PETER LYNCH, the famed Fidelity Investments’ mutual fund manager, used to advise investors to “buy what you know.” But many of today’s investors have other ideas.
Obscure cryptocurrencies and nonfungible tokens have taken the financial social media by storm. Most investors have heard of bitcoin, ethereum and dogecoin. But a new set of coins have emerged—cardano and solana are the hot trades. Meanwhile, JPEG and GIF image files are changing hands for ridiculous amounts of money. I’m reminded of another investing adage, this one from Warren Buffett: “Price is what you pay. Value is what you get.” I wonder what the Oracle of Omaha thinks about all this.
In February, market-watchers marveled at NBA Top Shot. It’s a platform where individuals can own GIF images of superstars as if they were digital trading cards. Sales surged as it went viral across social media. Individual “moments” sold for more than $100,000. At the peak of the frenzy, the combined value of all NBA Top Shot moments had a market cap above the value of some NBA teams.
One-upping those prices is the latest round of insanity. EtherRock 27 (yes, that’s a thing) recently sold for some $3 million. It’s a picture of a fake rock. What’s the appeal? Perhaps it’s the chance to impress acquaintances at a dinner party by saying you have so much money you can just throw it at the most useless thing imaginable.
I believe financial markets often know more than what my small brain can fathom. No, I don’t own any GIFs or cryptocurrencies. But I do believe the assets of the future could look different from what seasoned investors are used to purchasing today. Keep an open mind—but don’t go all-in buying things you don’t truly understand.