Buying index funds is just as speculative as buying Bitcoin

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
agottem
Posts: 9
Joined: Tue Aug 29, 2017 11:55 am

Buying index funds is just as speculative as buying Bitcoin

Post by agottem » Sun Dec 10, 2017 2:57 pm

The vast majority of people buying index funds don’t care much about the underlying companies they are purchasing shares of. Their primary goal is to perform as well as the underlying market and hopefully beat inflation. They are speculating that by throwing their money into a little bit of everything that the overall gains will outweigh their losses. If another index comes along that can outperform their current index on a risk adjusted basis they won’t hesitate to pull their money from the companies they previously owned a part of. This is not investing.

I argue that this is just as speculative as people buying bitcoin.

In fact, people buying bitcoin are trying to fix a broken system. They believe people should have the option to store their wealth in a currency that isn’t subject to manipulation. They believe using inflation to force people to put their retirement in the hands of corporations is wrong. People who buy bitcoin aren’t against investment, however. Should an opportunity come along that they believe in they of course would have the choice to risk their bitcoin.

The system we had in 2008 was perverse. Before bitcoin people’s only option was to hand their savings to a company and hope for the best. The alternative was to eat the price of inflation or hope the gold markets aren’t manipulated. Bitcoin is a populist movement every bit as unexpected as Brexit.

I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.

runner540
Posts: 501
Joined: Sun Feb 26, 2017 5:43 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by runner540 » Sun Dec 10, 2017 3:10 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
The vast majority of people buying index funds don’t care much about the underlying companies they are purchasing shares of. Their primary goal is to perform as well as the underlying market and hopefully beat inflation. They are speculating that by throwing their money into a little bit of everything that the overall gains will outweigh their losses. If another index comes along that can outperform their current index on a risk adjusted basis they won’t hesitate to pull their money from the companies they previously owned a part of. This is not investing.

I argue that this is just as speculative as people buying bitcoin.

In fact, people buying bitcoin are trying to fix a broken system. They believe people should have the option to store their wealth in a currency that isn’t subject to manipulation. They believe using inflation to force people to put their retirement in the hands of corporations is wrong. People who buy bitcoin aren’t against investment, however. Should an opportunity come along that they believe in they of course would have the choice to risk their bitcoin.

The system we had in 2008 was perverse. Before bitcoin people’s only option was to hand their savings to a company and hope for the best. The alternative was to eat the price of inflation or hope the gold markets aren’t manipulated. Bitcoin is a populist movement every bit as unexpected as Brexit.

I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
Do you have an actionable question? There have been plenty of bitcoin threads in recent weeks that you could post on. Bitcoin is trying to be a means of exchange and store of value (a form of money). Index funds are different: you actually own a tiny piece of real assets the produce goods and services in the economy.

livesoft
Posts: 58327
Joined: Thu Mar 01, 2007 8:00 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by livesoft » Sun Dec 10, 2017 3:12 pm

This thread is probably confirmation of something.
This signature message sponsored by sscritic: Learn to fish.

PFInterest
Posts: 690
Joined: Sun Jan 08, 2017 12:25 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by PFInterest » Sun Dec 10, 2017 3:13 pm

Hahahaha....no.

ThePrince
Posts: 171
Joined: Sun Aug 20, 2017 9:15 pm
Location: U.S.A.

Re: Buying index funds is just as speculative as buying Bitcoin

Post by ThePrince » Sun Dec 10, 2017 3:17 pm

livesoft wrote:
Sun Dec 10, 2017 3:12 pm
This thread is probably confirmation of something.
Agreed.

User avatar
Pajamas
Posts: 3043
Joined: Sun Jun 03, 2012 6:32 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Pajamas » Sun Dec 10, 2017 3:19 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.

:beer

User avatar
Fudgie
Posts: 123
Joined: Sun Oct 11, 2015 12:01 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Fudgie » Sun Dec 10, 2017 3:20 pm

livesoft wrote:
Sun Dec 10, 2017 3:12 pm
This thread is probably confirmation of something.

