding your codes. This feature is often referred to as the “be your own bank” feature.
[1] Specifically when compared to the banking system, or to commodity assets and their storage, BTC is vastly more efficient.
[2] https://www.buybitcoinworldwide.com/how-many-bitcoin-users/
[3] Electronic money has never been expanded more widely by both state and public than in 2020, and the eventual introduction of central bank digital currencies has been well sign-posted. Imagine what will happen when the central bank can both instantly tax you at source whilst directly stimulating your competitor with an injection of digital cash to support the French car manufacturing industry, for example? Such forces would bolster the case for BTC.
Is it still true that the blockchain can be rewritten if you control the majority of mining power? What percentage is in China?
Are there any plans to change Bitcoin's cryptography to make it secure against quantum computing?
China is the undisputed world leader in Bitcoin mining. Chinese mining pools control more than 60% of the Bitcoin network's collective hashrate.
There is not much Bitcoin left to mine as only 21m available and over 18m already mined.
There is a new mine being built in the USA.
Correct regarding China. Also how secure are their servers...
Bitcoin can be fractionalized to infinity, a 21 million cap means little. Most people that own some Bitcoin via the likes of Revolut only own a fraction of a Bitcoin i.e. <1 BTC. Also I believe that Bitcoin (unlike some of the alt coins) is still not fungible rather amusingly.
Sure you can fractionalize it, but this is a negative not a positive. It's meant to be a "currency". You're supposed to transact in it. But why would anyone ever cash in a bitcoin? Or even part of a bitcoin - as the economy grows you gain value through doing nothing, thus the economic growth will be slowed, if not halted completely, because of the deflationary pressure that holding has.
I'll give you an example. A Ferrari costs, say $200k. At $20k per coin a Ferrari was 10 bitcoin. But now it's $50k a Ferrari is 4 bitcoin. You'd have to be mad to ever use a bitcoin - you'd be better off just borrowing at near zero interest in $. And that is why it's not a currency and never will be. Maybe it'll be a long term store of wealth. Maybe. But that's a big punt.
Yes I agree. You are preaching to the choir:-)
Simply stated, Bitcoin is absorbing a lot of the spare currency units coming from currency debasement injections. Remember, the discount rate used in evaluating investments has crashed from perhaps 10% ten years ago to about 1% now, so all kinds if dumb or risky things look like an investment because of the even worse alternatives (e.g. negative yield bonds).
For people with only a limited grasp of history, the Bitcoin alternative looks great. It is not accident it is usually the young (thus inexperienced) who are going for this.
Bitcoin is a form of fiat money and as Voltaire said "Fiat currency always eventually returns to its intrinsic value--zero."
https://mothership.sg/2017/12/bitcoin-is-biggest-bubble-dutch-tulip-mania/
When the price of money is zero, and assets are priced on money - what value assets?
You are presumably conflating money with currency here? When a currency goes to zero, assets priced in said currency also collapse. A good example of this was in 1720 in France thanks to Mr John Law, French stocks got wiped out. 1 oz of gold bought a hotel in Germany when their currency collapsed or a nice apartment in Recoleta BA in circa 1989... As Mr JP Morgan once said, "Gold is money, everything else is credit".
I meant more that when interest rates are the tool to price money, and they are zero or less, how does one value assets with fiat?
The hole in this thinking is that it will only go up, forever. It has had some ferocious bear markets by 'normal' standards. Will its scarcity be the sole driver of future returns? Is that the sole driver of current returns? If it reaches wide spread adoption, what happens to its volatility? Would it stabilize? How sustainable would it be then? What if a better 'thing' comes along? What if it reaches $1m and then barely moves? What if it goes back to 10k or zero? Like asset management now, the future is a moving feast. Investment in one respect to me is being able to accept the unknowns in comparison to the alternatives and their unknowns.
Is it still true that the blockchain can be rewritten if you control the majority of mining power? What percentage is in China?
No and yes. The Bitcoin blockchain is immutable, it can't be rewritten once committed. However, if you control the majority of miners you can select which of several double spend options you want to commit.
Yes, the majority of miners are in China but they're not government approved, they're private outfits who are pretty peripatetic, always looking for the cheapest electricty. China is more focused on its digital yuan, which is the most interesting of the various Central Bank Digital Currencies around (it permits person to person payments, if anyone's interested).
Roughly 18 million out of 21 million Bitcoin have now been mined, but it'll take until 2040 to mine them all. Once that's done then Bitcoin would have to move to a transaction fee model to get anyone to approve transactions.
Ultimately Bitcoin will probably fail due to technical obsolescence - changing anything is really difficult due to its decentralised nature. But how long that will take - who knows? A breakthrough in cryptoanalytics would certainly be a problem, but quantum computing has been threatening that for a long time without delivering. Or maybe it has, and NIST and the NSA aren't telling us.
Is it a bubble? Hell, yes. The inflation in all cryptos, many of which are dodgier than Del Boy with a suitcase full of knocked off DVDs, tells us that. It doesn't, however, tell us anything about where the price of Bitcoin will eventually settle. Ultimately that will probably be determined by regulators and the willingness of real-world companies to accept it.
The sheer volatility of Bitcoin has made it unusable for anything other than speculation up to this point. The interest of payment schemes like Paypal and Visa in it doesn't tell us much - they make their fees on transactions, not on the underlying market value. The interest by the likes of Tesla, well, that could be different. If fiat currency breaks down somewhere significant then that too could be a driver.
It's fascinating. As seen from behind the sofa, through fingers ... :-)
timarr
Quantum computers are currently too expensive. You can get Azure or AWS to replicate quantum computers but it’s probably not yet worth the cost to target cryptographic, plus I should imagine the platform owners are very much alive to this and won’t allow themselves to be abused in this way.
Won’t be too long before the compute power to replicate quantum computers, if not actual ones, will be cheap enough.
As you allude, very likely big, approved, gov agencies are already doing this though - the tech is available.
I might be being thick with bitcoin but the fact is you can make up another cryptocurrency at the drop of a hat and if you can do that then the value of bitcoin must surely be 1 away from f all.
I had a quick look at the values and saw one I'd never heard of called Polkadot which is described on wikipedia as 'a heterogeneous multi-chain interchange and translation architecture which enables customised side-chains to connect with public blockchains'. This has gone from being worth exactly 0 in August 2020 to $31 billion at todays special value price. I like a heterogeneous interchange as much as the next person but this is clearly ridiculous.
Or as I said - I might be a bit thick.
For me professing that Bitcoin is a certain bubble or alternatively passionately arguing that it is an extremely important fiat currency alternative both miss the point.
The reality is that we are in unknown territory and still have too little historic information to really make any sort of prediction with any level of credibility. The whole digital currency thing is in its infancy as far as economics is concerned.
What we have seen is a fairly consistent increase in demand for digital currency over a what is a historically short period of time. Like most early stage markets we have seen euphoric peaks and crashes accompanied by periods of consolidation/stabilisation. Still far too volatile to be considered a currency but that doesn't mean it won't become one in the future either.
It is finding increasing adoption by forward thinkers / mavericks* (delete as appropriate) and has now had enough peaks and troughs to suggest it is here to stay. But Central Banks clearly haven't got their head around it yet either, so there is a real potential tail risk that it eventually gets strangled by the worlds regulators.
This uncertainty is precisely why a number of smart and wealthy investors are committing small %ages of wealth to digital ccys. Not enough to be dangerous to their wealth but enough to take advantage of it if it continues. Personally I have followed that approach. I cannot profess to know the ultimate direction of digital currencies - we have too little information.
Sold out of my position in Ig Group (LON:IGG) just thought with market conditions getting toppy, the light at the end of the tunnel with vaccination, their recent acquisition, that frothiness may take some of the shine off it.
Bit worried about the legislative creep on Buy Now Pay Later stocks, which may I understand include Boohoo (LON:BOO), and suspect their acquisitions may prove rather less straightforward than supposed, but will hold .
Does Ig Group (LON:IGG) not benefit from the whole volatility in the market?
I sold earlier, on the way down, but after going up and down twice I just decided to take the £££ and work out what happens later.
A good company, not sure about the acquisition...
For me I knew we were in a bubble when someone appeared on the Martin Lewis money show and asked if she should invest in bitcoin. Martin said it was a gamble and doesn't recommend it, unless she was happy to lose her total capital. She obviously had no investing history to her and when asked whether she would invest knowing it's a pure gamble she said "yes I will".
Just wanted to come back on the accent point - it can be very difficult for native speakers of one language to acquire an authentic accent in another. It is a function of the person themselves but also the proximity of sounds in one language to the next - or rather the native versions. For instance - it is easier for Irish people to pronounce the fricative j and rhotic r sounds of Spanish than it is for English people because Gaelic contains those sounds. In my experience people can hit a wall with accent improvement early in their journey that is impossible to improve upon
Can anyone explain why is (LON:XPD) XPEDIATOR has risen 19% today? There is no RNS.
