Jonathan, did I read you saying somewhere saying that you have already purchased deferred annuities (i.e., immediate annuities with a deferred start date) to cover some of your living expenses in reirement? If that’s the case, the 80:20 asset allocation really isn’t as aggressive as it might sound, because the annuities are a species of fixed income, akin to a pension. For asset allocation purposes, they supplement the 20% in bonds. But for a person without an annuity or pension, and who is relying on portfolio withdrawals and doesn’t have much margin for error, 80:20 may be just as aggresive as it sounds.
Bitcoin was originally promoted as an alternative to money, but it is inferior to established currencies as a store of value and a medium of exchange. (It is highly volatile in price, isn’t widely accepted for payments, and is far more expensive to transact in than ordinary currency.) Now people say, well, if it isn’t good as money, at least you can use it as an investment. As an investment, however, it looks sort of like a Ponzi scheme - people who cash out are paid with the money from newcomers who invest in response to price increases (with no revenues or earnings to fund the payouts). But unlike a Ponzi scheme, there is a fundamental driver of demand for Bitcoin - it is supposed to be usable by criminals and state actors to make payments that cannot be traced by law enforcement. This feature of Bitcoin makes it genuinely valuable to criminals and underpins demand. It might be sufficient to turn Bitcoin into an investment asset, if governments continue to allow Bitcoin and similar products to perform their function of facilitating illegal commerce, This week’s news that the FBI was able to recover most of the Bitcoin from the Colonial Pipeline ransomeware attack should give pause to those who rely on Bitcoin to make untraceable payments. In today’s world, where banks and other financial institutions are under heavy and growing government pressure to fight money laundering, it is hard to believe that Bitcoin and similar schemes that faciltate untraceable payments will be allowed to continue unrestricted. So, I would have to say that Bitcoin is a speculation, and not an investment.
Comments
Thanks for the clarification.
Post: My Investment Sin
Link to comment from October 16, 2022
Jonathan, did I read you saying somewhere saying that you have already purchased deferred annuities (i.e., immediate annuities with a deferred start date) to cover some of your living expenses in reirement? If that’s the case, the 80:20 asset allocation really isn’t as aggressive as it might sound, because the annuities are a species of fixed income, akin to a pension. For asset allocation purposes, they supplement the 20% in bonds. But for a person without an annuity or pension, and who is relying on portfolio withdrawals and doesn’t have much margin for error, 80:20 may be just as aggresive as it sounds.
Post: My Investment Sin
Link to comment from October 15, 2022
Bitcoin was originally promoted as an alternative to money, but it is inferior to established currencies as a store of value and a medium of exchange. (It is highly volatile in price, isn’t widely accepted for payments, and is far more expensive to transact in than ordinary currency.) Now people say, well, if it isn’t good as money, at least you can use it as an investment. As an investment, however, it looks sort of like a Ponzi scheme - people who cash out are paid with the money from newcomers who invest in response to price increases (with no revenues or earnings to fund the payouts). But unlike a Ponzi scheme, there is a fundamental driver of demand for Bitcoin - it is supposed to be usable by criminals and state actors to make payments that cannot be traced by law enforcement. This feature of Bitcoin makes it genuinely valuable to criminals and underpins demand. It might be sufficient to turn Bitcoin into an investment asset, if governments continue to allow Bitcoin and similar products to perform their function of facilitating illegal commerce, This week’s news that the FBI was able to recover most of the Bitcoin from the Colonial Pipeline ransomeware attack should give pause to those who rely on Bitcoin to make untraceable payments. In today’s world, where banks and other financial institutions are under heavy and growing government pressure to fight money laundering, it is hard to believe that Bitcoin and similar schemes that faciltate untraceable payments will be allowed to continue unrestricted. So, I would have to say that Bitcoin is a speculation, and not an investment.
Post: Is bitcoin an investment or a speculation—and why?
Link to comment from June 11, 2021