It's one of the four Bernstein bubble requirements. "skeptics of <insert speculative asset here> are met with anger."
"That's entertainment!" - Vlad the Impaler

User avatar
telemark
Posts: 2126
Joined: Sat Aug 11, 2012 6:35 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by telemark » Sun Dec 10, 2017 3:22 pm

Index investors buy stocks, but by the nature of index investing they don't set stock prices. By and large, prices are set by active investors, who do care about the underlying companies and research them carefully. This is why we see the occasional accusations that indexers are getting a free ride off the active investors.
If another index comes along that can outperform their current index on a risk adjusted basis they won?t hesitate to pull their money from the companies they previously owned a part of.
If you spend much time on this forum you'll notice that we strongly discourage chasing returns or switching asset classes
on the basis of past performance. "Stay the course" is the mantra.

Other claims made are outside the scope of this forum.
Last edited by telemark on Sun Dec 10, 2017 3:23 pm, edited 1 time in total.

livesoft
Posts: 58327
Joined: Thu Mar 01, 2007 8:00 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by livesoft » Sun Dec 10, 2017 3:22 pm

There is no way that my amusement can be considered anger.
This signature message sponsored by sscritic: Learn to fish.

User avatar
Kenkat
Posts: 3912
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Kenkat » Sun Dec 10, 2017 3:24 pm

Index funds are made up of companies that have assets and generate sales and profits. Bitcoin is a currency and a new one at that. Regardless of your views on Bitcoin, to say they are one and the same is incorrect.

aqan
Posts: 291
Joined: Fri Nov 06, 2015 7:07 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by aqan » Sun Dec 10, 2017 3:27 pm

I wish it was. I’d be a millionaire:)

agottem
Posts: 9
Joined: Tue Aug 29, 2017 11:55 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by agottem » Sun Dec 10, 2017 3:31 pm

I don’t think it’s fair to say people who buy Bitcoin are speculators who only care about price increases. I buy bitcoin because I believe in the properties of the currency. I believe the technology offers new characteristics of money which have never been seen before. I chose to put my money into Bitcoin because the other option was USD, which does not have the properties I desire. The idea of programmable money is only made possible with bitcoin.

I believe me purchasing bitcoin was more of an investment than most people on this forum make when choosing an index.

User avatar
Fudgie
Posts: 123
Joined: Sun Oct 11, 2015 12:01 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Fudgie » Sun Dec 10, 2017 3:32 pm

livesoft wrote:
Sun Dec 10, 2017 3:22 pm
There is no way that my amusement can be considered anger.
My comment was a response to yours, but it was directed at the thread.
"That's entertainment!" - Vlad the Impaler

columbia
Posts: 554
Joined: Tue Aug 27, 2013 5:30 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by columbia » Sun Dec 10, 2017 3:39 pm

[Animated GIF removed by admin LadyGeek. Here's the link: https://media.giphy.com/media/l3q2K5jin ... S/200w.gif]

Regressor
Posts: 15
Joined: Tue Nov 07, 2017 9:28 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Regressor » Sun Dec 10, 2017 3:39 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
And I believe in bitcoin as a store of my wealth.
I think that you're the only one in the world that uses bitcoin to store wealth since bitcoin is so volatile and inefficient system and everyone else uses it for speculative gain.
Nobody reasonable making for example $45.000 per year would accept being payed 3 bitcoins instead of 45000 dollars because they might get fair value for their work, but they may end up working for free.


also, these two are contradictory:
agottem wrote: I don’t think it’s fair to say people who buy Bitcoin are speculators who only care about price increases.

...

I believe me purchasing bitcoin was more of an investment than most people on this forum make when choosing an index.