Xpediator (LON:XPD) seems to be an Investors Chronicle tip.
Thanks Herbie
Xpediator (LON:XPD) listed in this week's Astro Almanac. (Too bad I didn't buy it!)
I still believe there is a lot of misunderstanding about Bitcoin which is truly a fantastic bit of decentralise technology and I believe one of the most exciting "currencies" today on a theoretical level.
But Roubini mentioned something that I am not sure many people will have picked up on. Tether or USDT is a stable coin that in theory has a 1 to 1 peg with the USD. For every Tether they "print" there should be a deposit of $1. The New York Attorney General is gunning for Tether, but they have been delaying complying and at the same time ramping up their printing more and more Tether.
For example, yesterday I saw about 300 million dollars in Tether generated in a few hours.
The scam is simple.
Print billions of Tether, buy Bitcoin or Ether or anything really.
Sell and get out of crypto.
The bubble is because of Tether, and when that crashes then Bitcoin and everything else will crash and the bubble will be over. but Bitcoin will continue.
Wrong. Tether is one of many stable coins and are primarily used by cryptocurrency exchanges who do not interact with the fiat system - they do not use, receive or send dollars or pounds at all. Tether is the vehicle by which you get funds to these exchanges. Quite simply, tether is a leading indicator for demand for crypto currencies - nothing more.
The tether FUD has been debunked so many times, yet people still parrot it. Feel free to research more - this is a starting point https://danheld.substack.com/p/dont-fear-tether
It's not the forum to debate this but I don't think it's debunked at all. Dan Held does a good job on trying to counter https://crypto-anonymous-2021.... but I don't believe he does fully. Both articles are interesting reads.
House prices are in a bubble in certain areas aren't they?
If you compare what the average persons house is worth relative to their earnings I would think for a good percentage of the population in London that they would not be able to afford it if they had to buy today. People buying today either have the benefit of equity gains from previous property, or BOMAD.
Yet anyone articulating this would be slagged off, and be reminded that they have been wrong for the past 10 years, and they would be implied to be bitter because they had missed the sweet gains.
I think house prices are too high myself and way out of kilter, however, I don't really see any one event that is likely to materialise to make it pop and instead the steam will be let out over a longer period by price rises being lower than inflation.
I think the key differences with houses is that they have utility, and depending what you want in a house or where you want it they may be locally scarce. I want (and am fortunate to have) a pleasant house with a nice garden and nice neighbours in a reasonable area within walking distance of shops and parks and schools that the kids could walk to. I want this regardless of whether it goes up or down in value.
On the other hand, I have absolutely no inherent interest in owning the rights to some computer-generated number. I only want this if I think that someone else will buy it from me for more in the future. It has no inherent value to me.
I don't disagree with what you say about house prices being too high and way out of kilter, but IMO that is more from the viewpoint that it is very unfair to the younger generation who don't have the benefit of BOMAD, and probably would like the option of being able to afford a pleasant house. I don't think house prices can be called a speculative bubble though since until supply exceeds demand then realisically we will all do what we have to in order to afford one because it has utility to us, not simply to sell to a greater fool.
I believe that many young people will inherit large sums of money from their parents and grandparents which my generation did not. We started from nothing and have built up wealth by hard work, saving some of our income and investing it carefully. Every generation has its challenges and they start off better equipped to meet those challenges than my generation in my experience.
"I believe that many young people will inherit large sums of money from
their parents and grandparents which my generation did not."
Tony the goverment gets most of it, if you own a house or have assets you have to pay for your own care, my mum is sadly suffering with alzheimer, her care cost £30,000 a year funded via the sale of her house, there are cheaper options but nothing below £20,000.
Theres also inheritance tax etc to pay.
What I wonder about is the current generation who are priced out of the housing market, there will be no goverment pension for them, it looks like baby boomers will be the last to get that. private pensions look pretty poor, you cant even choose which one you want as your company picks it based on there needs not yours.
generation x are heading for mass poverty in old age.
"I think that based on salaries house prices are very irrationally priced."
House prices are no longer based on salaries but effectively more on affordabilty and with interest rates low people can afford larger mortgages, it feels like eventually we are heading for a japanese system where mortagages can last 100 years and the home, encumbered by the mortgage, is passed on with the mortgage.
The bitcoin discussion is interesting but it spells out for me I dont understand it so wont be investing. I dont understand the demand, why has the price risen so much, where is this demand coming from is it just speculators, also who is the end user what can you actually use it for, it can just be criminals can it?
Tony the goverment gets most of it, if you own a house or have assets you have to pay for your own care, my mum is sadly suffering with alzheimer, her care cost £30,000 a year funded via the sale of her house, there are cheaper options but nothing below £20,000.
What about the 85% of over 85's that arent in care - or the individuals that unfortunately pass away before their time. It's a shame the govenment completely bottled it and didn't offer the option of paying your 30k , 50k or whatever to put that issue to one side - but i would guess the majority of individuals who acquire the excess wealth will manage to pass a fair chunk down the ladder when they reach the end of their time? - that is a presumption i must admit.
Being honest if i am in care and need to pay someone to house me and look after me and feed me i would not be pretending that the money goes to the government when paracticably speaking most of the money is going on my direct upkeep costs.
Theres also inheritance tax etc to pay.
Is not potentially 650k tax free enough or 325k if there is one parent? i want to be having the problem of paying inheritance tax as that means there is a very generous chunk of inheritance being paid out.
What I wonder about is the current generation who are priced out of the housing market,
Are the current generation really priced out the housing market or do they have of aspirations of living in either too nice an area - or not want to put in the hard graft needed to get their own home or want to have a nice flash car / new mobile and holiday first?. Obviosuly anyone who lives anywhere near the capital will serious be struggling but surely there are plenty of available options here if young uns really want to prioritsie getting on the housing ladder - unfortunately that may involve moving somewhere where the options are better but thats probably to be encouraged if there is more deamn than supply in an area. Being frank the young ones of today with low interest rates - help to buy - cash assed to isa and potential bank of mam and dad may have never had it better.
Being frank the young ones of today with low interest rates - help to buy - cash assed to isa and potential bank of mam and dad may have never had it better.
Average wage to average house price ratio in 1970 = 2.4
Average wage to average house price ratio in 2021 = varies between 6.1 and 11.87 depending on if you live in NE or SE.
Them kids. They've never had it better.
When I was young interest rates fluctuated between 7 - 15% so newly married but working in London, we moved out 50 miles to buy a house that we could afford and put up with a daily commute which took 1-2hrs. It wasn’t easy even then!
Add in the burden of student loans to that. I left Uni with no debt whatsoever. There's a huge inequality between the luckier kids with parents who can help with paying off debt and gifts of house deposits and the majority who have to make their own way.
But interest rates were much higher in the 70s and 80s, also you could not borrow so much. So in those days a lot of your money was going to pay off interest not capital. You could only borrow around 3x the main salary. Early 70s rates were around 7% rising to around 17% in 1979, these rates were also common in the 80s. Taxes were also a lot higher especially on the lower paid.
If you belong to the boomer generation then your contemporaries benefited from free education, decades of high post war economic growth, well paid secure employment opportunities, affordable property and rents relative to income, national economic protectionism and generous defined benefit pensions. Subsequent generations have not enjoyed some/all of these benefits and would have found it harder to accumulate capital without gifts or inheritance.
Is all that really true Momoko?
By free education I guess you are referring to university. Well, it was only around the top 4% who got the opportunity to go to university so the vast majority of the boomers didn’t get that.
Decades of high growth and well paid secure employment - that’s not how I recall the 1970s.
Housing and rents - agreed more affordable. However, things like foreign travel were much less affordable until the advent of low cost airlines.
Generous defined benefit pensions - most private sector defined benefit schemes had their benefits progressively eroded by changes to their terms over the years. While it is a generalisation, much of the public sector does still have relatively generous defined benefit schemes.
House prices are high because supply and demand, also interest rates are very low now. When I bought my first house, interest rates were around 10%, soon to rise to 15%.
Land is scarce in England, especially in the south east region which has a high population density.
Yes in some areas they are looking too high, this may correct soon as demand will change, I hear a lot of people are moving out of the cities, now they can work from home.
If there is a recession and high employment then we will see a correction.
Hi Snoo
I think that the points below are good, there are many reasons to wonder on house prices as the factors that drive it are many and complex.
Yes there is a bubble in terms of first time entries to the market and the average person who does a normal job (is the mean salary about £25,000 currently?) which is more than my wife earns with the NHS in a full-time graduate position. So what can a working couple with family actually afford to buy really if they are not getting parental/grandparental support in terms of cash, childcare etcetera?
So my worst (and that takes some doing) investment decision was to sell a two bedroom terraced house between Leytonstone and Stratford back in 2010. This money was eventually used as the deposit after several moves of jobs, location etcetera for us to buy our first family home in 2014.
