Jack Bogle Says ‘Avoid Bitcoin Like the Plague’

[TheTimeLord]

https://www.bloomberg.com/news/articles ... the-plague

“Avoid bitcoin like the plague. Did I make myself clear?” Bogle, founder of Vanguard Group Inc., said in response to an audience question at a Council on Foreign Relations event in New York Tuesday.

[JDCarpenter]

I, for one, don't disagree one bit!

But is there any reason to think that Mr. Bogle's opinion will impact anyone's decisionmaking on this one way or the other?

E.T.A.--I'm guessing that the Venn diagram of Bogle-believers/indexers and bitcoin aficionados probably has little overlap...

[chevca]

At the risk of getting chastised for blindly following Mr. Bogle's advice , I will gladly follow this advice.

Not that I planned to get into Bitcoin anyway. It's on my own avoid list.

[Amart]

Charlie Munger had the same sentiment. I find comfort in listening to people much more intelligent than me warn about the dangers of speculation in the midst of the "mania". There seems to be some mass inertia behind the idea that owning units of this decentralized, digital means of exchange is in itself an investment, and people are buying into it with the hope that it will continue to rise as it has. I won't be buying the dip.

[3funder]

I invest in stocks and bonds. Period.

[jlcnuke]

I invest in stocks (index funds) and bonds.

I speculate on any number of things (I throw some money at the lottery, I gamble in casinos, I own some crypto-currencies).

Buffet told the world in 2014 that bitcoin was a "mirage" and we should stay away. $11k at that time is worth $100k today; a much better return than BRK.A....

Had I invested the $18k I put in my 401k in 2012 in bitcoin instead I'd have ~$15,000,000 today. Needless to say, my index investing hasn't produced those returns either.

Are the current levels sustainable? I don't know, but time will tell.
Is it a great "investment" - well an investment is something you expect to increase in value and there's no compelling reason I can see why this "asset" *should* have any appreciable increase in value, so I'd say it's not an investment at all. However, I felt the same way 5 years ago or I might have had $15,000,000 today....
Is it something "worth" speculating on? To me, sure. To others? Who knows, speculation is about a personal risk:reward decision that each person has to make on their own.

[Levett]

In his appearance, Mr. Bogle commented on a great deal more than just Bitcoin--comments wholly consistent with his wonderful book, The Battle for the Soul of Capitalism.

Lev

[staythecourse]

Didn't read the link, but would assume Mr. Bogle would say the same about ANY speculative investment. Most of which I would agree with including bit coin. I disagree on a few things with Mr. Bogle, but can't say I remember ONCE he was so vehement on one topic and was found to be completely wrong. Even international he refers to not needing it, but never used phrases liek "avoid like the plague". Either this is the FIRST time he totally missed the mark OR more likely he is the one who is correct.

Between betting on Mr. Bogle and bitcoin I would go with Mr. Bogle.

Good luck.

[Wakefield1]

Big lottery jackpot? Paid for by those buying in? When more players/buyers/sellers start to cash out/sell instead of buying into the game will the jackpot start to shrink? Can it go all the way to nothing?

[jlcnuke]

Big lottery jackpot? Paid for by those buying in? When more players/buyers/sellers start to cash out/sell instead of buying into the game will the jackpot start to shrink? Can it go all the way to nothing?

My speculation into most lottery jackpots have gone to $0.... every drawing I don't win something from (most of them) is a 100% loss of the money I speculate on that drawing. Which do you think is more likely: my bitcoin value going to $0 tomorrow or the money I spent on tonight's lottery ticket being worth $0 tomorrow? Personally, I'd say the latter is more likely as historically that has been the overwhelmingly most common result while historically bitcoin hasn't ever had a 100% drop in value overnight.

[Watty]

The flip side is that I would also not dare shorting Bitcoin is there was easy way to do that.

Remember the quote “The market can stay irrational a lot longer than you can stay solvent!”

[Jonathan]

Does this mean that Vanguard will no longer offer bitcoin-backed stocks?

[jalbert]

Had I invested the $18k I put in my 401k in 2012 in bitcoin instead I'd have ~$15,000,000 today. Needless to say, my index investing hasn't produced those returns either.