User avatar
triceratop
Moderator
Posts: 4099
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Buying index funds is just as speculative as buying Bitcoin

Post by triceratop » Sun Dec 10, 2017 3:39 pm

agottem wrote:
Sun Dec 10, 2017 3:31 pm
I don’t think it’s fair to say people who buy Bitcoin are speculators who only care about price increases. I buy bitcoin because I believe in the properties of the currency. I believe the technology offers new characteristics of money which have never been seen before. I chose to put my money into Bitcoin because the other option was USD, which does not have the properties I desire. The idea of programmable money is only made possible with bitcoin.

I believe me purchasing bitcoin was more of an investment than most people on this forum make when choosing an index.
Which is it, a store of value or an investment? A currency, or an investment?

I can assure you index investors are very clear that their shares are not in any sense currency or a store of value.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

euroswiss
Posts: 123
Joined: Sun Oct 25, 2015 4:40 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by euroswiss » Sun Dec 10, 2017 3:40 pm

agottem wrote:
Sun Dec 10, 2017 3:31 pm
I believe me purchasing bitcoin was more of an investment than most people on this forum make when choosing an index.
Good for you - and best of luck!

bgf
Posts: 168
Joined: Fri Nov 10, 2017 9:35 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by bgf » Sun Dec 10, 2017 3:41 pm

agottem wrote:
Sun Dec 10, 2017 3:31 pm
I don’t think it’s fair to say people who buy Bitcoin are speculators who only care about price increases. I buy bitcoin because I believe in the properties of the currency. I believe the technology offers new characteristics of money which have never been seen before. I chose to put my money into Bitcoin because the other option was USD, which does not have the properties I desire. The idea of programmable money is only made possible with bitcoin.

I believe me purchasing bitcoin was more of an investment than most people on this forum make when choosing an index.
Ok, without referring to historical price movements, tell me what one bitcoin is worth.

User avatar
Watty
Posts: 12158
Joined: Wed Oct 10, 2007 3:55 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Watty » Sun Dec 10, 2017 3:44 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
The vast majority of people buying index funds don’t care much about the underlying companies they are purchasing shares of. Their primary goal is to perform as well as the underlying market and hopefully beat inflation. They are speculating that by throwing their money into a little bit of everything that the overall gains will outweigh their losses. If another index comes along that can outperform their current index on a risk adjusted basis they won’t hesitate to pull their money from the companies they previously owned a part of. This is not investing.

I argue that this is just as speculative as people buying bitcoin.

In fact, people buying bitcoin are trying to fix a broken system. They believe people should have the option to store their wealth in a currency that isn’t subject to manipulation. They believe using inflation to force people to put their retirement in the hands of corporations is wrong. People who buy bitcoin aren’t against investment, however. Should an opportunity come along that they believe in they of course would have the choice to risk their bitcoin.

The system we had in 2008 was perverse. Before bitcoin people’s only option was to hand their savings to a company and hope for the best. The alternative was to eat the price of inflation or hope the gold markets aren’t manipulated. Bitcoin is a populist movement every bit as unexpected as Brexit.

I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
Just FYI, inflation is as low as it has been in 50 years and deflation is a very real(and nasty) concern.

A huge underlying problem with this post is that even if you are right and bitcoin can be used as a store of value and a bitcoin you buy today is worth the same as when you are retired in 50 years then it is a horrible place to put your long term money since there is no return on your "investment".

Lou354
Posts: 507
Joined: Sun Apr 03, 2016 10:51 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Lou354 » Sun Dec 10, 2017 3:44 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
Blockchain is a technology used by bitcoin and other crypto currencies. In what sense is bitcoin itself a technology?

jayk238
Posts: 175
Joined: Tue Jan 31, 2017 1:02 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by jayk238 » Sun Dec 10, 2017 3:50 pm

You should invest all of your assets in a broadly diversified portfolio of bitcoin in various websites and companies that let you buy it.
Mortgage the home even and get a loan to buy computers to mine even more bitcoin. Thus further diversifying your techno portfolio.

And then tell us how youre doing in 10 years.