So since 2014 there has been minimal move in house values where we live, but the house I sold appears when I look at Rightmove to have >100% rise in value. Big ouch as an investor. So the 2 bed terrace, about 15 minutes walk from the tube on Zone 3/4 border, with tiny yard is worth more than a 4 bed house with reasonable garden etcetera? Supply and demand.
Would I move back to London, not if I had a choice, but I do not save never. We have what we feel is right for us all right now and for what we can see in the future. Yes the schools could be better, the girls bedrooms a bit bigger, being able to chop down the trees in the garden (protection orders) would be good, but overall a nice area to live and grow up in.
The new builds on the edge of town are smaller, less garden etcetera but worth more than our house, I guess new build premium? And I do wonder if people will ever pay off the mortgages on these or just go on paying until they are beyond retirement?
All a bit of a waffle
Tommy
ps. I hold!
Of course, there are many factors - it is too simplistic to say otherwise.
I think that based on salaries house prices are very irrationally priced. But if this was the only arbiter they would have collapsed long ago. There is an element of speculation in it all - if you visit any newly completed block of flats in London I reckon many are owned by investors - that is speculating that rents and values will continue to be good.
I think the point being that things don't need to have intrinsic value to be stupidly priced. Certain bottles of whisky in 2010 with a starting price of double figures can now be worth four or five figures, that almost approximates the trajectory of Bitcoin. Those things have little value either, as once they are opened the value disappears.
I'm ambivalent on BTC but I do believe the best way to regulate the markets is to let some things fail once in a while. I doubt that Wallstreetbets will be trying short squeezes any time soon, for instance because of what happened to GME.
Like the whisky example, if people want to pay stupid prices, who really cares? You'd probably only go on Youtube denouncing it as a bubble if you had some vested interest in the price going down.
A good Scotch will always be able to be opened and enjoyed, whatever its value, but Bitcoin has no intrinsic value whatsoever. People using Elon Musk, of all people, as evidence of Bitcoin going mainstream are surely kidding themselves, and institutions will buy into bubbles just as any other investors do when they see momentum. Roubini's arguments are compelling (and so what if he has an accent...).
How quickly everyone forgets how wrong we all can be.
B2V
A fund manager survey from earlier this week....investors taking higher than normal risk.
With the probable popping of the US market bubble. Does anyone have a view on how PGM's and industrial metals will play out?
The BBC report that the Supreme Court have ruled that Uber drivers are workers and entitled to holiday pay and minimum wages. Big implications for the gig economy.
massive implications for the gig economy
Here's the recording of Wednesday's Stockopedia / piworld StockSlam. 10 best stock pick ideas from 11(?) investors, (including Ed & Scotty!). Bite-sized 3 minute nuggets, from which to do your own research. Extremely informative, and fun!
Video & Podcast.
03:35 Caledonia Mining (LON:CMCL) – Damian Cannon
10:10 Unite (LON:UTG) – David Brunsdon
17:15 Rws Holdings (LON:RWS) Holdings – Nick Cotton
23:27 Braemar Shipping Services (LON:BMS) – John Sladden
29:13 Renold (LON:RNO) – Paul Scott
36:07 Sdi (LON:SDI) – Rebecca Stewart & Tamzin Freeman
42:11 £CBOX– Ed Croft
48:52 Gear4music Holdings (LON:G4M) – Martin Flitton
55:52 Halfords (LON:HFD) – Diarmuid O’Hare
01:02:44 Atalaya Mining (LON:ATYM) – Edmund Shing
Bitcoin: totally separately, last week we spoke to Charlie Morris on how to value bitcoin, and many other aspects. He says it comes down to inflows and outflows. The current inflows aren't enough to sustain a $50k bitcoin, yet. See the video or listen to the podcast.
Hi Tamzin,
I just wanted to say thanks to you and Damian and all the stockslammers and anyone else involved in producing Wednesday's StockSlam - I thought it was brilliant. Really interesting, particularly the shares which I wouldn't go anywhere near! This includes Halfords (LON: HFD) - my wife is managing director of a small community cycle workshop and they are constantly having to fix bikes that people bought in Halfords and which weren't correctly assembled by the Halfords staff. Halfords don't employ qualified mechanics so not only are the store assembled bikes not good, but the after sales service is very poor. So it's hard to see much customer retention. In other bike news that seems to have broader implications for commodities, the cost of some bikes (e.g. Trek) is going up over 20% this year because the raw materials (rubber, steel, aluminium etc) are so much more expensive.
Thanks. You say the chat on SDI is at 36.07 but the video and podcast are only 34 minutes long. Am I missing something?
Yes the podcast is over 1 hour long. The time looks correct.
The double act was the best pitch I think!
G4M and TUNE both excellent companies. I just wonder whether the trading momentum and valuation will continue post lockdown.
personally I started trading stocks by phone in the 90s and learnt a lot over the following years including the dot com boom and bio tech boom of the Same period
Learnt the hard way the benefits of diversification and have since always held different asset classes at the moment my holdings are spread across
shares
tech and bio investment trusts
Private equity
ETFs and other real assets
Emerging markets
Small amounts in precious metals and Bitcoin/Bitcoin related shares
Used in this way Bitcoin is just another asset to diversify your exposure across asset classes
In my study I have a little tin with some bank notes my grandad brought back from WW2 including some notes for millions of German marks
This and rereading “When money dies ”(the original book) reinforces the need to always being diversified and how people who thought they where living a comfortable life and thought they would never be poor where left with nothing
The Jews bought gold, diamonds, and works of art to fend off hyper-inflation. Look what happened to them after the crash of the Weimar Republic if they didn't up sticks in a hurry. Just a thought when the upwardly mobile have Lear Jets.
Like it or not many investors do own Bitcoin involuntarily through stocks owned that have invested in it i.e. Tesla,Square, SMT etc. The worst part of this is that the CEOs of these companies had no authority to hold Bitcoin or derivatives from their shareholders. Musk raised capital in late 2020 to fund industrial facilities for car making and then puts $1.5 Billion in Bitcoin. This stuff is pure shambolic and could easily be brought down to earth by Tax Authorities around the World requiring all sales and purchases of Cryptocurrencies to be reported by the Financial Agents involved immediately to the State Tax Agency. See then where Bitcoin etc stands in the real World that the majority have to contend with - paying our taxes as due on transactions and assets acquired/sold!!!
Michael Saylor CEO of Microstrategy exchanged US dollars on their balance sheet for Bitcoin because US Dollars are being created at a rate of 20% new a year at the moment. You have to create 20% value with your business or you are falling behind and losing purchasing power. HE stated 'cash is a melting ice cube'
This is why he decided to steward his companies capital more safely by placing it into something that is not being debased.
It's all explained carefully here -> https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/MicroStrategy%20Adopts%20Bitcoin%20as%20Primary%20Treasury%20Reserve%20Asset.pdf
Currently he's looking very clever however I can see a number of scenarios. 1. If many other organisations follow it will be very easy for Governments to bring in some form of legislation/tax to control it. 2. I would not want to be the CEO/advisor facing the questions if it tanks. 3. Owning Bitcoin hardly sits well with the ESG rules. 4. I do hope he and his advisors didn't already own bitcoin before they made this move.
That just massively oversimplifies subjectively selected information in order to support the contention that buying bitcoin is the same as “stewarding.” It’s equally simple to present a case to show that buying bitcoin at the current price is very far removed from the generally accepted definition of stewardship.
It's no wonder that some funds are cutting their holdings in Tesla.
Bitcoin is a gamble.
In a way Musk is the human embodiment of the Bitcoin, and all other cryptocurrency issues. Notwithstanding his achievements, in financial terms his conflated worth is not grounded in reality, it is buoyed up by intense speculation.
Ragusa
Tsla
The worst part of this is that the CEOs of these companies had no authority to hold Bitcoin or derivatives from their shareholders. Musk raised capital in late 2020 to fund industrial facilities for car making and then puts $1.5 Billion in Bitcoin.
Is this factually correct or just a conspiracy theory of yours ? - what evidence do you have that Musk did not have authority to buy the bitcoin.
Read what I said in the post. I held all of the companies mentioned and not aware of any approval by “shareholders”that they could hold Bitcoin or derivatives thereof. If you are aware of such approval then please advise of same. Maybe there is approval that you know about?
Tesla stated that the capital raise was for car making facilities. Don’t recall a stated use to buy Bitcoin. Tesla has low FCF as it is only modestly profitable and capex is sizeable. So the money for $1.5 billion Bitcoin had to come from the capital raise. Remember the non-existent $420 Saudi share offer and fine by SEC, the refusal to apply Covid-19 restrictions at the Fremont plant and recently Dogecoin trivia. So it does not matter what you press release to shareholders any more. Amazed that BGifford is accepting this as have great regard for them. Without some adherence to the rules everything goes out the door.
Bitcoin - everything you don't understand about computers combined with everything you don't understand about money.
I feel that Roubini is missing some perspective on Bitcoin, and perhaps Paul is too.
