Is There a New Dotcom Bubble?

[Ed209]

The next step for the NASDAQ will be 13.000.

We can only hope. There's nothing better for making money than during a complete and utter market meltdown, when there's total carnage and there's blood in the streets, as they say. It's the best time to get into anything, without question, but it's also when retail become least interested.

There's a chance we could see one of those extremely rare opportunities of a proper armageddon style crash like in 1929, 1987, 2008, etc.

My advice would be to wait for signs of capitulation, though, before doing anything, and that hasn't happened yet. I wouldn't make a move until there's a clear sign which way the markets intend to go. Let's see what the Fed will have to say next.

Remember, the markets are driven by human psychology far more than fundamental economics. The question remains, other than value stocks, where will the money flow to counteract the ever expanding and diluted US dollar? Billionaires won't sit on cash that has a rapidly diminishing value. The money will have to flow somewhere.

 

[Juan]

My advice would be to wait for signs of capitulation, though, before doing anything, and that hasn't happened yet. I wouldn't make a move until there's a clear sign which way the markets intend to go. Let's see what the Fed will have to say next.

The markets still have a long way to continue falling.

 

[ZFire]

Hey @Ed209, how is it going? Sorry I couldn't respond much earlier, busy preparing for a job interview.

In the last 12 years, nothing has come remotely close to matching the kind of returns that can be made, but it's not for the faint-hearted, or for newbies. It can wreck you in a heartbeat if you don't know what you're doing. The volatility is what allows you to make the insane gains, and adoption continues to grow year on year. To put it another way, the only way anyone could have possibly lost any money, so far, is by panic selling or by buying a scam shit coin. Even with this current crash, my core holdings are still up by over 20x, and I took profits on the way up at much higher margin intervals. I also made many multi-bagger trades along the way. My original investment came out a long time ago along with a ton of profit. It's a free ride from here for me.

Crypto may have produced the best returns in the last decade, but that's because it's a speculative asset that's highly volatile. It works like stock but without a companies actual performance or government regulations to reign in any insanity that it's investors try to do with it. That's all going to change very soon.

You say it's not something for newbies which I wholeheartedly agree with, but the reality with speculative assets like Crypto is that it actually thrives and preys on newbies buying up these coins.

The notion that Crypto has brought accumulating life changing wealth for a couple hundreds of people... while true, doesn't really impress me. That statement sounds almost scam-like and manipulative to get vulnerable people who are likely to panic sell involved in the Crypto markets. For every winner, there's going to be a whole bunch of losers.

If it's to make the most money possible then there's no better asset class, performance-wise, than the crypto markets.

Making the most money possible is the mindset Wall Street people have. I would say a modest investor's main use for the markets would be goals such as retirement planning and to protect purchasing power. This can easily be achieved through the purchase of low-cost broad based index funds (thank you Jack Bogle) or Exchange Traded Funds (ETFs) and holding them in tax-sheltered accounts for decades. With this, you aren't trying to time the market, rather you are betting on society to pretty much continue and flourish (total world stock market indexes specifically). If all of society crumbles, your investments will be the last thing to worry about. Even if the index fund has produced average returns, average is still very good in the Wall Street sense. Only 1/4 of actively managed funds were able to outperform an index fund like Vanguard's S&P 500 fund over a 10-year period. You can imagine the number being even more smaller over 20, 30 years down the line. Rock bottom costs along with low expense ratios is something you can control and then simply just let compound interest work its magic.

Keep in mind my advocacy for index funds comes from a US centric POV due to the many tax sheltered accounts available here which allow for tax free growth. Not sure what's offered in the UK. An ISA account only?

I've marked out a 9-year chart of Bitcoin. The green circles show where retail often turn up, and the red circles show where they usually get flushed out. It's pretty much: buy, get wrecked, buy, get wrecked, buy, get wrecked, etc, over and over again. Those circles represent 30-85% price corrections. Now, look at the blue dots; the ones that bought and forgot about it, and ignored all the noise. What happened to them? They all accumulated life-changing wealth.

All markets are the same, but the boom and bust cycles in crypto occur at a much faster rate. People shouldn't really dabble in these things if they don't understand what they're doing. Of course, it's not for everyone, and there are plenty of other options that will give steady but slower returns if the volatility is too much to handle.

When I look at your chart (thank you btw), I get this sense that the greater fools theory along with market manipulation is being properly demonstrated here. Get the retail investors to buy something that's already overvalued and make them think the value is still gonna go up. I believe Elon Musk holds a massive position in Bitcoin and has been credited for raising the prices of cryptocurrency through a series of tweets in the past.