Longdog
Posts: 968
Joined: Sun Feb 09, 2014 6:56 pm
Location: Philadelphia

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Longdog » Sun Dec 10, 2017 3:54 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
In that case, you should put all of your money in bitcoin.
Steve

User avatar
flossy21
Posts: 378
Joined: Sun May 27, 2007 2:04 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by flossy21 » Sun Dec 10, 2017 3:55 pm

Maybe...but I'll take the Index Fund investment.

Bitcoin is competing with a currency backed by the US Gov't. The US Gov't has a monopoly on US$. Why would the US Gov't willingly give up it's monopoly in favor of Bitcoin?

agottem
Posts: 9
Joined: Tue Aug 29, 2017 11:55 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by agottem » Sun Dec 10, 2017 3:58 pm

Lou354 wrote:
Sun Dec 10, 2017 3:44 pm
Blockchain is a technology used by bitcoin and other crypto currencies. In what sense is bitcoin itself a technology?
Bitcoin itself is many things. Proof of Work is the technology which secures it. The blockchain is what the proof of work is securing. Bitcoin is the reward given to miners performing the proof of work. The consensus rules enforced by Bitcoin nodes are what define the properties of a Bitcoin. Rootstock is a sidechain which integrates with the bitcoin blockchain. Rootstock allows you to program Bitcoin. (Imagine a smart contract which defines an insurance for farmers. Farmers can pay into that insurance monthly. When a drought is detected, the smart contract is programmed to automatically payout to farmers impacted). Lightning Network is a technology which allows instant micropayments anywhere in the world. Think "streaming money", something not possible today. This area is under immense innovation. It's unfortunate most people in this forum only focus on the price.

User avatar
Tycoon
Posts: 1129
Joined: Wed Mar 28, 2012 7:06 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Tycoon » Sun Dec 10, 2017 3:58 pm

Longdog wrote:
Sun Dec 10, 2017 3:54 pm
agottem wrote:
Sun Dec 10, 2017 2:57 pm
I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
In that case, you should put all of your money in bitcoin.
Exactly
...I might be just beginning | I might be near the end. Enya | | C'est la vie

User avatar
SimpleGift
Posts: 2719
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: Buying index funds is just as speculative as buying Bitcoin

Post by SimpleGift » Sun Dec 10, 2017 3:59 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
The vast majority of people buying index funds don’t care much about the underlying companies they are purchasing shares of. Their primary goal is to perform as well as the underlying market and hopefully beat inflation. They are speculating that by throwing their money into a little bit of everything that the overall gains will outweigh their losses. If another index comes along that can outperform their current index on a risk adjusted basis they won’t hesitate to pull their money from the companies they previously owned a part of. This is not investing.

I argue that this is just as speculative as people buying bitcoin.
Unfortunately, you're confusing the concepts of "investment" and "speculation." The value of any financial investment is simply the present value of its future income stream. Only income-producing assets, such as stocks, bonds or commercial real estate, are truly investments. Granted, many stocks do not have current earnings or produce dividends — but any stock price above zero suggests that some investors believe it may pay out in the future, if only from the sale of its assets. The acquisition of non-income producing assets, such as bitcoin, rare coins, or fine paintings, is considered a speculation, as one’s return is entirely dependent on someone paying a higher price for them later.

When folks invest in index funds, they are investing in the future earnings of the companies in the index (chart below) — which have quite a track record for growth over long investment horizons, driving increases in stock prices.
The price of bitcoin is only being driven by speculation today — the hope of selling to future buyers at a higher price.
Cordially, Todd

agottem
Posts: 9
Joined: Tue Aug 29, 2017 11:55 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by agottem » Sun Dec 10, 2017 4:02 pm

Watty wrote:
Sun Dec 10, 2017 3:44 pm
Just FYI, inflation is as low as it has been in 50 years and deflation is a very real(and nasty) concern.