I agree with Roubini that Bitcoin as a retail transactional unit of account is not feasible due to the low numbers of transactions per second, however (as his interviewers allude to) it is a useful for wholesale B2B transactions for large amounts. I agree with Roubini that KYC AML checks must be strong to prevent criminals from benefitting.
Now onto what I disagree with:
A store of "value" is only given when people agree that it has value (same as fiat currency), and the market has already spoken on that. Roubini agrees that gold is a store of value but I think he misses that jewellery and industrial application only makes up about 50% of its inherent value, the rest is the market using it for the same reasons it is using bitcoin, but Roubini does not given Bitcoin and Gold any equivalence at all which I found slightly disingenuous. Also, Bitcoin is similar to gold in that it becomes progressively harder to mine which decreases it's supply over time.
Roubini says the valuation in Bitcoin is a bubble, but isn't it now being used as an viable alternative to gold by many businesses and high net worth individuals as inflation protection. This would also explain why gold value (and gold miners like Centamin) have been dropping.
Out of all of the companies that you have shares in (and therefore a share in the ownership of their excess cash) why wouldn't you want some of them to put a small percentage into Bitcoin as a mixture together with short term loans, gold etc to protect against inflation. I think the same could be argued for your own money.
As always, if the facts change then I reserve the right to revisit this opinion :)
Gold miners and gold aren't dropping because HNW individuals and businesses are using Bitcoin as inflation protection. Gold is dropping because yields on bonds are rising, giving people and organisations a long-term alternative. Around 95% of Bitcoin is owned by 2% of users. Prices for BTC are rising due to mania and lack of liquidity.
"Around 95% of Bitcoin is owned by 2% of users. Prices for BTC are rising due to mania and lack of liquidity."
Both Completely UNTRUE. I have to laugh but i can't see such falsehoods and say nothing.
Yes the 2% part part is incorrect, one person does hold around 1m, said to be the largest holder.
However there are only about 2.35m out of 21m bitcoins left to be mined.
what happens when all the bit coins have been mined ? how then would the computers mining, which is effectively maintaining the block chain, to be rewarded ? is it just assumed that bit coin will keep increasing and thus a smaller and smaller amount of bit coin will be needed to reward the miners ?
Hi Kenobi - Bitcoin mining
Equally - What happens when the last oz of gold is mined?
It never will be.
The sea contains loads of it. It’s just too uneconomic to extract. If the price goes high enough someone will work out how to do it at a profit.
Miners get paid in Bitcoin (BTC) for their efforts, so it only works if the price of BTC is > cost of mining. This for me is a key vulnerability, as if the miners don't get paid enough to recoup real-world costs, they're out and the blockchain freezes. If the blockchain freezes, your coins are suddenly worth nil, you can't transfer them.
I believe that miners still get 6.25 BTC for solving a block, which today means ~ 6.25 * $52,000 = $312,500 which is why they spend vasts sums on kit to out-race each other in solving the hash value to enter a new block.
When the BTC cap is reached, at that point the miners won't be paid with new BTC coins. I suspect what will happen is they will then be paid via transaction fees attached to a new block. So, to sell your block you will have to pay this fee in order to get the miners to add it to the blockchain. i.e. give away a fraction of your BTC as a transaction cost.
I appreciate though that people who bought BTC at the lows have done very well, although the question is always when to jump off the train. Best while others are clambering aboard.
Gold dropping because "the market" erroneously believes that interest rates will rise. The US 10 year won't go much higher, you will see yield curve control holding it below 2%.
Agreed. I think a good part of the Bitcoin volume is simply the Whales trading back and forth, perhaps not even taking any price risk by moving it between two accounts they control. That virtue of anonymity cuts both ways in terms of understanding what is happening. That further says Bitcoin is just a Ponzi asset and people are not even using it to buy the proverbial million dollar pizza.
"...A few large holders commonly referred to as whales continue to own most Bitcoin. About 2% of the anonymous ownership accounts that can be tracked on the cryptocurrency’s blockchain control 95% of the digital asset, according to researcher Flipside Crypto." Bloomberg Source
Deleted due to misread.
He said "handily" not "hardly".
Morning Paul, first post from a new investor, I just want to thank you ( genuinely) for your frank and candid comments. For passing on the harsh lessons you’ve learnt to people like me .. who hopefully wont make the same ones!! P.S The SCVR’s ain’t bad either ;-)
I am afraid Roubini is rehashing old arguments against Bitcoin. There is a lot of speculative money chasing crypto currencies. The danger for the world economy though is if punters are borrowing money to invest. Would the collapse in the Bitcoin price endanger the banking system?
On Bitcoin, I found it interesting that very recently Nassim Taleb (of Black Swan fame of course) has now turned against the cryptocurrency, having previously been a big proponent of it. He has been selling; much to the disdain of the rather toxic twitter cryptocurrency culture (seems more like a religion to them than a currency!). The main observations seemed to be that it has been hijacked and is no longer aligned with original vision; it's far too volatile to be used in consumer transactions and is too tractable for use as a store of value. I suspect he sees heavy regulatory action coming down the road, which at this point seems unavoidable as far as I'm concerned.
Sounds like pump and dump.
Taleb shared only one criticism of Bitcoin “You can’t price goods in BTC” stating it is too volatile. If he thinks the ascent of a new monetary asset should be linear and non volatile like the life of a turkey leading up until Christmas - then that is his mistake. Bitcoin displays classic ‘anti-fragility’.
Bitcoin is repeating the same adoption cycles of bull and bear markets we have seen since for 11 years. It’s been called a bubble every bull market since 2010. And that will continue by people that have done their research. See this Bitcoin log chart 2012 to now.
Roubini has been wrong on Bitcoin since the price was in double digits, it’s embarrassing now. He’s nothing but a broken record repeating the SAME logical fallacies that are easily refutable if you simply spend a small amount of time to investigate or learn.
You could listen to Stan Druckenmiller or Paul Tudor Jones or Paypal CEO or Jack Dorsey or many others who value Bitcoin and give a different point of view to Roubini.
Regulation has already happened with Bitcoin, regulators globally are working with Bitcoin to promote and support it’s integration into the existing financial system. If you aren’t paying attention you wouldn’t know this though.
I wrote about Bitcoin here at Stockopedia early last year https://www.stockopedia.com/co...
And again in Jan 2021 https://www.stockopedia.com/co...
These articles should serve as a good primer to introduce people to Bitcoin from an investing stand point.
The reason I write is not because people on Stockopedia has any effect on Bitcoin price, that’s ridiculous – it’s a near $1 trillion market. I write because I am passionate about a topic so many people completely miss the boat on. Bitcoin will become as important and ubiquitous as the internet and I don’t want the UK left behind. Countries like USA and Singapore are already miles ahead in this new industry.
Why would 'regulators' want to integrate a digital cryptocurrency into the world economy? The US does not want a competitor to the dollar as the world's reserve currency, and China is developing it's own digital yuan wallets (that are pretty terrifying when you consider it's human rights record) that are v.likely designed for social control as much as financial control. Neither want a cryptocurrency to undermine either effort.
indeed it’s the Chinese DCEP that should be the main concern of everyone in that it poses a major threat to world financial markets as we know it. Did anyone listen to James Aitken on a fairly recent Grant Williams podcast discuss this ?
"Bitcoin will become as important and ubiquitous as the internet"
Anyone prepared to make grandiose assertions such as this immediately lose credibility in my eyes. You seem to think you can see into the future, a trait common amongst the cryptocurrency acolytes, but maybe not surprising for a movement swept up in so much hype and hysteria.
I work on the basis that I know nothing about what the future will hold, but try and make risk adjusted bets on what might happen, at least this way I'm protected against the worst transgression, being both confident, and wrong.
As for Roubini, it seems to me that the most common argument used against him is simply the fact that he said Bitcoin is worthless, and yet it has gone up in value. Problem is this fact alone does not make any of his points objectively wrong. I've not heard any Crypto proponent explain how to resolve the vast and growing energy use (waste?) of crypto hashing, or any explanation as to how to prevent mass financial fraud and tax evasion, if the cryptocurrency was ever more widely adopted.
Seems to me that Bitcoin needs to do a lot more than just make a (relatively speaking) very small number of people quite wealthy, for it to be welcomed as the next saviour of the human race. I think blockchain technologies have a lot of potential, but Bitcoin as a global means of exchange and/or store of value similar to hard assets like land and commodities? Doesn't quite add up to me I'm afraid, Bitcoin is just not good enough. Maybe there will be a digital currency in the future that will be a better fit.
Wrong. There is plenty written about Bitcoins energy use and how it's incentivising renewables. Heres just one link for you https://www.coindesk.com/the-last-word-on-bitcoins-energy-consumption
Wrong. Roubini flat out repeates the same logical fallacies. It's honestly tiring to keep replying to them- i simply signpost to you that they are incorrect and feel free to find out why. Hopefully i provide a lone counter voice to the bearishness and anti Bitcoin sentiment on Stocko.