The index funds may well have obliterated the bitcoin return in risk-adjusted terms. An investment is a claim on future cash flows. The only future cash flows of a bitcoin are the willingness of someone to buy it from you or accept it in a barter trade (the word "currency" used in its description notwithstanding).

[MossySF]

Dunno ... the plague has quite a lot more downside .

Put 1% in bitcoin and you might lose your 1%. That hurts but not-plague-like pain.

[alwayshedge]

People said the same thing about the internet. Many many intelligent people thought it was blasphemy to think the internet would surround our lives like it has. Now we're sitting here, on the internet, discussing about how one should avoid the next tech.

Not saying Mr. Bogle is wrong. But don't let the whole conservative "I only buy index funds because everything else is stupid" put the blinders on you. The world goes through changes. Things that seem stupid and speculative sometimes do actually become what they said could never happen.

[VictoriaF]

Here is an interesting TED talk about BlockChain: https://www.ted.com/talks/don_tapscott_ ... d_business

Victoria

[hightower]

Like Duh you should avoid "investing" in bitcoin. Way too risky. However, that's not to say I don't believe in block chain technology. It sounds like a very good solution to a lot of important problems. But, I'm not putting my money on it.

[fatlever]

Also Warren Buffet when Bitcoin was priced at $290:

"Bitcoin is a mirage, stay away from it"

As much respect as I have for Warren Buffet and Jack Bogle, it's outside their "circle of competence" as Buffet says.

But then Warren Buffet's buddy Bill Gates says:

Bitcoin is better than currency

Nobody can stop Bitcoin

There are plenty of others like Richard Branson who also said the Blockchain is an "economic revolution." They might have a better assessment of Bitcoin than Bogle/Buffet but ultimately you have to make your own decision.

Some of this economic revolution and better than currency talk stems from the fact that there are like 2 Billion people in the world who are unbanked, are kept out of the financial system for one reason or another; where governments, restrict cross border payments, exercise capital controls, if you send money you might be flagged as a criminal, services like Western Union charge outrages amounts for migrants to send remittances and or just the fact that you might have an incompetent or outright criminal governments inflating the currency and something like Bitcoin which is very accessible is a great alternative.

[AlohaJoe]

Does this mean that Vanguard will no longer offer bitcoin-backed stocks?

You do realise that Jack Bogle doesn't own or run Vanguard, right?

[BogleMelon]

Had I invested the $18k I put in my 401k in 2012 in bitcoin instead I'd have ~$15,000,000 today. Needless to say, my index investing hasn't produced those returns either.

In order for you to have these returns, you would have to sell today. So the question is, had you invested the $18k you put in your 401k in 2012 in bitcoin, would you sell today to lock in your 15 M returns? Or Would you sell earlier and get out of market too early? Or wait a bit more, and who knows what would be your returns?

[BogleMelon]

Other than speculation and the high demand, I don't really understand what is the use of the bitcoins today! I don't see people get paid salaries in bitcoins, I don't see that much use of it as a way of spending money. Let alone that I fail to understand where they really come from and what they represent! (Oh please don't tell me about mining and ledger, I failed to understand whom's ledger!) Anyone else?

[PFInterest]

thats what all the old people say.

[nisiprius]

...People said the same thing about the internet...

Who? I really don't remember that. See if you can find some quotations from the 1990s to back up what you are saying. I'm not saying there weren't, but I really don't remember much naysaying. There was a long period when not many people knew about the Internet.

And I do remember a session at the Apple Worldwide Developers' Conference in 1996 when someone opened a talk with a slide that said "this session is not about the Internet," and said "They told us that they wanted every single session to to use the word 'Internet' so I've used it."

[Levett]

Yes, I am an old person.

Been there; done that.

Lev

[jadd806]

About the stance we all expected, but I'm glad that Mr. Bogle has made his position on Bitcoin crystal clear. I really liked the last quote in the article:

It’s “crazy” to invest in the digital asset, he added. “Bitcoin may well go to $20,000 but that won’t prove I’m wrong. When it gets back to $100, we’ll talk.”

