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John Hamilton: “As a longtime reader from north of the border, I’d like your comments/opinion on the different cryptocurrencies being traded on the public markets.”

→ Let me first offer the wisdom of two guys, aged 90 and 97, who are a lot smarter than I am.  Charlie’s last line — a throwaway — made me laugh out loud.


Like gold, crypto is a bet against the dollar.  Like gold, crypto is expensive to mine.  Its value is its scarcity, so mining more of it does no one (other than the miners) any good.  I’d prefer to see that energy go to building schools or hospitals or a smart grid.

Unlike physical gold:

> Crypto is easy to buy, sell, and “store.”

> Crypto may be useful to criminals.

> Crypto has no alternative uses, like jewelry or dentistry.

I hate to think the world’s government-issued currencies — especially the U.S. dollar — will lose value relative to gold or crypto, though with inflation or chaos, they well may.

So I do see how the price of crypto and/or gold could be higher tomorrow or a year or ten years from now.

But buying one bitcoin for $57,000 today to bet against the dollar carries considerable risk even with the looming possibility of inflation.


After the bitcoin price had fallen from a then-high of $14,000 to $3,200 a couple of years ago, I tried to buy 10 of them . . . mainly on a lark, but also with a sense of the rhythm of such things.

At the time, you had to set up a new account somewhere, and Robinhood  seemed easiest, so I started to do that — but bailed when Robinhood asked for my bank password.

That false start has thus far cost me $567,000.

Oh, well.

It was like the time I passed up the chance to buy 10 shares of Berkshire Hathaway at $300, back when the above-referenced nonagenarians were already attracting notice.   Had I pulled that trigger — and held on for 40 years — my $3,000 would today be $4.3 million.

Oh, well.

Two big differences:

(1)  My botched bitcoin bonanza would have taken just 2 years to balloon.  Score one for crypto!  And it could octuple again in short order — or crash — neither of which Berkshire is likely to do.

(2)  Buying bitcoin at $3,200 would have been speculating.  It had (and has) no intrinsic value.  Buying Berkshire Hathaway at $300, by contrast, would have been investing.  There was intrinsic value in its several businesses, and in the brains engaged in trying to make those businesses grow.

Two important notes:

(1) In the face of potential inflation, shares in companies that can raise prices may, over the long run, do just as well as gold or bitcoin — or better.  Over time, the stock market has always outpaced inflation.

(2) Selling — or spending — bitcoin in which you have a profit subjects that profit to tax.


All that said: I don’t have a clue where crypto is headed.

I missed that boat and will just plod along swinging for the fences a different way: investing in various potentially-profitable enterprises that could make the world a little better, and me a little rich, if they succeed.  (Have I got an Aquablation Therapy for you!)

Speaking of which: enjoy Cap’n Joe.



Have a great week!

 

 

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