Correct - we need to be humble and noone knows the future. I do know that many people said the internet was the future in 1995 but were derided. I do know that i have been consistently right on Bitcoin for several years now so i trust my own judgement.
And yes - investors should allocate Bitcoin within their portfolio according to their own style and risk appetite. Going back to my first article - Bitcoin is such an asymetric bet, that you only need a small position to make it very worthwhile if people making absurd sounding claims about the future are even half correct :-)
"Wrong. There is plenty written about Bitcoins energy use and how it's incentivising renewables. Heres just one link for you https://www.coindesk.com/the-last-word-on-bitcoins-energy-consumption"
That is one of the feeblest arguments ever. Written by a chap whose livelihood depends on crypto blockchains. Confirmation bias in all its glory in the bitcoin realm (again).
For example:
It ignores the huge co2 emissions from constructing concrete hydro plants.
It ignores the fact that using hydro power to mine crypto means that hydro can't be used to displace China's huge coal plant fleet.
etc etc etc.
One of the requirements of owning bitcoin is to constantly ramp bitcoin.
It has zero utility and is environmentally toxic. Musk should have spent the £1.5bn on Covax.
Last word for those that can't see the forest for the trees.
Microstrategy, a US publicly listed company put $600m into Bitcoin late 2020 explained eloquently a d fully by their CEO for anyone who cares to click the link I shared.
Since then, other public companies Square, Marathon, Tesla have followed suit.
Microstrategy held a 'Bitcoin for Corporations' event a couple of weeks ago. They had 15,000 attendees.
We see the CEO/CFOs of Uber, General Motors, Twitter all being asked if their companies will put Bitcoin on the balance sheet during live television interviews.
We have PayPal, Visa, Mastercard all integrating with cryptocurrency as we speak. All announced since 2020Q4.
I could go on and on....
But yes...probably nothing and likely going to zero.
Stan Druckenmiller owns a lot more gold than he does Bitcoin.
https://www.indigopreciousmeta...
Gold is still his largest position in fact...there are a few interviews of him pointing this out.
Stan is the world's most successful trader beating even Buffett's average annual returns. He is a trader and trading Bitcoin for guys like Stan probably represents a pool of dumb money to harvest through via market manipulation tricks and simple better training and knowledge. Even BTC proponent Raoul Pal said that trading Bitcoin feels like the 1980's before the High Frequency Trading algos showed up and eliminated arbitrage opportunities.
Bitcoin, like your arm, can reach all kinds of price targets if we focus at the max bid instead of the structure of the whole bid stack. As we saw with Cannabis stocks in 2019, these bids can evaporate very quickly when greed turns into fear. I think Bitcoin is sort of a perennial shiny Ponzi object precisely because it is mysterious and poorly understood.
Great synopsis paul of greed & fear, so easy to jump on the bandwagon due to fomo & envy without calculating the risks,you make an excellent point regarding "do i need to make more money .,Fortunately I'm at that stage now & can say I've bought stuff through boredom & chasing & it's cost me.A big part of my portfolio is just boring stuff like Ulvr.Gsk.Rdsb,Ko, Etfs,Reits,Inv Trusts,etc,etc.I spend a lot of time telling myself "i do not need to beat the markets",just need a reasonable return".One of my favourite quotes is Warren Buffet's Investing is simple but it's not easy.
To the newer and more worried posters on this board, I would say 'get rich slowly'. I'm a tortoise investor; I don't expect miracles, and am rarely disappointed when they don't happen.
According to my numbers:
FTSE is now 100% of 2007 year end ie about breakeven
My ordinary portfolio is now 322% of 2007 year end, and I've spent all the dividend income on living.
My pension is now 406% of 2007 year end where I've saved the income, and 307% where I've drawn down all my tax free cash to help the kids.
At the moment my favourite share is TCAP. Depressed post rights issue, does better when volatility is high, divi halved for this year only. In my view a significant part of financial services 'backbone' and likely to re-rate.
I have had a serious pasting on REITs, in fact my worst ever losses. Fortunately it was counterbalanced by private equity investment trusts. So I plod on.
Well done Paul for pointing out the risks; the USA market is at one of the three highest points in history. Not a time to take risk. I am pondering whether to take some money off the table, but then it will get eroded by rising inflation (soon to rocket?).
Well done Mr Roubini. Quite right too.
And well done Paul for your constant honesty.
What proportion of your portfolio is bitcoin ?
(only joking ! Post of the Day)
If people want to do crypto though a Revolut account card makes it easy, Bitcoin ethereal and others......commodities too...
i agree i think plus 500 is a brilliant play on all this volatility and increased retail participation . 2021 eps expectations look very low in light of 2020 (expectations are for half the eps of 2020). and in the meantime you get a nice yield and a special dvd. The high fcf yield makes it vulnerable for takeover
As long as you are aware of the Israeli tax on Plus500 (LON:PLUS).
Great video, best bear case for bitcoin I've heard.
Needed that, after watching a couple of Michael Saylor videos.
Always good to have some balance.
Not sure why anyone listens to a word Michael Saylor says to be honest, seems to me to be completely untrustworthy. Back around yr2000 he had to settle with the SEC over a fraud case and had to return something like $11m to clients. Also, any Microstategy (his investment company) followers should pay a visit to the companies long term chart, which through 1999-2000 looks like a railway spike, would bring tears to your eyes! History does not repeat but often rhymes etc etc. Caveat emptor
FWIW,
I have really really tried to understand 'Bitcoin', spent or probably wasted hours researching it because of FOMO and I am wiser but not wise enough to invest, if I dont THINK I understand it I dont invest . I thought I was getting there but the one of the problems for me is that until it gets to a stage where 'things' are priced in Bitcoin how can it be anything other than a speculative investment?? How can Tesla price their products in Bitcoin? One day the $40000 price tag would be 0.5BC and the next it would be 2.0BC !! I just dont get it or am I being really dumb.
Richard
You could say the same about gold no one prices things in ozs of gold either but many people see it as an alternative asset and if enough people see Bitcoin as acting in the same way it will have value that will fluctuate the same as the gold price (far more volatile at the moment I admit )
The BIS (the banker's bank) up until circa 10 years ago priced everything in troy ounces... They still do behind closed doors of course. The investment banks still monitor oil prices in gold and so on. The IMF of course are the 3rd largest holder of gold - I wonder why:-)
I take your point and hold gold as a hedge too all I am saying is that Bitcoin could end up being seen in the same way having an exposure of 1% of your portfolio and forgetting about it has a downside of 1% an upside of ?
Central banks aren't going to dump their gold and replace it with Bitcoin. The reason central banks hoard gold is so that if/when their fiat currencies start to fail they can back up their fiat with real money (gold). The USD has lost 98% of its value against gold since 1971.
30 years ago VHS or Betamax looked pretty good but technology marched on. Ditto for the ubiquitous 3.5” floppy disk.
There are over 10,000 cryptocurrencies now, Bitcoin was first to market but its underlying technology is lacking Vs some of the other newer “coins”. Most of the people pushing Bitcoin aren’t technical people and frankly haven’t a clue how any of it works. They just blindly seem to believe in Bitcoin in a religious like way.
Private Coins such as "Monero"or "Pirate Chain" are at least anonymous and don’t resemble William the Conqueror's Domesday books (that listed every cow,chicken, crop, land ownership in England) after he conquered England and wanted to know how much to tax the serfs.
Bitcoin is merely a Public Ledger whereby once the authorities have your address, they get to see all of your previous transactions…why would anybody other than big government want such a nefarious thing.
Alphaflight. thanks for your comment above. For me you hit the nail on the head for the case for bitcoin. "The USD has lost 98% of its value against gold since 1971."
Money in the bank is not safe, as it loses value every minute. I use my family's history of property purchases to remind myself of this. My grandfather bought his first house for £400. That was a huge amount of money in those days. My mother bought her first house for £4000. That was a huge amount of money in those days. I bought my first house for £40000. That was a huge amount of money in those days. By the time my children buy their first house, I will not be suprised if it costs £4m and that will be a huge amount of money in those days.
The clever people appear to be investing in bitcoin as fiat money might be the one that crashes. Fiat money certianly doesn't hold its value and the more that is printed, the more it is devalued.
Maybe we should all just put our cash in property as a store of value? Oh waiit, but there's always a fear of a bubble and the values plummiting.
"The USD has lost 98% of its value against gold since 1971."
I looked into this as it did not seem credible and the article I read said since 1913 not 1971.
herbie47,
As you can see from the below chart, there is a clear pattern here since Nixon closed the gold window in 1971.
Since 1971, fiat currencies have been losing lots of purchasing power. Most (98%) of the purchasing power has now gone when measured in gold.
"Other than the Japanese yen, the other major currencies illustrated have lost over 98% of their purchasing power, measured in gold: it is the peoples’ money being compared with that of their governments. [Before the introduction of the euro, the gold/euro rate is calculated on the basis of its constituents]". Source
Currency collapse has happened many times before throughout history. This time it is much more serious because all currencies are now non-metallic backed, Switzerland was the last currency to come off a gold standard (in 1980 I believe). So whereas in the past, if your Hungarian Forints or German Marks or Austrian krone ...et al were collapsing you could switch into another currency that was backed by gold, this time that is not an option.