I'm 24 and quite a few people my age that I know have bought Bitcoin in the past couple of weeks or are planning on buying it. Pretty much all triggered by the media frenzy surrounding the recent price explosion. Older relatives were asking me about how they could buy some on Thanksgiving. Interestingly, I remember the exact same thing happened on Thanksgiving of 2013, when the Bitcoin price topped $1000 for the first time, which was a 10x gain in a few short weeks.

It makes me sad for those I know in my personal life who have bought into Bitcoin with hopes of getting rich quick. It seems to have captured the attention of my fellow millennials who think saving for retirement or general wealth building is impossible.

Blockchain technology is valuable, but you can't invest in blockchain by buying Bitcoin any more than you can invest in the Internet by buying Comcast stock.

[ccieemeritus]

I was surprised to see on winkdex.com that the bitcoin volume for the last 24 hours was 65k BTC, or about $640M in current value. That’s about 0.4% of the $167B “market cap”.

At some point the people with substantial BTC will unload it. The question is who unloads how much before it falls apart.

[abuss368]

I still do not quite understand the whole digital currency (i.e. Bitcoin) market.

This has to be one of the best pure speculation trades in recent memory.

How does this end?

[neurosphere]

I remember a buddy buying Dow Corning at $110, because fiber optics were the "future of the internet" and growth was "unlimited".



I personally bought at about $80 on the way up, and $70 on the way down. "GLW" was my personal lesson on "I don't know squat about any individual company/sector". It could have been much worse.

Bitcoin feels the same to me. But I could be wrong, because I don't know squat.

NS

[jlcnuke]

Had I invested the $18k I put in my 401k in 2012 in bitcoin instead I'd have ~$15,000,000 today. Needless to say, my index investing hasn't produced those returns either.

In order for you to have these returns, you would have to sell today. So the question is, had you invested the $18k you put in my 401k in 2012 in bitcoin, would you sell today to lock in your 15 M returns? Or Would you sell earlier and get out of market too early? Or wait a bit more, and who knows what would be your returns?

I likely would have sold half when the value doubled my initial investment of $18k (at $24/bitcoin, leaving me with 750 bitcoin), then again when it reached $2m (at $2,667 as that would let me "almost" retire leaving me with 375), and another half when it doubled in price again (at $5,333 letting me retire with $2M and 187ish bitcoin still), and another half when it doubled in price again (letting me increase my lifestyle with another million dollars in traditional investments and 94ish bitcoins still) etc.

That was essentially the plan for the 600,000 shares of a "penny stock" I gambled on back in the day (that one didn't work out). Take my winnings, then let things ride until there was good reason to get out (crashing and looking like it or "I'm pretty well off now" being good reasons to get out/off the ride, at least 1/2 at a time).

[retprof]

...People said the same thing about the internet...

Who? I really don't remember that. See if you can find some quotations from the 1990s to back up what you are saying. I'm not saying there weren't, but I really don't remember much naysaying. There was a long period when not many people knew about the Internet.

And I do remember a session at the Apple Worldwide Developers' Conference in 1996 when someone opened a talk with a slide that said "this session is not about the Internet," and said "They told us that they wanted every single session to to use the word 'Internet' so I've used it."

1995 Newsweek article by astronomer Cliff Stoll:

http://www.newsweek.com/clifford-stoll- ... ana-185306:

“After two decades online, I’m perplexed. It’s not that I haven’t had a gas of a good time on the Internet. I’ve met great people and even caught a hacker or two. But today, I’m uneasy about this most trendy and oversold community. Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.

Baloney. Do our computer pundits lack all common sense? The truth in no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”

[dwickenh]

Did you expect someone of Jack's experience to support a crypto currency that has ballooned in value over a short period of time. This is one of those stories that the "happily ever after" is not known until the end of the book. I would be shocked if he did recommend it!!

[Mingus]

...People said the same thing about the internet...

Who? I really don't remember that. See if you can find some quotations from the 1990s to back up what you are saying. I'm not saying there weren't, but I really don't remember much naysaying. There was a long period when not many people knew about the Internet.

