If we put "blockchain" in this title, will our post views go up 1,000%?
Amazingly, the S&P 500 had a realized Sharpe ratio of 4.91 for 2017 (the historic norm is closer to 0.7). Here’s a “heat map” showing how well the individual components of the S&P 500 performed for the year. No surprises that technology stocks, Amazon and Apple (not in the technology sector!), and financials were up big.
You know the old adage, it’s time to sell stocks when your shoeshine boy (or Uber driver, as you will) gives you stock tips? There’s certainly a case to be made for applying that adage here. Nonetheless, in the event it continues to dominate conversations in early 2018, here are some interesting tidbits about the cryptocurrency.
- 1,000 large investors (“the whales”) control 40% of the market (learn more about the whales).
- Bitcoin “ATMs” exist, which is odd given that it is a purely digital currency with no physical token. We suppose the ATMs just provide the user with a receipt (see a map of ATMs).
- Investors can buy bitcoin with a credit card (read why this is a bad thing).
- Giant bitcoin “mines” exist in China and other developing nations. The cost of power needed to unlock a bitcoin is almost more than the coin is worth, so these facilities are located where power is cheap (understand what it takes to mine a coin).
- There are several rival cryptocurrencies, often called “alt-coins” – Ethereum and litecoin are the most well-known. The total universe of cryptocurrency is $600B, with twenty-six of these currencies having over $1B in market cap (if they were start-ups, they would qualify as unicorns).
Going back to the basics of currency, a currency should function as a means of exchange. Right now, these cryptocurrencies don’t do that. Put simply, cryptocurrency doesn’t meet the criteria of a long-term investment at this point. Going back to the basics of investing vs. speculating, Seth Klarman put it well when he wrote in Margin of Safety, “speculators… buy and sell securities based on whether they believe those securities will rise or fall in price. Their judgment regarding future price movements is based, not on fundamentals, but on a prediction of the behavior of others.” Does this sound like it might fit bitcoin? It does to us.