February 2023…wow, where does the time go? Our daughter was born almost a year ago, and when I think about it now it feels both like yesterday, and an age ago. The mind sure can play tricks on you sometimes.
Remember the Lehman crash? Was that really almost 15 years ago? It’s clear as day to me still, but an awful lot has happened since then. I remember in late 2008 listening to what, for me, was an early podcast. It was called the Financial Sense Newshour, and it is still going today. Boy, was that some doom and gloom! You see, they were looking at the government response to the meltdown, which was basically printing money and bailing out the banks, and discussing how this was going to destroy the global economy as we know it. The advice was to get into your bunker, buy gold and other precious metals, and wait for the storm to hit.
I knew a couple of people back then who took this to heart. They stopped buying stocks and only invested in metals. They were ready for the total debasement of Fiat currency as we knew it. And for a few years that was actually a solid strategy. Gold outpaced stocks until around April 2013. After the lines crossed though, gold was left in the dust and these guys missed out on, perhaps, the greatest bull market in stocks in their lifetimes.
They are still waiting to be right about armageddon today. They see no way that governments in developed markets with a ton of debt (hey, Japan!) can survive without destroying their currency, and paper assets with it. And, of course, they are right! It’s totally unsustainable over the long term. However, as Japan has proven, you can keep printing money and propping everything up for a hell of a long time before the music actually stops.
In the meantime, life goes on. Opportunities arise. March 2020 was one of those opportunities. I hold my hand up and say I didn’t see that one clearly enough at the time, but as risk assets plummeted, the thing to do was buy them! Not to be too hard on myself, I did buy them, but nowhere near aggressively enough.
The purpose of this post is not to prepare you for the unwinding of this gigantic, unsustainable debt bubble, although prepared you should be. It is simply to try to make you aware of something perhaps even more terrifying: You don’t really know what you are doing. Not just you, of course. Me, too. All of us. We think we know. We think we are smarter than the herd. But we are just human beings, governed by fear and greed, trying to think our way past our emotions.
Stocks go up if you hold them for the long term. That’s it. If you buy a bunch of stocks, hold them and don’t sell them, you will make money. If you buy them when nobody else wants to buy them, you will make even more money. It’s really as easy as that. And nothing you believe, no matter how true it might turn out to be eventually, is likely to change that.
Do you want to be right, or do you want to make money? I think about this question sometimes. I get this with Bitcoin sceptics a lot. They are usually smart people, often quite technical and analytical. And they look at Bitcoin and say things like: “I don’t see this ever being used for day-to-day transactions” or “There’s no way governments will ever let this take over from actual money that they control”.
I don’t disagree with them on either count. In fact, they are probably right. However, the value of Bitcoin will likely go up regardless. And I can make a number of solid arguments for why that is the case, and these people will not care. Which is totally fine. I’m not interested in being right, or in convincing them. I’m interested in making money.
As an aside, there’s a neat little segment in this podcast, which comes around the 52-minute mark, where legendary investor Howard Marks describes how talking with his son helped him overcome his knee-jerk scepticism about Bitcoin. If you think you might need a little help overcoming your own scepticism, then maybe start by reading my encouragingly titled Bitcoin is Dead post.
Back in April 2019, I wrote a short post about how Bitcoin was in an accumulation phase. It was a really short post, because I didn’t actually understand very much about Bitcoin at the time and was just quoting other people’s work! But I owned some, and I was pretty sure I was going to make money. The Bitcoin price was about $5,200 then. It had shot up to $20k in the 2017 bull market, crashed back to $3k in short order, and was gradually being accumulated ahead of the next halving in 2020. The 2021 bull market which followed saw it peak at $69k.
And so here we are in February 2023 in an accumulation phase. You might hate Bitcoin. You certainly might hate crypto and crypto bros. You might have lost money on FTX or Luna. You might worship Charlie Munger and think that a 99-year-old man is a good source of opinion on blockchain technology. But we’re in an accumulation phase regardless. The halving is around April/May next year. And in the bull market that follows, where quite coincidentally central banks might just have cut rates to head off some devastating crisis, it will hit prices that will make your eyes water. Especially if you don’t own any…
Do you want to be right, or do you want to make money?
Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.