Bitcoin Bubble Goes Boom

 bitcoin-cracked-smoke

 

Bitcoins, an online based currency developed four years ago by a nerd in his mother’s basement, has lost 75% of its value in 2 days.  In the last month the exchange rate for the digital currency skyrocketed, trade at 47 USD per Bitcoin in March to 266 USD last Wednesday. But that was as high as it may ever likely trade at again. The Bitcoin bubble is an excellent example of what a trading bubble is like on crack. The boom and bust of this all happened in less than a month, suggesting that the volatility of this currency is will spell then end of investors intrest in it.

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This doesn’t mean that Bitcoins are out of the market completely, or that anyone who traded with them is an idiot. In fact I am sure some people made a good chunk of change on this bubble. There are those who traded early last month and road the bubble to the peak or maybe a little below then sold which then caused the value to plummet from under his fellow investors. There are some very cunning individuals who might have used their coins to buy assets or stable commodities that can be traded back after the market stabilized or turned into another investment. Like this guy who bought a  Porche.

The good news here is that there is not a Bit nation where peasants will be suffering from this disaster. Usually when there is a currency crisis  a whole nation of people is left to suffer in the devastation caused by the hubris of the few. So luckily no children will be starving because mom dosen’t have enough Bitcoins to buy a loaf of digital bread. In this case the only losers are those invested large amounts in Bitcoin and now can’t find a buyer, like the guy that sold his Porche.

However there are those who still believe that there is utility and value in the Bitcoins, albiet not in the way investors hoped. As an investment Bitcoins turned out to be the 21 century answer to the tulip  bubble. As for the actual legacy of Bitcoins, the jury is out.

CNN Money

Sell Your Gold, Buy Wampum

 

http://mariopiperni.com

It’s time to sell your gold. At the height of the Great Recession investors and doomsday preppers alike flocked to dump all their assets in gold, the safest of all investments. It was perceived that gold was the soundest investment in the turbulent market since it has a consistently increase in value over the last decade. In fact it had gained 650% since 1999. This was once true of the real estate market as well. The thing is, gold has no real utility outside of its use in manufacturing certain electronics and its use in jewelry. So the price of gold is mostly fixed to what someone is willing to pay to own it. However, gold is on the decline losing 17% value since 2011. Big investors are pulling out of the market and ordinary citizens are seeing their once foolproof investment dwindle before their eyes.

Last call, you don’t have to go home but you can’t stay here.

It’s sometimes hard for some to accept that this was just a bubble that inflated beyond its true value and not a real consistently sound investment. There will be those who will say this is only a hiccup and gold is worth more than the market appreciates. However, I find in situations like this it’s best to look for the next big foolproof investment bubble. It’s Wampum.

OLYMPUS DIGITAL CAMERA
If you’re from India why are you white?

Wampum, cut sea shells woven together in strings or belts, was once a currency and jewelry of the East Coast Native American tribes. Today Wampum is still around mostly in Native American tourist traps and online retailers. But the real allure to an investment in Wampum is that it is a completely arbitrary item, just like gold. I personally predict that if you get in on the ground floor you stand to make a 1000% return on your original investment in as short as 7 years. At which time I predict the bottom will fall out in the Wampum market and the next new big investment will be these giant stones with holes in the center that early humans decorated their lawns with, doomsday preppers will love these.

Check out the latest addition to my investment portfolio.

 

New York Times

Should the US Sell GM Right Now?

United States of GM
United States of GM

Executives at General Motors are urging the United States Treasury department to sell its remaining shares of the once (and probably still) fledgling US automaker. The reason? Because GM claims that the restrictions (like executive pay) are making it difficult for the auto-giant to attract quality talent for its high ranking management staff. If the government were to sell its share today, with the current share price, the government would lose a total of $15 billion. For the US government to break even on the bailout, the share price would have to climb to $50 a share, more than double the current price. With a P/E of only 8.5, $50 is not an entirely laughable target, but can GM reach that target without removing the executive pay restrictions? I actually think so, and I also think it is quite ballsy of GM to even ask the government to sell its shares right now at a cost of $15 billion to the taxpayers.

