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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.
Beanie Babies were the hot collectible when I was just beginning to learn about investing. I thought about buying some, but they were ugly and the boxes would have needed dusting. I put the money in my variable annuity instead, which was a lousy investment with high fees. At least the variable annuity was easy to sell when I learned enough to realize how bad a deal it was.
My parents have bags of Teanie Beanie Babies (McDonald’s) in the attic!
Buffett’s adage got me to thinking about how “value” is conceptualized by investors. Value stocks are generally defined as those that trade at lower prices relative to their fundamentals. However, Buffet’s adage seems to imply a broader concept of “value.” Of course, value is also commonly used to refer to what we can sell something for or what it is “worth” (another ambiguous word).
Are EtherRocks the digital version of the Pet Rock of the 70’s?
Could also be a means of money laundering. Idk. It might also represent a revolt against the traditional banking system. Those are two other kooky takes.
I have had that thought. It seems like a reasonable comparison.
It all reminds me of the Pets.com super bowl commercial in 2000, when they paid $2 million for a 30 second ad featuring a sock puppet. The Federal Reserve has put so much excess liquidity in our banking system that all of these crazy speculations are occurring.
Maybe. Remember Second Life? Defunct now, but someone paid over $1M for a digital building that I believe no longer exists. People are always trying to get early into new markets. Sometimes it works, sometimes there is no Second Life.