I don't have any quotes. But my friends and I in the 90s in our lack of intelligence, thought of the internet as an extension of the ham radio crowd's domain. It wasn't even a curiosity. Only reason we knew about it was because one of our friend's dad (a ham radio guy), had a computer and some form of the internet at the time.

[jlcnuke]

Did you expect someone of Jack's experience to support a crypto currency that has ballooned in value over a short period of time. This is one of those stories that the "happily ever after" is not known until the end of the book. I would be shocked if he did recommend it!!

I don't expect ANY financial advisor, investment advisor, or the like to recommend ANY highly speculative investment. I would, however, appreciate if they qualified their statements with something that expressed "why" they aren't recommending it (i.e. "it's highly speculative and there is no way today to know if it is fairly valued, severely overvalued, or undervalued and is thus not a suitable investment for anyone looking for any sort of somewhat predictable outcome for their investment money"). You don't have to recommend the 'next best thing" or the "last worst idea", before it is known to be "the next best thing" or the "last worst idea", but you can avoid putting yourself in the history books as the person who was "massively wrong about the next best thing" by not "speculating" on whether that speculative future might happen. I only wonder why he decided now was the right time to decide it was a good idea to "speculate" on whether or not Bitcoin was a good idea since he's been silent on the subject of crypto-currencies for years.

[Mingus]

They speak of electronic town meetings.

Wait until AI Bots overtake electronic town meetings to push a narrative.

[Angelus359]

I had 5% in crypto currency as a one time buy... I now have closer to 10% in crypto currency without buying more

I'm doing a buy and hold there...

Leaving it alone

[HomerJ]

Had I invested the $18k I put in my 401k in 2012 in bitcoin instead I'd have ~$15,000,000 today. Needless to say, my index investing hasn't produced those returns either.

Don't confuse result with strategy. You can let it ride 10 times on red at a roulette table and win. It's still a bad idea.

The fact that it's gone up so much so fast is NOT a positive. Something gaining 900% in a year is a huge red flag that the price is disconnected with reality. Yet many others see that as a reason to put their money in it.

Sure it might go up 2x or 10x or even 100x again. People are stupid. But it's far more likely to crash at some point. One can roll the dice, but that's a very risky play with one's retirement money.

Avoid "get rich quick" schemes.

[HomerJ]

People said the same thing about the internet. Many many intelligent people thought it was blasphemy to think the internet would surround our lives like it has. Now we're sitting here, on the internet, discussing about how one should avoid the next tech.

Not saying Mr. Bogle is wrong. But don't let the whole conservative "I only buy index funds because everything else is stupid" put the blinders on you. The world goes through changes. Things that seem stupid and speculative sometimes do actually become what they said could never happen.

Bitcoin is not the Internet. Blockchain MAY be the Internet (although I highly doubt it), but Bitcoin could be MySpace or Alta-Vista or Ask-Jeeves.

Blockchain may become very successful and important. But that does not mean Bitcoin has to.

[dwickenh]

Did you expect someone of Jack's experience to support a crypto currency that has ballooned in value over a short period of time. This is one of those stories that the "happily ever after" is not known until the end of the book. I would be shocked if he did recommend it!!

I don't expect ANY financial advisor, investment advisor, or the like to recommend ANY highly speculative investment. I would, however, appreciate if they qualified their statements with something that expressed "why" they aren't recommending it (i.e. "it's highly speculative and there is no way today to know if it is fairly valued, severely overvalued, or undervalued and is thus not a suitable investment for anyone looking for any sort of somewhat predictable outcome for their investment money"). You don't have to recommend the 'next best thing" or the "last worst idea", before it is known to be "the next best thing" or the "last worst idea", but you can avoid putting yourself in the history books as the person who was "massively wrong about the next best thing" by not "speculating" on whether that speculative future might happen. I only wonder why he decided now was the right time to decide it was a good idea to "speculate" on whether or not Bitcoin was a good idea since he's been silent on the subject of crypto-currencies for years.

I think Jack has earned the right to speak his mind without explaining the intricacies of his thinking. It is speculative at best at this time and to state that would be to state the obvious.

[jlcnuke]

Had I invested the $18k I put in my 401k in 2012 in bitcoin instead I'd have ~$15,000,000 today. Needless to say, my index investing hasn't produced those returns either.