I suppose at the same time, this guy at Forbes predicts GM will be bankrupt in a years time, so perhaps it is a good time to sell..

Financial News Sensationalism at its Best

mr bean hates sesnationalism
Mr. Bean knows what I’m talking about

Dear New York Times,

Yeah, we know some crazy shit went down today on major exchanges in New York. Some rogue computer application made A LOT of trades, creating mass confusion among *day traders* for about an hour. The culprit, Knight Capital, said they had some technology issues that will be thoroughly investigated. You, NYT, have turned this into an opportunity to say “…spreading turmoil across Wall Street and drawing renewed attention to the fragility and instability of the nation’s stock markets.” Only half of this statement is really true – day traders did suspect turmoil in the early hours. However, fragility and instability of the nation’s stock markets? Please. This is exactly why we have the SEC and federal regulations, which in time will do its job to clear this mess. The only real loser in the ordeal will be the idiots who tried to move on the excess volume, and of course Knight Capital who will surely face heavy lawsuits from its greedy clients. Cut the sensationalist shit, report the story AS IS, and be done with it.

Dear Wall Street Journal,

It’s unlucky that I read the New York Times article first, because afterwards I didn’t think it could get worse. I was wrong. The title alone, “When Will Retail Investors Call it Quits?”, is deserved of a five-across-the-face. Are you kidding me? You say that small investors, like “Grandpa”, don’t stand a chance when things like this happen. Why is that exactly? Is Grandpa buying and selling the same stocks everyday? Well, he might be, but if he is he deserves to lose his money. For proper, long-term investors, this makes no difference whatsoever, so stop acting like it does. Stocks, particularly equities, in the long run will be evaluated exactly where they should be by the overall market. I can’t even believe you found people stupid enough to say stuff like:

With events like the flash crash and this week’s stumble, Mr. Glasser adds, “you could buy and hold a company for 15 years and then have everything you’ve built up disappear in five minutes. No one can take that kind of risk anymore. There’s no such thing as a widows-and-orphans stock anymore.”

If your portfolio is designed in a matter where you can lose 15 years worth of investments on a day like today, you really deserve to be broke, because I’m guessing your portfolio only consists of Knight Capital. Other than Knight, all other stocks affected today will still be the same companies tomorrow, and their value will find their way back to where they should be.

This mess affects only day traders, plain and simple. And anyone who thinks they can make money day trading may as well play the slots, because there is no short-term rationality to the stock market. Never has been, never will be. And stop comparing this to the Flash Crash of 2010, a day where the Dow dropped more than 900 points. This incident lasted an hour, and the market closed almost exactly where it would have regardless of the morning’s snafu.

Tiny Cars for Tiny People: the Electirc Car Boom in China

 

The rapidly growing/developing nation of China is edging the world to the precipice of unsustainable development and at the same time promoting the development and sales of electric and plug-in hybrid cars. In order to promote this industry the Chinese Government is offering a sizable subsidy of nearly 10,000 USD per vehicle. This artificial lowering of the price coupled with the artificially high price per barrel of fuel in China is going to cause a boom in the sales and lead to a massive economy of scale in the manufacturing and sales of these tiny golf carts with doors. It’s no wonder that Warren “Big Bucks” Buffet is heavily investing in this market. This industry is going to take off like lightning even if the average Chinese driver only goes a snail’s pace of 25 mph city and 35 mph highway.

 According to the chart below, provided from the Economist, China and Europe will lead the world in the market for these highly efficient and O-Zone saving vehicles, while America will continue cowboy up to their F-150 (the bestselling car in America, despite the fact that it is a truck).  This all makes perfect sense to me; since China is full of small people ( average height 5’6″ average weight 145 lbs) they want small cars and America is full of really big people ( height 5’9″ 191 lbs.) they want really big cars to haul around their fat asses. If you want more detailed information and analysis on this subject and less sarcastic punditry and racist anecdotes, you have come to the wrong place.

The Economist