Investment & Investing

Nerdwallet has done pretty well today. Did you buy?

I think many would agree that bitcoin and associated investment vehicles are clearly showing all the hallmarks of a bubble, and that based on the 5 stages of a bubble as characterised by Hyman Minsky we are in the Euphoria stage , to be followed (eventually and who knows when) by profit taking and then panic stages. From what I have observed on some of my past investment follies the slow gradual decline is a feature, but comes after the panic when the last believers continue to hold, confident that it will bounce back to its highs, and they will recoup their losses, but that crowd ultimately dwindles away with price slowly dropping in the absence of new buyers who will by now have moved on to the next big thing. I have never held crypto assets but have had my fair share of losses in other things over the years. Totally agree with the lack of intrinsic value explanation also, very well put.

Yeah - I’m on holiday but I ran some analysis on serps winners/losers and then created a list of shares to buy. Nerd was top but there are a few others. It’s based on the idea that they acquire more users organically. That’s my thought process who knows if it holds true. Reddit is an easier pick and up 20%

I didn’t manage to sell Microstrategy at the top but took some out at $490 on Wednesday but then I paid ~ $170 so it’s less painful. And the whole idea here for me was to have btc in an isa wrapper. That said it still made sense to take profit.

This is all caveat this with I know nothing about investing. But just looking at Microstrategy market cap versus it’s earnings the disparity in the figures are insane, but that a comparison's that’s for perhaps a more conventional business. That being said the tech sector in general as the same issue currently.

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Less painful 🤣 I’d say.

looking at Microstrategy market cap versus it’s earnings

There's a big change in accounting rules coming which will make those ratios look very different, from next quarter. They will be required to report unrealised capital gains as earnings. Having bought loads of bitcoin over the last few years, their unrealised gains are very high, maybe $10bn.

That's not a reason to buy them or not buy them, it's just accounting, not a real change, but some algos or humans following rules might do so as a result. Apparently it might also qualify them for inclusion in indices such as the S&P 500.

The current earnings figure relates to their legacy business intelligence software business while their market cap is based on their bitcoin stash and what they may be able to do with it, so comparing the two doesn't really shed a lot of light on their performance.

Their software earnings allow them to service some of the debt pile they've taken on to buy bitcoin, but given they are now raising large amounts at 0%, even that may not matter so much in future.

As you imply, the conventional investment metrics are not what people buying this are basing their decisions on!

bitcoin and associated investment vehicles are clearly showing all the hallmarks of a bubble,

I think the big question is bubble vs cycle.

Bitcoin has obviously shot up in price before. Historically it has always followed a four year cycle, with a post-halving peak, a crash, sideways for a couple of years, then eventual recovery to a higher peak. It's not like, say, the dot com bubble where it only happened once.

People do a lot of analysis on how closely it is tracking this cycle. Eg https://giovannisantostasi.medium.com/the-bitcoin-power-law-theory-962dfaf99ee9

However, past performance is no guide, etc... So of course it could flip to being a bubble at any point. For example, it could shoot way off ahead of the models on exuberance and froth. Or it could grow to a scale where other factors or limitations come into play which mean the models don't apply any more. Or it could crash down if something outside the models happens, like a major tech failure or law change.

But what I've seen is that it seems to be pretty much where the models, based on past cycles, say it would be likely to be, so current prices suggest it is on the upswing of another cycle rather than a bubble.

Yeah, as I was out for a ride this morning I realised that this figure for revenue clearly didn't take into account the Bitcoin they hold. But even at 8x market cap it's still very much at the high end in historical terms of what could be considered to be a bubble or the top end of the cycle.

P/e of 8 is not exactly evidence of a bubble!

I think that's the challenge with this and similar stocks. If you try to value it on conventional metrics, it's way over priced and has been for ages. If you accept the validity of other bases of valuation, then it potentially still looks cheap.

So it comes down to what you believe, how do you think the future will play out, what do you think the bitcoin price will be in the future, do you think there is value in owning a big pile of bitcoin greater than the sum of the individual coins?

Credible arguments can be constructed to support a wide range of valuations, depending on answers to those and other questions.

The current MSTR share price suggests the market implicitly does believe that bitcoin will be worth more in future, and that there is some value in owning a big stack, but it can't decide exactly how much for either - and it never will - hence the volatility which we are always likely to see.

Thanks for looking. Anyone else have a referral?

I don't think the offer is on just now. I can't access it either.

Ah I think it's only for Invest or Stocks ISA accounts. Not cash ISAs. Maybe that's it

Promotion has ended...

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I had not heard of MSTR before seeing these posts, on reviewing the investor relations page on their website I have no idea what they actually do except buy bitcoin, and honestly the stuff about generating yields from it kind of gives me Ponzi vibes. Note - I am not saying that there is anything improper
about their activities , just that it is impenetrable and opaque for me and that would cause me to give it a big swerve, but good luck to those who understand it better than me. Also, I am unclear how a company with no apparent earnings can have a P/E ratio of 8 (or of anything?) but I am looking at P/E from a conventional perspective

Strange. I have a referral from Be Clever With Your Cash but wanted to see if I could get one form an individual instead.

No way is BTC a bubble. BTC ETFs were one thing but when the US federal reserve starts to hoard it other countries and businesses will have to follow suit or get left behind. Of course the price will always fluctuate but it has already shown staying power. Ps, I hold no Bitcoin.

No way is BTC a bubble

Saving this for posterity.

Give me your future price prediction. I’ll do the same.

I wasn't really predicting something, just observing that bubbles often are not perceived to be bubbles.

But for fun: 2035 - somewhere between $1,000 and zero.

Unless lobbyist billionaire techbros manage to get the BTC Act passed. Conceivably, which would likely boost demand in the shirt term, but could conceivably be a precursor to the techbrogovernment adopting it as some sort of reserve asset, and giving it some actual value beyond buying weed and speculative hodling.

demand in the shirt term

Those Silicon Valley companies are just too casual for my taste.

2012 called and wants to buy its bitcoin back!

giving it some actual value beyond buying weed

yes, it's very possible that BTC will keep going. Just like gold and house prices.

Back to investments and investing, my retirement planning is largely focused on waiting for a bubble as opposed to chasing bubbles that are already inflated and to that end I am mostly invested in gold and precious metal mining related funds and stocks (~50%) with some allocation to natural resource funds (~10%) and emerging markets (~10%) with remainder currently in cash. My hypothesis may or may not be rational or logical but is based on an expectation that historical cycles tying in with the significant debt issues facing developed countries does lead to a general currency crisis impacting trust in conventional investments and driving money into gold. Will not see good returns if I am wrong but happy to give it until the end of the decade to find out. Recognise that I have been negative on crypto vehicles which are to an extent supported by a similar mindset but I do feel that gold has more of a proven and enduring track record than crypto in such conditions (acknowledging it has had several thousand years in which to generate that track record, which crypto has not) and is less likely than BTC to become displaced by a new paradigm or to be subject to a loss of trust. Nothing wrong with bubbles from investment perspective as long as you see them coming early, get in early, recognise it for what it is, and have an exit strategy that is not over-ridden by emotions or suspension of disbelief around the likelihood of it continuing up and up (which is what I perceive to be happening in crypto at the moment)

Actual gold or ETF?
If actual would you have possession of any of it?

I’d be curious to hear what others have done if they have gold in any form?