A huge underlying problem with this post is that even if you are right and bitcoin can be used as a store of value and a bitcoin you buy today is worth the same as when you are retired in 50 years then it is a horrible place to put your long term money since there is no return on your "investment".
I don't think you'd be able to reach agreement on what inflation actually is right now. Sure, the official CPI number is low. Do you consider CPI an accurate picture of inflation? I certainly don't. Everything I have an interest in purchasing (a house and health insurance) have done nothing but increase at a rate well beyond the advertised 2% per year.

I want an asset that is not subject to the whims of individuals whom aren't elected. If I want to risk money for a return on investment, I want to do so voluntarily. Inflation leaves me little option.

billthecat
Posts: 127
Joined: Tue Jan 24, 2017 2:50 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by billthecat » Sun Dec 10, 2017 4:04 pm

livesoft wrote:
Sun Dec 10, 2017 3:12 pm
This thread is probably confirmation of something.
How can one sell short Bitcoin?

agottem
Posts: 9
Joined: Tue Aug 29, 2017 11:55 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by agottem » Sun Dec 10, 2017 4:04 pm

bgf wrote:
Sun Dec 10, 2017 3:41 pm
Ok, without referring to historical price movements, tell me what one bitcoin is worth.
No one can answer that question yet. It's a currency that's in its infancy. It's earning its credibility from the ground up. We're still learning what a bitcoin is worth. I can only look at the underlying properties of bitcoin and attempt to value it using my own opinion. I believe this is true for absolutely everything (amazon stock, gold, money, etc).

User avatar
Phineas J. Whoopee
Posts: 6810
Joined: Sun Dec 18, 2011 6:18 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Phineas J. Whoopee » Sun Dec 10, 2017 4:05 pm

I must say I'm surprised that despite all these recent Bitcoin threads nobody has claimed (or maybe I skimmed over and missed it) that it's Bitcoin which has a stable and steady economic value, consistently buying a men's suit of clothes, and what we're seeing is simply the wild gyrations of the speculative and volatile US Dollar.
PJW

agottem
Posts: 9
Joined: Tue Aug 29, 2017 11:55 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by agottem » Sun Dec 10, 2017 4:08 pm

triceratop wrote:
Sun Dec 10, 2017 3:39 pm
Which is it, a store of value or an investment? A currency, or an investment?

I can assure you index investors are very clear that their shares are not in any sense currency or a store of value.
It's both. Bitcoin is a currency. Bitcoin is also a technology. With Bitcoin, I can program my money. With bitcoin, I can store any information I want on the blockchain itself and it'll persist forever (trivia: the first bitcoin block ever mined contains the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"). Bitcoin enables me to transfer value anywhere on earth without the need to present an ID, or open an account. If you don't think this is a huge innovation you're very short-sighted.

Pinotage
Posts: 200
Joined: Sat Nov 12, 2011 6:02 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Pinotage » Sun Dec 10, 2017 4:09 pm

Not to pile on, but...
agottem wrote:
Sun Dec 10, 2017 2:57 pm
They believe people should have the option to store their wealth in a currency that isn’t subject to manipulation.
You gotta be kidding.

hightower
Posts: 377
Joined: Mon Dec 12, 2016 2:28 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by hightower » Sun Dec 10, 2017 4:11 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm
The vast majority of people buying index funds don’t care much about the underlying companies they are purchasing shares of. Their primary goal is to perform as well as the underlying market and hopefully beat inflation. They are speculating that by throwing their money into a little bit of everything that the overall gains will outweigh their losses. If another index comes along that can outperform their current index on a risk adjusted basis they won’t hesitate to pull their money from the companies they previously owned a part of. This is not investing.

I argue that this is just as speculative as people buying bitcoin.

In fact, people buying bitcoin are trying to fix a broken system. They believe people should have the option to store their wealth in a currency that isn’t subject to manipulation. They believe using inflation to force people to put their retirement in the hands of corporations is wrong. People who buy bitcoin aren’t against investment, however. Should an opportunity come along that they believe in they of course would have the choice to risk their bitcoin.