You might end up fine, but it is guaranteed the majority will not. It is design.

I guess kudos to those that were able to buy at the right time in something that fluctuates wildly even by stock market standards and held long enough for mass gains. I heard about 100,000 people have over $million in Bitcoin now. That's nice and all, but it's still a small amount of people succeeding in the grand scheme of things. Market timing is something that's quite difficult to consistently do and it seems like you capitalized on it. I'm going to assume you also had a considerable amount of disposable income at your service as well, but regardless... big congrats to you.

In short, Crypto is too volatile to serve as actual currency and it's not something I would recommend the common investors get involved in, so I agree with you there, but to say it's only way to make to make exponential wealth is where I agree to disagree. There are other simpler and more cheaper ways to accumulate wealth if one plans to have an investment career of over 40 years.

Also... If quantum computing delivers, that very well could disrupt all of Crypto, but for now, that is speculation. I do find the emergence of blockchain technology interesting though.

 

[Ed209]

That statement sounds almost scam-like and manipulative to get vulnerable people who are likely to panic sell involved in the Crypto markets. For every winner, there's going to be a whole bunch of losers.

The same is true for any market. There has to be losers by the very definition of what a market is.

Making the most money possible is the mindset Wall Street people have. I would say a modest investor's main use for the markets would be goals such as retirement planning and to protect purchasing power. This can easily be achieved through the purchase of low-cost broad based index funds (thank you Jack Bogle) or Exchange Traded Funds (ETFs) and holding them in tax-sheltered accounts for decades.

I've held stocks and traded since I left school and this allowed me to buy my first house. I've said many times that everyone should have their own strategy because we are all unique, but don't pretend that Wall Street doesn't rule the stock market. They wreck retail all the time and it's as corrupt as anything else. I could tell you loads of stories. Making money is the goal, let's not kid ourselves, and many ETFs are designed to rip people off.

When I look at your chart (thank you btw), I get this sense that the greater fools theory along with market manipulation is being properly demonstrated here. Get the retail investors to buy something that's already overvalued and make them think the value is still gonna go up. I believe Elon Musk holds a massive position in Bitcoin and has been credited for raising the prices of cryptocurrency through a series of tweets in the past.

You might end up fine, but it is guaranteed the majority will not. It is design.

It's Metcalfe's law at play. As a network expands it becomes more and more valuable. Elon Musk is mainly a Dogecoin advocate which is not something I'm interested in. You also have to appreciate that the overall liquidity in crypto is still low as it's a maturing market. As this grows, the volatility will decrease, but so will the exponential gains.

I guess kudos to those that were able to buy at the right time in something that fluctuates wildly even by stock market standards and held long enough for mass gains. I heard about 100,000 people have over $million in Bitcoin now. That's nice and all, but it's still a small amount of people succeeding in the grand scheme of things. Market timing is something that's quite difficult to consistently do and it seems like you capitalized on it. I'm going to assume you also had a considerable amount of disposable income at your service as well, but regardless... big congrats to you.

It's nothing to do with the sector, it's the average retail investors' mindset that's the problem. They don't know what they are doing in any market, as they traditionally buy the top and then get dumped on. That's usually how it goes in all markets including the stock market. I'd disagree that it's hard to make money in crypto. It found it to be significantly easier than the stock market and I've traded in that for a long time so I have a grounded comparison to go by.

I had barely any money at the time, so I didn't have a considerable disposable income, no. The pandemic had ruined my business and I was forced to work in a mail centre that year to make ends meet. I put all that money into crypto, but not on a whim. I did extensive research and had a conviction in my beliefs about what was about to happen.

In short, Crypto is too volatile to serve as actual currency and it's not something I would recommend the common investors get involved in, so I agree with you there, but to say it's only way to make to make exponential wealth is where I agree to disagree. There are other simpler and more cheaper ways to accumulate wealth if one plans to have an investment career of over 40 years.

I've answered your first point in another thread. I don't think you understand this sector at all, if I'm being honest (and no disrespect). What most people wait many years for (often decades), my friends and I achieved in a year. One of my friends retired from work in his 30's by investing in crypto. He now has around £1m, he paid off his mortgage, and earns a lot of passive income each week via interest (and it's more than enough to live on). It sounds like a nightmare scenario, I agree . I think he should have waited 40 years by using an index fund . I'm just joking around with you, of course.

I don't mind what people invest in as it's none of my business. I think everyone should have the autonomy to do what's right for them. I have always invested in high-risk stocks/assets with a select group of friends, and we have been successful since the beginning. I'd fall asleep if my money was in a fund as that's really not for me.