OK it's right. But since 1980 gold has only gone up about 3x. Not sure what this has to do with Bitcoin which could just disappear.
I view crypto investing as a form of gambling however there is massive asymmetrical upside to be fair to the crypto guys.
(1) 1971-1980 (gold up 2,200%)
(2) 1999-2011 (gold up 760%)
I expect central banks will make a further mess of things and inflation will blow up. Negative real rates will go further negative which is of course good for gold. I may be wrong of course.
Gold is kryptonite to the financial industry so nobody likes it basically.
gari en desti,
Bitcoin is priced in fiat USDs...so that means if/when the USD finally collapses, your BTC will go to zero. It is not a USD hedge.
I would suggest that you read all the below article and then reconsider your thesis:
https://www.goldmoney.com/rese...
Hi Alpha. wouldn't Bitcoin need to be pegged to USD for it to go to zero if USD collapsed? Gold is also priced in USD, doesn't mean it will go to zero if USD collapses, in fact, the opposite is more likely and people will buy Gold and Bitcoin in this case to protect their wealth, which is what is happening now.
I reckon Nouriel Roubini would not work out well as a dinner party guest.
Re Bitcoin Paul, thanks for the comment. As you say, pity about the presentation. 'Lost in translation' is where I am . I had to turn it off. It was quite literally doing my head in! If you find a transcript please let us know!
Re Bitcoin Paul, thanks for the comment. As you say, pity about the
presentation. 'Lost in translation' is where I am . I had to turn it
off. It was quite literally doing my head in! If you find a transcript
please let us know!
Re the Roubini presentation on Bitcoin, if you can't understand his accent turn on the subtitles.
You do this by clicking on the cog symbol at the bottom right and selecting subtitles on.
YouTube's auto-generated subtitles used to be hilarious and bear only a slight resemblance to what was actually being said, but for this video they are very close to what Roubini is saying.
Thanks so much for that, gtrdave. These computers and services are wonderful things, arent they? In truth, you dont need much in the way of subtitles to get the meaning, do you? As for the hilarity, I could do with a bit of brightness anyway. Thanks again. Certainly for those who have understood him, he seems to have polarized opinions here!
Well he grew up in Italy so no surprise he has an Italian accent. I bet most of us would have a British accent if we spoke Italian. I found the American guy quite bad.
I got very used to hearing English spoken with different European accents. I was at a conference one day. A French chap starts his talk by apologising for his English. It was no problem to understand him. Because he spoke slowly, clearly and didn’t mumble. The next speaker on was a Scottish guy who made no attempt to modify his delivery for the international audience present. Unfortunately, he had very strong accent, spoke too quickly and mumbled.
Guess who I found easier to follow?
Roubini just spoke a bit too quickly otherwise no problem for me as I got used to different European accents. But I have found that there is a tendency on Bloomberg etc for everyone to speak too quickly. Do they think it somehow adds drama or excitement?
@GrahamF
My experience exactly. At one time I was in a regular phone call with people from Switzerland, Mexico, the Deep South of the US and Scotland. I had to run all the calls because I was the only person in the room who could begin to understand everyone. So whatever I thought I heard was what went in the minutes. It's worth making the effort to meet part way rather than just moaning about it.
At least in the video you can watch his lips move.
But I guess we're part of that international elite that the Brexiteers so disliked. (Still too soon?)
Two bete noires for me on accents, Dara O'Briain the comedian, and NewsNight's Kirsty Wark. Then tend to gabble in slushy English, like they are talking to friends in a pub, half way between mumbling and speaking. Can't stand it! Rant over.
Being a Scottish gentleman living in Wales and a Brexiteer to boot one feels duty bound to respond to Sassenach ‘elites’. One’s first posting abroad – to England – involved me communicating with persons in a place called Birmingham – jolly difficult to comprehend them at times 8-)
Re American guy - there were several, guys and gals. I guess you mean the older one. Yes, me too. Almost as bad as the Italian!
Roubini has got used to barking and being noisy. . If you listen for content or unique insight in this rant or the ones around the COVID crisis ( he got that wrong) , there is little. But he is good for glitzy television CNBC.
There will eventually be a well used and acceptable digital currency but it may not be Bitcoin which does not seem to lend itself to fast, small transactions. I think it has always been a good idea for investors to have 1% of their capital invested in these currencies and if you lose it all, so what. That happens with shares all the time. IOTA, for example, is intended to work in a completely different way and it may never work but if it does it will be worth a lot. Bitcoin does seem expensive and at this stage I would go for a spread of the lesser known ones. On the chart a breakdown below 30,000 is something to watch out for on Bitcoin but it is quite possible it could go to 100,000 before then!
Hey Paul....Happy Friday. Your stock market life story is interesting. When you say 'back to flat', do you mean back to the book value of your portfolio ie...the hard earned you put in?
Reason I ask is that I have not done too well in this market!!!! Yep not a typo. Why, how???? Well, I had lots of value stuff, caught a few falling knives, stayed on sidelines on things I should have bought and also just had some legacy rubbish in my portfolio. Recently I went for some in vogue stuff and now I am in a loss on that.
I find shares really hard to make money on. You make on one, lose on another. In this forum everyone seems to enter and exit and the bottom and the top.....wish I was there!!
I enjoy your column and find it accessible and educational.
I admire your honesty and I am sure you are mot alone.
I’m sure you’re not alone:) Thanks for your honesty
Thanks for posting this I have great sympathy in that I started investing for the first time late november after everyone seems to have made a fortune and have spent my entire time trying to get my head round this wild ride. So much makes no sense at all and you can be equally slammed on your safe choices as your bold choices whilst getting punished for not getting involved in the crazes as well. I set out putting together a portfolio to keep for 2021 which got me to -10% and then have almost become a day trader which got me to +3.5% early this week then been killed last two days to be back to -2% and they still talk of the big correction to come
You have to ignore the noise, only people who are doing well shout and so if you read it all you always get the impression you are doing worse than everyone else.
Its a long term thing, I started investing 10 years ago and probably 5 years ago much more seriously. The first 5 years I invested small amount (less than 50k) and basically lost over the timeframe but I learnt a lot through my mistakes and over the last 5 years have managed a reasonable 11% on quite a bit more than the original 50k.
Most the people who seem to know what they are doing have been doing it for many years and this requires a ton of patience.
and now back to 3.5% up having added 5.5% in a day whilst avoiding all the crazy stuff. Wierd.
Hi Racer78
Oh goodness, that is exactly how I started my direct in shares investing career (having previously tried collective investments such as AVCs in Equitable life, split capital investment trusts, etc, none of which ended well). Back in about 1999 I carefully avoided the feeding frenzy of the dot-com bubble by investing in value (having read a very small bit of early Buffet & Munger investing wisdom). When this did not instantly work I gave in to my FOMO and pilled into tech stocks, my largest holding being Marconi. My timing was perfect, getting in just before the crash after which I ended up with only a fraction of my original stake money left.
Fortunately for me the dot-com crash was the best lesson I could have had. It changed my investment style. Nowadays I only use a small portion of my portfolio to play with riskier fads (edit: but NOT bit-coin, I meant to imply early stage companies), and otherwise select what I think are safe quality shares that are consistently profitable over the long term, have sound balance sheets and cash flows. The sort of share where if the share price slumps, I think the dividends might still be there until the price recovers. I also have a foundation of ETFs that I don't worry about. I'm not a very good investor as I often get it wrong (otherwise I'd post here more often), but overall I sleep well at night.
In short, I hope it helps that a lot of people like me have been there, done that, got the tee shirt. Don't give up, it's those who stick with it and learn from mistakes that survive.
Racer78
With that record in the recent market you are entitled to be depressed but not to give up. You do not say if you are a trader or an investor or what your time frome is; I suspect you have been a trader with too short a time frame?
If you are not a stock picker - and most "professional" money managers fail to beat the indexes - then take the burden off your shoulders and pick some that do. I don't invest in funds but I am heavily invested in asset managers who make a very good living on the back of other peoples' money.
This is not a recommendation but below is a selection of my largest holdings: held for an average of about 8 years and currently see no reason to sell.
Apollo Global Management
Blackstone Inc
Polar Capital Holdings
Partners Holding
Intermediate Capital Holdings
Not everything in this sector has worked out for me, Aviva which I classify as an asset manager, has been a disappointment but hasn't lost me any money.
US Technology companies have also been very kind to me over the past few years: the rest of my holdings an undistinguished mixed bag of winners and losers.
It's the Asset Managers that have been the big winners and the stabilising bedrock.
I have to say I would not choose to be starting out at todays market valuations and would sit on the sidelines in a good proportion of cash. If the market does crash it will take everything with it but I will stay invested and stay calm. This is not advice; just the experience of an average investor, not trader.