Don't confuse result with strategy. You can let it ride 10 times on red at a roulette table and win. It's still a bad idea.

The fact that it's gone up so much so fast is NOT a positive. Something gaining 900% in a year is a huge red flag that the price is disconnected with reality. Yet many others see that as a reason to put their money in it.

Sure it might go up 2x or 10x or even 100x again. People are stupid. But it's far more likely to crash at some point. One can roll the dice, but that's a very risky play with one's retirement money.

Avoid "get rich quick" schemes.

The value of a "new" idea, concept, or item is unknown. It is only discovered through learning the supply and demand curve. To say that something going up 900% in a year is "disconnected with reality" is to ignore the fact that "reality" may not yet understand the value of a new item. It "could" be worth 10000% what it currently is priced at, but only time can tell that. Until someone can categorize all the possible ways that people will value it, and the "average" valuation those ways will produce, we have no idea what the "true" cost of a bitcoin should be. Maybe it's $0.0000001, but maybe it's $10,000,000.

I said it's speculative BECAUSE we have no idea today what the "actual" value society will place on it. I have no way of predicting if it's massively overvalued or undervalued. Then again, for all I know, 15 of the top 10 companies in the S&P 500 will file bankruptcy next year... I can't predict the future. The latter, however, having more knowledge of events (past and present) giving it the current valuations, provides a much better prediction that it won't suffer catastrophic declines immediately (though previous crashes have told us that is still quite reasonably possible).

[vitaflo]

Big lottery jackpot? Paid for by those buying in? When more players/buyers/sellers start to cash out/sell instead of buying into the game will the jackpot start to shrink? Can it go all the way to nothing?

My speculation into most lottery jackpots have gone to $0.... every drawing I don't win something from (most of them) is a 100% loss of the money I speculate on that drawing. Which do you think is more likely: my bitcoin value going to $0 tomorrow or the money I spent on tonight's lottery ticket being worth $0 tomorrow? Personally, I'd say the latter is more likely as historically that has been the overwhelmingly most common result while historically bitcoin hasn't ever had a 100% drop in value overnight.

I mean, risk = reward right? Winning the Powerball is a (currently) ~80,000,000% return on investment overnight. Bitcoin has "only" gone up 1,000% this year. Certainly bitcoin has less risk than Powerball, but perhaps that's not saying much.

If smart investing is about managing risk, I would consider neither to be good investments.

[vitaflo]

Blockchain may become very successful and important. But that does not mean Bitcoin has to.

Blockchain is important and has a ton of potential uses. My company is working on one right now for a F500 company (not related to currency at all). It's a very cool technology.

People saying Bitcoin is special because it uses Blockchain miss the point of blockchain. Blockchain is a tool. Bitcoin is just one application of it. There is nothing special about the fact that Bitcoin uses it, just as there is nothing special about any other application of blockchain. They will sink or swim on their own merits as an application regardless of the tool itself.

[Cycle]

Bit coin is a form of money. It is odd that people are buying and holding money.

I'm slightly bitbitter I didn't purchase a few hundred and forget about them till now. I've been reading about btc since they were pennies each, then soared into the dollars then crashed below a dollar.

I'd be curious if people are actually using btc like money or if people are mostly just hoarding it like tulips. The transaction cost is $4.5 last I checked and I think a repository typically costs 2 percent, which would be higher than inflation considering I do hundreds of transactions with my checking/credit accounts each year.

[jalbert]

There are plenty of others like Richard Branson who also said the Blockchain is an "economic revolution."

Blockchain may well outlast Bitcoin.

[Iridium]

Bit coin is a form of money. It is odd that people are buying and holding money.

The bitcoin miners and developers have managed to muck up the scalability so badly (the existing protocol can only process ~300,000 transactions/day) that even though digital cash was their original claim to fame, I think BTC has now turned into something more akin to a digital gold coin. The perennial solution proposed has been the lightning network, which would allow transfers to be confirmed nearly instantly and tiny cost. However, that technology is still many months from being available, let alone adopted.