Thanks for the discussion, though, ZFire. It was a pleasure talking this stuff through with you.

Have a great evening/day

 

[Juan]

The notion that Crypto has brought accumulating life changing wealth for a couple hundreds of people... while true, doesn't really impress me. That statement sounds almost scam-like and manipulative to get vulnerable people who are likely to panic sell involved in the Crypto markets. For every winner, there's going to be a whole bunch of losers.

I agree with you on crypto looking like the classical get rich quick scam.

 

[Juan]

Jerome Powell must be serving Trump, because his lack of action to tackle inflation, his inability to make decisions, will mean the end of Joe Biden as US President.

 

[Ed209]

Jerome Powell must be serving Trump, because his lack of action to tackle inflation, his inability to make decisions, will mean the end of Joe Biden as US President.

Did anyone expect anything less? That meeting pretty much went how I expected it to right to the letter.

 

[Juan]

Did anyone expect anything less? That meeting pretty much went how I expected it to right to the letter.

Well, I did expect Biden to be more clever, and try to keep his position. Biden will get kicked out because of Powell.

 

[Joeseph Stope]

How do you connect with the biblical four horsemen... You know, the rider on a red horse signifies war, and the pale rider signifies pandemic and the one carrying the scales signifies famine.

Ukraine, COVID-19 and inflation. They have already hit...

So look at the markets...?

I only know the questions, not the answers.

 

[Juan]

How do you connect with the biblical four horsemen... You know, the rider on a red horse signifies war, and the pale rider signifies pandemic and the one carrying the scales signifies famine.

Ukraine, COVID-19 and inflation. They have already hit...

So look at the markets...?

I only know the questions, not the answers.

The big investors, funds etc have to sell their positions to others and let them think they are getting great value and great prices now, just because US markets dropped a meager 5 - 10%, depending on the index.

FAANG have dropped a bit, while other Tech Stocks are plummetting. FAANG will drop too, later on into the correction...

The market may go up temporarily, like it did in the first 2 months of 2020, when big investors where already fully aware of COVID-19 and its real impact, and while FED members and US politicians were selling their stocks only to purchase them back with a huge discount after March 2020.

Stocks that were "trendy" like for instance those related to cannabis, vegan meat and the like have just collapsed. They are pretty much worthless.

Crypto is also worthless, and retail investors are still buying all sorts of crypto crap.

 

[Ed209]

Crypto is also worthless, and retail investors are still buying all sorts of crypto crap.

Define worthless?

I'd say 99% of the cryptos that are out there are pure nonsense that will go to zero, but the 1% that aren't have the potential to change the world. The legacy systems are so outdated and clunky I'm surprised it's taken this long for there to be a revolution of some kind. This industry wouldn't attract some of the brightest minds in science and technology, including people like Silvio Micali, (who won the Turing Award), if it was crap. The Turing Award is generally recognised as the highest distinction in computer science and is known as or often referred to as the Nobel Prize of computing.

There is a chance to redistribute wealth in a much fairer way by giving everyone access to a financial system that allows for equal opportunities. Nearly 2 billion of the world's population are unbanked, and this includes 10% of all US adults. This figure is pretty shocking and it highlights how grossly unbalanced the current system is. As an example, Cardano is working with African nations to provide them with an infrastructure that will be decentralised. This would give them access to a national ID system; data governance to control licenses and legal deeds of any kind; superior supply chain logistics to help grow their economies; a potentially more stable monetary system, etc, etc. Tokenised ownership of assets will also even out the playing field and give poorer people much more of an opportunity to participate in things that were previously exclusive to the wealthy.

We can also unlock and make use of all those unused data that sit on silos; this alone would aid researchers in all scientific fields. The current set-up doesn't allow for this without breaking through the privacy/secrecy barrier, meaning that something like 90% of data sit unused which is massively wasteful and uneconomic. Ocean Protocol solved this problem and is now working with the EU on the Gaia X project (which aims to share data across the world). They have an extensive list of world class partners and governments working with them.

This does all seem pretty worthless especially considering how great the current legacy system is going under the control of the central banks.

 

[Juan]

There is a chance to redistribute wealth in a much fairer way by giving everyone access to a financial system that allows for equal opportunities.

Wealth redistribution would be efficient if the US started taxing their billionaires, those privileged people who are above the law and do not pay taxes anywhere.

Also wealth redistribution would be effective if central bankers did their jobs.