Bonitabeach
Hey Racer
I echo your sentiments , as I sure a lot of investors do too, especially when you look at postings on social media (people rarlely post their failure stories!!). One thing i do know is you are in the right place for good advice, good leads (not tips, you have to research and make your own call based on your risk profile etc), and most importantly good financial data. It's a very valuable community for me.
I'm rubbish at reading balance sheets but the ranks and layout of each stock provides me a valuable structure to counter this lack of experience. It has really helped me turn my rather poor stock picking history into something that is working now. It took me 5years and several costly lessons to realise that and get here. I'm not a city hotshot by any means but my portfolio has massively benefitted. Not necessarily because I've made gains (as it seems anyone can in this market) but because I know the stocks I'm invested in now have either quality and or value.
Good luck with your portfolio and thanks for your honest post (It made me post my first proper comment since joining 6mnths ago)
Patrick
Don't worry, many had the same issues when starting out, if it was easy everyone would be doing it. Mark Minervini who some regard as one of the more successful investors today, took around 7 years before he made money. It took me a while when I joined Stockopedia to get it to work for me.
Last year was very tricky year for investors, if you were in the wrong sectors you would have been badly burnt.
Have you read the articles on NAPs? Think it had around +27% gain last year.
Reading articles and listening to podcasts, it's easy to get the impression everyone is doing well, it is not always the case if you look at their overall performance, it is so easy to cherry pick the winners and gloss over the losers.
My opinion is keep on going and learn from your mistakes. Falling knives are always risky, I prefer to buy shares with positive momentum, you can look at the top QM shares to get some ideas.
I have some very nice tulip bulbs available if anyone interested! Eventually on Bitcoin the music will stop and people should see what a load of bollocks it all was. Meanwhile I bought a nice stake in Plus500 £PLUS a few months ago based on the fact that 76% of their clients lose on their CFD’s, special dividend coming as they are doing so well.....
Aren't they unhedged?
I would have presumed that most of the amateur traders that they have would be long as that features a limited loss to a (theoretically) unlimited profit.
Given Bitcoin and other coins performance since January if they aren't hedging there surely are some big losses there for them, although I'd expect them to profit if the market tumbles.
They've introduced targeted hedging in FY21, but agree with the sentiment for Plus500 (LON:PLUS) gaining if the market unwinds.
The problem with Plus500 (LON:PLUS) is they have no US presence, they are considering buying some US platform, which is what IG Group (LON:IGG) have done for $1bn, their shares went down a fair amount when that was announced. These platforms will now be expensive to buy and Plus500 (LON:PLUS) mcap is not that large.
I'm starting to wonder if the reaction to Ig Group (LON:IGG) acquisition was a reaction to currency moves. The pound hit $1.40 this morning and the dollar continues to weaken and looks set to continue to do so.
What if this continues? Rishi's march budget is taking on more and more importance in my mind. If the pound continues to strengthen like this, there seems to be a few obvious points to make:
1) it is deflationary in UK (cheaper imports). The inflation the US is generating by their actions may just be exporting it to countries like the UK - i.e. we may be forced to follow suit and start even more QE/ negative interest rates
2) commodities should do well in this environment (weaker dollar). However, UK commodity companies may not as they earn in dollars, report in pounds. They normally hedge to mitigate some of the damage.
3) the wave of acquisitions we have talked about may be on hold as UK companies are becoming relatively more expensive every day.
4) there is a class of companies I'm going to start looking at today - importers who buy in dollars and sell in pounds who may be set for windfall profits.
A lot of the share price fall in IG Group (LON:IGG) was to do with the dilution, as the acquisition was partly share based payment, I think around 16%. So 900p after 16% = 759p.
Not sure about the £ going up much more, I think we will have our own problems as well as the USA, when lockdown is over, it will be like the tide going out.
Imports cheaper because of stronger £, yes but there are some Brexit costs as well to content with and I'm noticing food prices increasing again.
UK companies still look cheap as the US markets have risen more than the UK. The $ has been quite weak for a while.
This will not be good for a lot of our largest companies which have a fair amount of revenue in $s.
Commodities won't do so well because most are valued in $s, so their value has fallen, maybe thats why the prices are going up?
What if this continues? Rishi's march budget is taking on more and more importance in my mind. If the pound continues to strengthen like this, there seems to be a few obvious points to make:
From my perspective i see a strong pound (or should i say "less weak" pound perhaps) is a good time to be be adding US listed shares - obviously its future direction that matters and if we end up back at $2 to the pound i will end up with egg on my face but i feel like $1.40 seems like a great price to be us shares - does anyone agree here? I feel this is a less complicated route than trying to work out the ins and outs of UK listed companies where the current shareprice will be factoring in future currency expectations - you do raise a very good point at 3 though that takeover potential premium may be waning - will this not have already been factored in by the market though if there was previously an element of premium that may already have bene removed by the market?
As you say, it's the future direction that matters. In the past, I've tried to ignore currency as much as possible because I think it's largely a mugs game for experts and impossible for a small investor to really profit from it. All you can do is ignore it or try hedge with a portfolio across different countries.
However, the $1.40 level is important in my mind. If the pound can establish above it, I think it changes the calculation. The future direction also "seems" clear - all major powers are devaluing. However, the UK is lagging the rest with US and EU announcing greater QE, the UK has been largely silent (albeit while still continuing their QE program on a massive scale). It's all relative. I really feel this March budget is a huge moment where the UK could choose a direction finally.
I would be very interested in seeing your shortlist if/when you care to share
Wow, that Roubini video feels like something out of 2013. Saying that it has no utility (and that at least people liked flowers (Tulips) is one of the most ignorant things I've ever heard. I respected Roubini a lot for his commentary during the GFC, but this is not his best work.
Is Bitcoin a speculative bubble? For sure. Has Bitcoin (and most importantly the blockchain technology that Bitcoin pioneered) matured enormously over the last 10 years? Absolutely. Does Bitcoin (and other select crypto) have value. 100%. Is $50k the right value for Bitcoin - who knows. Value is what someone else is willing to pay, and at the moment, it seems people would prefer to hold Bitcoin than US$ - this I completely understand.
Bitcoins decryers have been railing against it since the beginning, but this is one of the worst. China has no rule of law? I lived there for 15 years and I can promise that this is absolutely wrong. I am genuinely dumbfounded that Roubini holds these views.
Wow, first time I have missed the "Thumbs down" option. And I write that as somebody who never used it.
Wow, first time I have missed the "Thumbs down" option.
No problem. We just give you a blue thumb instead. :-)
Personally, I don't see the point of discussing bitcoin and I'm a bit disappointed Paul has raised it. because the two sides of the argument will never, ever see the other sides view and everyone just ends up wasting their time. It's just completely intractable. So much time and so many words have already been wasted on something so utterly pointless to real investors. The only real value it has is to criminals, money launderers, drug cartels etc. Everything else is just speculation.
All the best, Si
The issue with bitcoin for investors will be when the bubble implodes and c$1tn disappears from personal and corporate balance sheets.
Even in the age of QE, that is a huge amount of capital destruction.
LTCM was a fraction of the size in much calmer times and its implosion led to widespread fall out.
For every buyer there’s a seller
The issue for bitcoin, as for all bubbles, comes when for every seller there isn't a buyer.
Personally, I don't see the point of discussing bitcoin...
You either get it or you don't. Only time will prove whose right. Nothing more to be said IMHO.
You either get it or you don't. Only time will prove whose right.
Or even who is right? :-) I made my mind up in 2012 when it was only criminals and students interested in it. Personally, I'm surprised governments did not stamp it out way back when it was only used for crime on the dark web. There might be some way the USG can stop the conversion into USD for instance if they really wanted to. What would happen to the price then if it could not be converted into something tangible?
Anyway, I care not, but there are a generation of investors who are yet to meet their Waterloo. The best lessons are sometimes the hardest to take.
All the best, Si
I would have happily been write ;-) back in 2012 at $5 a coin.
Valuations aside, I find the phenomenon of crypto fascination. The diversity of projects, the decentralisation of it, the DAO's being setup to govern all manner of things. It is a sector which does not lack ambition.
If you will excuse me, as it is a slowish Friday, I watched a video yesterday produced by a group of academics and financial 'activists' called Trust in the Blockchain Society. From the blurb:
Every time a new technology is announced one question arises: can we trust it? When the blockchain made its appearance with the claim of being ‘trustless’, we could not help but wonder: how is this going to change the shape of trust?
It gives an insight in how academics are viewing blockchain from a societal and cultural perspective. No investment advice given :-)
Cheers
25 years ago I learned about "Linked Lists" while learning the computer language C. A blockchain is roughly a linked list with some encryption tacked on. These cryptocurrencies (much like SSL and SSH) are based around SHA 256. There is actually a possibility that mathematicians at some future point will work out how to reverse the encryption process. Also, if we ever get quantum computers up and running properly they would also challenge the 256 bit hash and distributed ledger setup.