The system we had in 2008 was perverse. Before bitcoin people’s only option was to hand their savings to a company and hope for the best. The alternative was to eat the price of inflation or hope the gold markets aren’t manipulated. Bitcoin is a populist movement every bit as unexpected as Brexit.

I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
Good for you! Fortunately you live in America where you have the freedom to do whatever you want with your money. Put it all in Bitcoin if you want. I sincerely hope you do well.
Since we're all just sharing opinions here, I'll share mine...I agree with this article: http://www.etf.com/sections/index-inves ... nopaging=1

technovelist
Posts: 2875
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Buying index funds is just as speculative as buying Bitcoin

Post by technovelist » Sun Dec 10, 2017 4:12 pm

agottem wrote:
Sun Dec 10, 2017 3:58 pm
Lou354 wrote:
Sun Dec 10, 2017 3:44 pm
Blockchain is a technology used by bitcoin and other crypto currencies. In what sense is bitcoin itself a technology?
Bitcoin itself is many things. Proof of Work is the technology which secures it. The blockchain is what the proof of work is securing. Bitcoin is the reward given to miners performing the proof of work. The consensus rules enforced by Bitcoin nodes are what define the properties of a Bitcoin. Rootstock is a sidechain which integrates with the bitcoin blockchain. Rootstock allows you to program Bitcoin. (Imagine a smart contract which defines an insurance for farmers. Farmers can pay into that insurance monthly. When a drought is detected, the smart contract is programmed to automatically payout to farmers impacted). Lightning Network is a technology which allows instant micropayments anywhere in the world. Think "streaming money", something not possible today. This area is under immense innovation. It's unfortunate most people in this forum only focus on the price.
Here is the argument, if I may call it that:
1. Blockchain technology may be important, even very important, in the future.
2. Bitcoin uses blockchain technology.
3. Thus, people who buy Bitcoin should get rich.

Let's take another example:
1. The internet has transformed society.
2. Many computers use the internet.
3. Thus, people who bought computers that use the internet should have gotten rich.

:confused
In theory, theory and practice are identical. In practice, they often differ.

User avatar
oldcomputerguy
Posts: 2256
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: Buying index funds is just as speculative as buying Bitcoin

Post by oldcomputerguy » Sun Dec 10, 2017 6:34 pm

agottem wrote:
Sun Dec 10, 2017 2:57 pm

I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
Would you feel the same way if tomorrow Bitcoin dropped to below what you paid for it? Are you sure enough of your position to hold on during, say, a three-year downturn?
Anybody know why there's a 20-pound frozen turkey up in the light grid?

Nate79
Posts: 1587
Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Nate79 » Sun Dec 10, 2017 6:38 pm

At some point it's really hard to take the bitcoin fanboys seriously. :confused

smitcat
Posts: 894
Joined: Mon Nov 07, 2016 10:51 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by smitcat » Sun Dec 10, 2017 6:39 pm

agottem wrote:
Sun Dec 10, 2017 4:08 pm
triceratop wrote:
Sun Dec 10, 2017 3:39 pm
Which is it, a store of value or an investment? A currency, or an investment?

I can assure you index investors are very clear that their shares are not in any sense currency or a store of value.
It's both. Bitcoin is a currency. Bitcoin is also a technology. With Bitcoin, I can program my money. With bitcoin, I can store any information I want on the blockchain itself and it'll persist forever (trivia: the first bitcoin block ever mined contains the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"). Bitcoin enables me to transfer value anywhere on earth without the need to present an ID, or open an account. If you don't think this is a huge innovation you're very short-sighted.
Bitcoin is apparently a very poor method of transfer - please read this....
http://money.cnn.com/2017/12/07/technol ... index.html

smitcat
Posts: 894
Joined: Mon Nov 07, 2016 10:51 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by smitcat » Sun Dec 10, 2017 6:41 pm

One cut and paste from the link above...