We can also unlock and make use of all those unused data that sit on silos; this alone would aid researchers in all scientific fields. The current set-up doesn't allow for this without breaking through the privacy/secrecy barrier, meaning that something like 90% of data sit unused which is massively wasteful and uneconomic. Ocean Protocol solved this problem and is now working with the EU on the Gaia X project (which aims to share data across the world). They have an extensive list of world class partners and governments working with them.

Skipping the data privacy laws to me seems the most un-democratic and totalitarian stance. Actually data privacy laws protect us from predatory companies and protect people from several sorts of exclusion, even exclusion to be insured, to get healthcare etc etc.

That's why Europe has to enforce its data privacy laws and make technological companies comply with them.

To me it seems shocking that in the US anyone can get your data and call your private cellphone to make all sorts of unrequested offers... and even individuals are doing this, not even companies. People who call a private phone to offer ridiculous (low) money for properties you own! This is what happens when there are no privacy laws or those laws are not enforced.

I don't want my private data to be running around the Internet without my express consent.

 

[Ed209]

Wealth redistribution would be efficient if the US started taxing their billionaires, those privileged people who are above the law and do not pay taxes anywhere.

Economists know that this doesn't work, though, and there are data to prove this.

This chart shows federal tax receipts from all sources combined as a fraction of GDP. As you can see, it has stayed stable at around 17% for the last 70 odd years.

Now, take a look at this chart which shows how the tax rate has changed over time from the highs of the '50s to the lows of the Reagan era.

You can see that it makes no difference, and the reason is that it shifts economic behaviour until a status quo is met at around 17%. This is usually where things settle. Higher taxes affect job creation and productivity, which in turn reduces the overall revenue that a government can expect to obtain. It is not a simple equation. Lower taxes usually leads to more jobs and more revenue.

I still agree with your point, however, that everyone should contribute their fair share.

Also wealth redistribution would be effective if central bankers did their jobs.

How long have they had to get this right? Half the world cannot even access a bank account still. They underpay interest because they want all the profits, and yet it's our money they are using to acquire those profits. What about our cut? Now that they realise that crypto is a legitimate threat, they are going for a power grab by sneaking a provision into a bill so that an unelected official will have unilateral power to do as she pleases with no discussion or public hearing whatsoever. If that doesn't concern you then I don't know what else to say.

Skipping the data privacy laws to me seems the most un-democratic and totalitarian stance. Actually data privacy laws protect us from predatory companies and protect people from several sorts of exclusion, even exclusion to be insured, to get healthcare etc etc.

Who said anything about skipping privacy laws? It's difficult to discuss something when the other party doesn't know what they are discussing. The EU want to unlock the potential of these stored data as there's a lot to be gained in many aspects. It can help with climate change, improve automotive efficiency, help with medical research, etc, etc.

I don't want my private data to be running around the Internet without my express consent.

So you'd prefer a decentralised model then. Controlling your own data would be at the forefront then. Whether it can be achieved is another matter entirely as there will be many obstacles to overcome.

Crypto ain't ready for prime time just yet, but I believe in the vision of the projects that some are trying to build. It's a big risk, but that risk comes with potentially life-changing rewards.

 

[Vincent R]

I put all that money into crypto, but not on a whim. I did extensive research and had a conviction in my beliefs about what was about to happen.

You have obviously researched crypto currencies extensively, and investing in them have worked out like a charm. Good for you

That said, if you are still all in on crypto, then some degree of diversification might be worth to consider. Crypto is treated as a high risk asset, regardless of what you as an individual makes of its fundamental value. I would reallocate some of the gains into reasonably valued stocks.

By the way, what cryptos would you recommend? I consider a minor allocation into crypto myself, so I could just as well take the opportunity to ask someone who's read up on the topic.

 

[Ed209]

That said, if you are still all in on crypto, then some degree of diversification might be worth to consider. Crypto is treated as a high risk asset, regardless of what you as an individual makes of its fundamental value. I would reallocate some of the gains into reasonably valued stocks.

I discussed this somewhere else. All my profits are currently earning 12% on a stable coin which I'm happy with. I'll use this money to buy into opportunities as they present themselves, whatever they may be.

 

[Ed209]

By the way, what cryptos would you recommend? I consider a minor allocation into crypto myself, so I could just as well take the opportunity to ask someone who's read up on the topic.

You should ideally do your own research, and it depends what sector you want to go into as there are loads. There's layer 1's, layer 2's, dex's, DeFi protocols, NFTs, oracles, graphs, gamefi, etc.