In addition to the above, I should point out that SHA 256 was created by the NSA, they’ve been known to lie about network security in the past (e.g. the fairly recent example being that they knew all about the Heartbleed virus’ security hole in OpenSSH ... oh and they exploited it for years).
Have you heard the creation myth about the NSA being behind it all? The story being that they created bitcoin as a 'honey pot' to trap anyone who develops a quantum computer: i.e. if it gets hacked the hackers must have used a quantum computer.
But, could it be that blockchain is greater than the sum of its parts? To me, at least, it has a similar feel to the journey server computing went on from the late '90 till now. Virtualisation, applications running in containers, etc, are not new, but the move from having really expensive, specialised, servers running in a room at the end of the corridor (thinking the likes of Sun Solaris, HPUX, IBM AIX) to cloud hosted services, anywhere in the world, which are so easy to procure and use that it allows you to start a business with a credit card and few mates in a cafe. None of it is actually new if you really dig, and for many years it was not as good as building your own, but it was a lot quicker and has now fundamentally changed our relationship with computing.
What if we are at the cusp of the next wave; decentralised, distributed, systems. Perhaps to combat being at the mercy of your hosting provider (i.e. what happened to Parler with AWS) or whoever you fundamentally disagree with (Trump?). Then things get interesting and they are driven more by cultural and societal changes than costs and what seems intuitive to an old geezer like me.
:)
For further paranoiac thought generation re computing and US intelligence services this is great
https://www.amazon.co.uk/dp/17...
I haven’t finished yet so it may contain the Bitcoin creation myth. Full of juicy stuff like the dark web being created by US spooks for intelligence ops in general but to cover their tracks they introduced the criminal world to it to make plenty background noise...
Yes possibly, but now that it's becoming mainstream, with musk and other companies buying it and holding on their balance sheets, don't you think they've all taken advice on this ? don't you think it would now be massively difficult to move against bitcoin ? surely that's part of what has lead to it's rise when these companies have validated it by buying into it ?
These are assertions not arguments. And definitely not analysis.
China does not have the rule of law because it is explicitly stated that the communist party is above the law.
You can sue the UK govt and the uk govt is bound by the laws it sets, and everyone in the uk is too.
To an outsider it means that there are risks involved in doing business in china.
It does not mean there are no laws in china.
but to say there is no rule of law is wrong. there is a rule of law - it isn't our rule, but it is a rule. It's the same argument that most Westerners use when they keep expecting that china will eventually adopt democratic values. China and the Chinese in the main do not want democracy (or at least our version of it) because they believe that their system is actually better. It takes a long time living there to get over that specific mindset.
I said "the rule of law" which is not "no rule of law". I think that is called a strawman argument.
It is not really linked to democracy or lack of
You may feel the Chinese system is better. I do not know.
Providing some value: I strongly recommend Why nations Fail that classifies countries as...
Looking at the state of our own country I see a small group of people who are variously connected to others in public life who seem to get nice jobs as a result of those connections.
Looking at China I read about the 'princelings'
My favourite bubble marker, is the line that the brilliant business Tesla, has made more profit from its Bitcoin ‘investment’ than from all its business activity to date!
Buffett on Bitcoin. " It's rat poison squared "
Is fiat currency the rat?
Thanks for the advice Paul.
I switched on the radio the other day, a local station and the presenter and 2 investors were going mad over crypto not really talking about bitcoin as it was no longer giving the big returns compared to other crypto! The other crypto I'd never heard about like dogecoin and Pluto (that may not be a crypto currency but a business). I think one of them said he had no investment or trading experience but was putting £700 in one account and a few months later it was worth ten times that. How they were allowed on the radio to broadcast this madness to others I don't know. There's a rush by new investors investing for the first time to open broking accounts seeing this on all these social media discussion forums that are popping up everywhere. Trading 212 have suspended account openings recently:
"Last week Trading 212 became the most downloaded app in the UK. Due to the huge demand, we've had to pause new account opening until we increase our capacity to serve more clients.
Very soon, we will introduce a waitlist and will start onboarding those who have signed up."
All the signs of a bubble are there!
Morning Paul,
I love that line
" led to me risking money I needed, to make more money I didn't need. A very harsh lesson. Let's not do that again. "
Richard
I watched this 2 days ago. The best line is:
"The Flintstones had a better monetary system than Bitcoin."
Right or wrong pure class.
Big announcement from Sterling Energy (SEY) after the market closed last night. Two big shareholders accounting for 45% of the shares, have agreed to sell out. In come two new directors with extensive oil industry experience and plans to take the company in a new direction seeking assets in West Africa. The company is basically a cash shell, and at the current share price the company is valued at the cash in the bank ($42millions). Shareholders have been awaiting a deal of this sort for some time and it has finally arrived. Today could be very interesting. I held these many years ago and did rather well out of them. Sadly I am now fully invested, so no funds to play the news. I will have to watch from the sidelines.
PS. I know Paul doesn’t do resources companies, but I do and I know others on here will be interested. This is very definitely a small cap.
SEY - the new Tullow?
Another O&G cash shell at a large premium to nav.
Add it to KIST the new RockRose Mkt Cap £61m cash £31m or Longboat Energy the new Faroe or Wildcat Pet.
There are others - all after a deal but with the oil price up and lots of new investors interested in the O&G sector it seems unlikely they will succeed.
Great update from Focusrite (LON:TUNE) today, although they've covered themselves nicely if there's a hiccup in the future by sounding a note of caution on semi conductor supply issues.
On bitcoin - surely the fact it now consumes as much energy as Argentina makes it indefensible for that fact alone, especially presumably amongst the younger more environmentally aware generations?
He really does not like Bitcoin does he (Mr Roubini ) this is the second run up in Bitcoin I have put a very small amount of my net worth into this time through a couple of small cap stocks listed in UK
The first time was after a chat over lunch with a friend who owns a small tech firm so I bought some as a form of alternative currency not long after it shot up and turned into a classic bubble in my eyes so I sold it all a few months back I looked it again
This time with the view that although to me and my generation holding gold,art,classic cars etc is seen as an alternative store of value to shares etc To a younger more tech savvy generation Bitcoin is just as valuable and that with every central bank in the world printing money like there is no tomorrow we are going to see inflation sometimes bubble like in many assets and crypto currency will be one of them
In closing although many people don’t see Bitcoin as an asset a growing number do and the same as any other asset it is only worth what someone will pay for it
as with any high risk asset you should only risk what you can afford to loose when putting money into it 1-2 % of you portfolio in the same way you would only do the same with an early stage miner tech company or biotech firm
Follow up article again quoting Lord Lee...
"Bid approach disclosure faces review"
https://www.thetimes.co.uk/article/b7cdf232-7237-11eb-811f-f64a7b4cb430?shareToken=29e88bb1f02b29e8be3796a644cf39cd
Starts:
"The Takeover Panel is to review its oversight of the non-disclosure of bid approaches after revelations in The Times regarding a series of offers about which shareholders were not informed."
My morning smallcap tweet: Path placing pathetic
Provexis (LON:PXS) Sourcebio International (LON:SBI) Path Investments (LON:PATH) Idox (LON:IDOX)
Provexis (PXS) £50k (really?) placing at 0.75p, a 7.4% discount. for 'additional working capital'. There was a £1m placing in Dec! [SP=0.85 Cap=19m]
SourceBio (SBI) wins contract to manage the delivery of community based COVID-19 testing services through mobile testing units. Co will manage the 4 units on behalf of Mitie for the remainder of the pilot and is working towards continued involvement in a potential UK-wide programme. No £££. [SP=193.44 Cap=143m]
Path Investments (PATH) £3.5m placing at 0.25p, an absurd 70% discount, to support this sub-scale tinpot's 'continuing investment strategy'. Also warrants at 0.5p as if the deal wasn't sweet enough. ""We are delighted with the support we have received for the Fundraise." What? You've benn totally stiffed. [SP=0.85 Cap=2m]
IDOX (IDOX) approach at 75p, a 22% premium. Co rebuffed two very recent previous indicative offers from offeror at 67p and 70p. 39% premium to first approach on Feb 9. [SP=61 Cap=271m]
Thanks Paul. A timely reminder.
Didn't HMV say that streaming wouldn't last? So are the retail investors the new financial market streamers?
It's as easy now to buy a stock as it was a song back then, so will it end? It's just a thought.
Decca also said guitars were going out and didn't sign the Beatles. The music industry, like all others, don't know what the future holds with any degree of certainty.
"It's as easy now to buy a stock as it was a song back then, so will it end? It's just a thought."
As it was in the late 1920's, have a read of the Great Crash by Galbraith.
Reqiured reading whenever I start letting "it's different this time" thoughts to enter my head.
Apologies if you feel this is not the place but a brilliant sketch after the financial crash. A brilliant piece of acting with a message that is spot on in the current shenanigans and hey its Friday again I think: