Bogleheads and Bitcoin Maximalists (Part 2)
Crypto, cults and conviction
If I had to choose a financial cult, I would join the Bogleheads.
Most investors are best served with a low cost global equities index tracker as the foundation layer of their portfolio.
Global equities are the best game in town for the long term investor. Check out VWRL or VEVE or something like that. Dollar cost average into the stockmarket every month, ignore the predictions (including mine…see below!) and hold forever.
So now that I have declared my biases tribal allegiance upfront, I will talk about exceptions.
Warning: may contain nuance!
Last week in Part 1, I explained that it is my job to follow the data and trends in finance and explain what is going on to my financial coaching clients.
It do not push product. I don’t believe in just one asset class. There are no “good” or “bad “asset classes, there are just different tools for different jobs.
The right price can make any asset class a good opportunity and the wrong price can make any investment a bad one.
My thesis is that we are still in the early stages of a phenomenal run in high beta risk assets. This includes tech stocks, the NASDAQ, venture capital and crypto.
This is partly due to the long term secular trend of technology adoption and the convergence of new technologies including robotics, AI, bio-tech, green tech etc.
But it’s also cyclical. There will be a boom stoked as interest rates come down this year.
If I’m right, crypto will act as the tip of the spear, a lead indicator for all risk assets. BTC is already up > 300% from the cyclical lows around 1 January 2023.
If so, we will see The Mother of All Bubbles as flows from institutional investors follow ETF approvals, investment committees see “number go up” and pile in. This is how institutional adoption works; no one wants to be first, but no one wants to be last.
Retail investors will then FOMO in and go full “degen”. It won’t always be pretty (although it will be entertaining).
There will be pumps, scams, protocol hacks and blowups. Most new tokens will get hyped and then fade away to nothing.
The reaction to this will be telling.
I remember the howls of cognitive dissonance from the last crypto bull cycle.
If your financial adviser or favourite financial influencer tells you that they just don’t understand crypto, you should listen to them.
They are not telling you anything about crypto, they are telling you that they haven’t done their homework.
Isn’t it their job to understand different asset classes, new systems of money and new developments in finance?
If they can’t explain the pros and cons, then they only understand one side of the argument. And if they can’t make the argument for both sides of the case for any asset class, they are not much of an adviser.
It is not enough to say that “crypto is stupid”. Go listen to Naval Ravikant or Balaji Srinivasan and then tell me that they are stupid.
No one that smart ever went down the rabbit hole, did their homework and came up saying “nah, its tulips all the way down”.
It is absolutely fine to steer clear of crypto. For most people, it’s probably too risky, too volatile and too complicated.
Even for the financially sophisticated, it’s a difficult asset class to own through the insane volatility and the fog of competing narratives. If you do choose to own it, it’s best limited to the infotainment section of your portfolio.
My message to crypto-sceptic financial advisers and would-be influencers is just don’t hate on things that you don’t (yet) understand.
It’s okay to change your mind. Mea culpa: I was late to crypto because what I saw at the top of the rabbit hole (a speculative frenzy) put me off.
But the fact that a bunch of idiot speculators went to California in the gold rush of 1848 did not mean that gold has no value!
Love to everyone
Barney
If you would like to talk about financial coaching, please go here first and hit reply if you have any questions. I look forward to speaking with you!