 

[Juan]

Poor Cathie Wood...

 

[Juan]

When the ECB starts showing there are "a little bit concerned" about inflation it must mean that they are shitting their pants, fearing people will actually go to the ECB and give them what they deserve.

Still, the ECB keeps playing its delay tactics and does absolutely nothing to contain rampant inflation in the Eurozone.

 

[Juan]

Peter Thiel, PayPal founder and Trump ally, to step down from Meta board

Thiel, a major donor to the Republican party, was seen by critics as part of the reason why Facebook did not censor Trump.


https://www.theguardian.com/technology/2022/feb/07/peter-thiel-meta-facebook-board-resign

 

[Juan]

US inflation is breaking records.

US inflation surges to 7.5% in fastests annual rise in 40 years.

However, the FED does not move a finger to control inflation. Powell should do his job or submit his resignation.

 

[Ed209]

US inflation is breaking records.

US inflation surges to 7.5% in fastests annual rise in 40 years.

However, the FED does not move a finger to control inflation. Powell should do his job or submit his resignation.

I was waiting for you to post this

 

[Exit]

I was waiting for you to post this

Metoo! Scandalous!

 

[Exit]

@Juan, nobody gives a crap about inflation!

Now let's gear up and go ALL IN!

 

[Juan]

I was waiting for you to post this

I was reading an interesting FT piece about crypto mining near Irkutsk. It seems electricity is cheaper in Siberia

By the way, those Russians are going to raise interest rates to 9,5%.

 

[Juan]

@Juan, nobody gives a crap about inflation!

Now let's gear up and go ALL IN!

"Investors" who held Delivery Hero or Affirm cannot be happy...

 

[Ed209]

By the way, those Russians are going to raise interest rates to 9,5%.

We've already been over this: Russia has one of the lowest debt-to-GDP's in the world at 17%. They can afford to raise their rates sharply. The US can't.

 

[Damocles]

Getting déjà vu.

Spoiler

Spoiler

Albeit a slightly more respectful déjà vu.

 

[Juan]

We've already been over this: Russia has one of the lowest debt-to-GDP's in the world at 17%. They can afford to raise their rates sharply. The US can't.

The US will have to raise rates, and the EU too. I think Biden will prefer to raise rates and stay in office rather than losing his job just to please "the markets" or "those billionaires from Silicon Valley".

On a broader scale, and not focusing this on Biden particularly, this is about democracy, about doing what is right and fair for the majority, which is raising interest rates to contain inflation.

 

[Juan]

I read in the Financial Times that there is a crypto mining boom in Siberia. So, for those interested in crypto: move to Irkutsk. Take a coat with you!

Apparently the average household spends like 1 euro on the monthly electricity bill over there...

 

[Ed209]

The US will have to raise rates, and the EU too. I think Biden will prefer to raise rates and stay in office rather than losing his job just to please "the markets" or "those billionaires from Silicon Valley".

It's not up to Joe Biden, though. It has nothing to do with him.

There are many issues all coming to a head that need to be addressed. Take the declining employment rate which is currently at around 59% in the US. A low labour force drives up demand-pull inflation due to higher wages being paid to attract what labour is left, and this is a particular problem right now.

Businesses that are low on staff cannot run at full capacity meaning the output of goods and services are limited, and this causes cost-push inflation. When you add in all the printing they have done, it's a recipe for disaster as there's not enough productivity to keep up with the massive expansion of the monetary supply (around 40-50%).

There are many facets to this problem starting with the FED printing unprecedented amounts of money and the insane amount of debt that has been built up. You keep talking about raising the rates, but you are not looking at the state of the world. First of all, the US government would not be able to afford the debt payments if there was a sharp rate hike (above 3%), but it's not only that, a hike would also depress asset markets and cripple all retirees in the process. It would also significantly slow down the recovery for all industries that were hit hard during the pandemic and make the FED's bond-buying program seen pretty much a waste of time if large and small companies start collapsing. And, unless the rate hike was a meaningful one, it would do little to contain inflation anyway.

Raising the interest rates would be the right thing to do to control inflation (under normal circumstances), but not when the world is on the brink of a collapse. Their monetary policies have put us all in this impossible position.

It's better to have double-digit inflation than an all-out collapse as the latter would cause far more pain for people.

On a broader scale, and not focusing this on Biden particularly, this is about democracy, about doing what is right and fair for the majority, which is raising interest rates to contain inflation.

You make this sound so simple. What's right and fair for the majority is to keep everyone above water and make sure that people can survive. They shouldn't have created this mess in the first place, though.