"As bitcoin grows, the math problems computers must solve to make more bitcoin get more and more difficult," which means more processing power is needed, Holthaus wrote.
And he made a startling forecast: Without a significant change in how transactions are processed, bitcoin could be consuming enough electricity to power the U.S. by the middle of 2019.
Six months later, that demand could equal the world's power consumption.

User avatar
Vulcan
Posts: 97
Joined: Sat Apr 05, 2014 11:43 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Vulcan » Sun Dec 10, 2017 6:42 pm

How is bitcoin different from hundreds of other available crypto currencies?

Wakefield1
Posts: 738
Joined: Mon Nov 14, 2016 10:10 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Wakefield1 » Sun Dec 10, 2017 6:42 pm

Confusing of the buy and hold longterm investor in stocks or stock index mutual funds with the market timing investor chasing in and out of various ETFs that are based on all kinds of exotic indexes meant to be traded "in real time all day"?
Is that one of the things (chasing ETFs) that Mr. Bogle addressed in his recent speech that was just linked on this Forum?

KlangFool
Posts: 7581
Joined: Sat Oct 11, 2008 12:35 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by KlangFool » Sun Dec 10, 2017 6:44 pm

agottem wrote:
Sun Dec 10, 2017 3:31 pm
I don’t think it’s fair to say people who buy Bitcoin are speculators who only care about price increases. I buy bitcoin because I believe in the properties of the currency. I believe the technology offers new characteristics of money which have never been seen before. I chose to put my money into Bitcoin because the other option was USD, which does not have the properties I desire. The idea of programmable money is only made possible with bitcoin.

I believe me purchasing bitcoin was more of an investment than most people on this forum make when choosing an index.
agottem,

1) Good for you.

2) You could buy gold or silver.

3) You could buy some other bitcoin.

KlangFool

User avatar
whodidntante
Posts: 2501
Joined: Thu Jan 21, 2016 11:11 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by whodidntante » Sun Dec 10, 2017 6:49 pm

You forgot the Bitcoin argument about global fiat currencies collapsing. And I don't mean that as a slight. It could happen, and in some areas, it has already.

Also, we could have a disruptive innovation that makes money obsolete. Like replicators on Star Trek.

I'll hedge my bets by buying my speculative investments with my fiat currency though.

User avatar
whodidntante
Posts: 2501
Joined: Thu Jan 21, 2016 11:11 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by whodidntante » Sun Dec 10, 2017 6:53 pm

Vulcan wrote:
Sun Dec 10, 2017 6:42 pm
How is bitcoin different from hundreds of other available crypto currencies?
Critical mass, availability of exchanges, and "brand recognition" for lack of a better term. Sort of like how you'd recognize and want a 100 US dollar bill.

User avatar
nisiprius
Advisory Board
Posts: 34626
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Buying index funds is just as speculative as buying Bitcoin

Post by nisiprius » Sun Dec 10, 2017 6:57 pm

agottem wrote:
Sun Dec 10, 2017 3:58 pm
Lightning Network is a technology which allows instant micropayments anywhere in the world...
Lightning Network is not a technology yet. It is a controversial proposal that hasn't been completed, much less implemented.

It was said in the past that bitcoin would allow instant micropayments anywhere in the world. One satoshi, currently worth $0.00015, should be "micro" enough for anybody.

The need for Lightning Network shows that bitcoin does not, in fact, have the characteristics that were widely claimed for it.

Lightning Network is an elaborate way of going all around Robin Hood's barn to solve a problem that could be solved by changing one constant in one line of bitcoin's code. The fact that the bitcoin community has not simply done this (increased the block size) suggests a bitcoin community riven by disputes and factions, and far from being governed by "consensus rules."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Bastiat
Posts: 102
Joined: Thu May 26, 2016 11:07 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Bastiat » Sun Dec 10, 2017 7:08 pm

Buying index funds is not nearly as speculative as bitcoin. I buy stocks because they are productive assets. I buy index funds because I get the whole spectrum of those productive assets priced efficiently.