I'd be curious if people are actually using btc like money or if people are mostly just hoarding it like tulips. The transaction cost is $4.5 last I checked and I think a repository typically costs 2 percent, which would be higher than inflation considering I do hundreds of transactions with my checking/credit accounts each year.

I'm sure that some people are using BTC like money and I still see the 'BitCoin Accepted Here' signs on websites that want to seem cool, even though the transaction costs make the idea seem absurd. However, I would suspect that people who are more serious about cryptocurrency probably do their cash-like transactions with a different coin. The second biggest cryptocurrency, Ethereum, creates new blocks every 12-15 seconds (compared to BTC's 10 minutes), has a median transaction cost of $0.20 (compared to BTC's $3.60), and supports far more advanced payment orders (you can write computer programs that automatically pay when certain conditions are met). At this point, Ethereum is doing about twice the number of transactions as BTC, even though they are a much, much smaller currency.

[mortalsonofmortal]

...People said the same thing about the internet...

Who? I really don't remember that. See if you can find some quotations from the 1990s to back up what you are saying. I'm not saying there weren't, but I really don't remember much naysaying. There was a long period when not many people knew about the Internet.

And I do remember a session at the Apple Worldwide Developers' Conference in 1996 when someone opened a talk with a slide that said "this session is not about the Internet," and said "They told us that they wanted every single session to to use the word 'Internet' so I've used it."

1995 Newsweek article by astronomer Cliff Stoll:

http://www.newsweek.com/clifford-stoll- ... ana-185306:

“After two decades online, I’m perplexed. It’s not that I haven’t had a gas of a good time on the Internet. I’ve met great people and even caught a hacker or two. But today, I’m uneasy about this most trendy and oversold community. Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.

Baloney. Do our computer pundits lack all common sense? The truth in no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”

never say never

[mortalsonofmortal]

From my limited knowledge gathered from seeing videos and documentaries, bitcoin cannot be really compared to just another currency.
1.Bitcoin has limited availability but currencies can be printed. So people are comparing bitcoin to gold.
2. Bitcoin cannot be regulated as much as normal currency. This makes it perfect for not so legal transactions via internet or sometimes not through internet too.
3. With all of bitcoin advantages, what i think is happening right now is speculative buying.
4. One has to admit that Jack and Warren were not right all the time. They would be right if everyone makes their decisions based out of sound reasonings. There are times like this when the FOMO (Fear of missing out) drives decisions. With enough people that in itself can become a wave.
5. Crypto currency will definitely have its place in future financial domain. It may be bitcoin or ether or litecoin or ripple. But it wont be the only currency of the future.

I am gambling with my "fun" money in various crypto currency and all is good so far. My strategy is to take my capital out now that it hit high levels on all cryptos and leave my gains invested.(after all Warren said "always protect your capital" but probably may be not in this sense.

[GoldenFinch]

I don’t fully understand BitCoin, and for that reason, I’m out.

(Recently overdosed on Shark Tank)

[sambb]

did mr bogle avoid enron, or was it in his index funds? why would he be ok with enron, but not bitcoin?

[jlcnuke]

Big lottery jackpot? Paid for by those buying in? When more players/buyers/sellers start to cash out/sell instead of buying into the game will the jackpot start to shrink? Can it go all the way to nothing?

My speculation into most lottery jackpots have gone to $0.... every drawing I don't win something from (most of them) is a 100% loss of the money I speculate on that drawing. Which do you think is more likely: my bitcoin value going to $0 tomorrow or the money I spent on tonight's lottery ticket being worth $0 tomorrow? Personally, I'd say the latter is more likely as historically that has been the overwhelmingly most common result while historically bitcoin hasn't ever had a 100% drop in value overnight.

I mean, risk = reward right? Winning the Powerball is a (currently) ~80,000,000% return on investment overnight. Bitcoin has "only" gone up 1,000% this year. Certainly bitcoin has less risk than Powerball, but perhaps that's not saying much.

If smart investing is about managing risk, I would consider neither to be good investments.

I know I never claimed either were an "investment". In fact, I've said they aren't many times over the years. They're gambles/speculation.

[sschoe2]

Also totally agree. It is the 21st century tulipmania and at some point there are going to be a lot of bag holders.