I agree with Warren Buffett and think you could benefit from reading this article: http://fortune.com/2012/02/09/warren-bu ... and-bonds/

"Whether the currency a century from now is based on gold, [bitcoin,] seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.

Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk."

Most of what he says about gold applies to Bitcoin as well.

mmcmonster
Posts: 201
Joined: Sun Jan 12, 2014 1:18 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by mmcmonster » Sun Dec 10, 2017 7:22 pm

oldcomputerguy wrote:
Sun Dec 10, 2017 6:34 pm
agottem wrote:
Sun Dec 10, 2017 2:57 pm

I see a lot of talk calling bitcoin a bubble. This is my alternative perspective on the situation. I believe in bitcoin as a technology. I believe in bitcoin as a currency. And I believe in bitcoin as a store of my wealth.
Would you feel the same way if tomorrow Bitcoin dropped to below what you paid for it? Are you sure enough of your position to hold on during, say, a three-year downturn?
I think the problem is that for some people that believe in Bitcoin (in this case Bitcoin itself, not other cryptocurrencies based on blockchain technology), they understand that there's a hard limit on the number of Bitcoins in the world. There will never be more than 21 million Bitcoins in the world.

With the assumption that Bitcoin is going to be relevant years in the future, this would put deflationary pressure on the currency, increasing it's value against all government-issued currencies (which are all inflationary).

Actionable: If you believe that Bitcoin (the currency) is going to be relevant a decade from now, you should buy as much of it now as possible through all the swings in it's price against other currencies, with the assumption that over time (years? decades?) it will be more sought after and more rare (as some coins are lost forever).

I personally believe that the underlying technology, Blockchain, is where the action is. Bitcoin is just an implementation (and a poor one, at that).

User avatar
Kenkat
Posts: 3912
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Buying index funds is just as speculative as buying Bitcoin

Post by Kenkat » Sun Dec 10, 2017 7:37 pm

agottem wrote:It's a currency that's in its infancy.
I remember when my kids were mining Bitcoins in mining pools with their gaming computers back 2013 when Bitcoin was between $10-20 USD each. They also mined Litecoins, Feathercoins, Dogecoins and others. That seems like infancy. What has changed since then? I don’t believe the technology has changed. Perhaps you could say that awareness has increased? But don’t you have to question current prices when the price 4 years ago was so much lower while based on basically the same technology?

jalbert
Posts: 2379
Joined: Fri Apr 10, 2015 12:29 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by jalbert » Sun Dec 10, 2017 7:47 pm

If another index comes along that can outperform their current index on a risk adjusted basis they won’t hesitate to pull their money from the companies they previously owned a part of. This is not investing.
This presents a substantive misconception about how most index fund investors operate and even how indices are constructed.
Risk is not a guarantor of return.

investorpeter
Posts: 66
Joined: Sun Jul 31, 2016 5:46 pm

Re: Buying index funds is just as speculative as buying Bitcoin

Post by investorpeter » Sun Dec 10, 2017 8:01 pm

billthecat wrote:
Sun Dec 10, 2017 4:04 pm
livesoft wrote:
Sun Dec 10, 2017 3:12 pm
This thread is probably confirmation of something.
How can one sell short Bitcoin?
Sell the bitcoin future on the CBOE which just started trading a couple of hours ago, Ticker: XBT


https://www.cnbc.com/quotes/?symbol=%40XBT.1

User avatar
samsoes
Posts: 518
Joined: Tue Mar 05, 2013 9:12 am

Re: Buying index funds is just as speculative as buying Bitcoin

Post by samsoes » Sun Dec 10, 2017 8:04 pm

I see.

Please let us know how it works out in the end.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. (Avatar is the statue of Gen. Warren at Little Round Top @ Gettysburg National Military Park.)

Locked