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Why not hold TIPS[1], or a diverse basket of securities, or invest the money in something productive? Is it a good thing if sitting on a large cash pile is rewa

Why not hold TIPS[1], or a diverse basket of securities, or invest the money in something productive? Is it a good thing if sitting on a large cash pile is rewarded? [1] https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm https://www.treasurydirect.gov/indiv/products/prod_tips_glan...

formalsystem 6y ago
TIPS is measured via CPI not Asset inflation Sure they can invest in something more productive but the whole point of having reserves is to be more robust to negative changes e.g: COVID or jump on new opportunities (some company goes up for sale).
diegocerdan 6y ago
Value sitting on dollars or government bonds is being devaluated. Not all value can be invested in the present, thus people want to invest in the future (savings theory). If governments do not offer fiat money or bonds as savings vehicle, assets like Gold or Bitcoin will inevitable soar. MicroStrategy, and others, understand the situation and want to get in early to make multiply their actual savings.
- bluedevil2k 6y ago
  You sound like you think Bitcoin will only go up. The last 4 years have shown that to be WILDLY incorrect. Bitcoin price history has shown 0 correlation to the market or macroeconomic conditions. Gold, as well, is not a safe haven either. The US Government keeps printing money, yet gold is nowhere near it's all-time high (adjusted for inflation). You shouldn't offer these statements as inevitabilities when history has shown them to be completely wrong.
  - diegocerdan 6y ago
    I'm just reasoning why it will happen. Macro markets do not always react fast to these kind of trends. I agree with your description of the present and close past, thus calling an imminent bull market. The more time this present situation holds, the bigger is the buying pressure. I'm guessing you have a computer tech background and still don't share my view: imagine all the macro-investors not having this knowledge. They can't predict magic-internet-money eating their lunch. Cool thing about free markets: they find out the correct solution out of the greed and collective inteligence of the group. <3
  - rjknight 6y ago
    "Zero correlation to the markets" is one of the things that makes Bitcoin desirable. Diversifying your portfolio is all about having things that do not move in the same direction at the same time.
    - joosters 6y ago
      And yet Bitcoin plummeted in value at the same time as everything else at the start of the pandemic, so it's hardly uncorrelated. Buying lottery tickets would be uncorrelated. And you've less chance of being scammed or hacked when you do that...
      - christophilus 6y ago
        A lot of things were correlated then that aren’t always / normally. Bonds, stocks, gold... basically everything was sold to move into dollars. That doesn’t mean that those assets are all correlated over the long haul.
    - ineedasername 6y ago
      It is important to have a variety of uncorrelated assets, but in the case of Bitcoin it's still quite volatile, not always for clearly apparent reasons. It seems to be developing a place for itself, but I think it still needs a few years of less volatility for it carve out the niche many people want it to have.
- rjknight 6y ago
  This is the thing I don't understand. Why should savings automatically hold value or appreciate in value? If I invest my money in something risky, I get a reward for taking the risk. My reward comes from the value created by the things I invested in, so if I invest in a business which succeeds, some of that success comes back to me. If I don't make any investments, but keep my cash under the mattress instead, I lose out. If I buy Bitcoin, what value-creating activity occurs that pays for my reward?
  - diegocerdan 6y ago
    You are basically being first choosing the store of value that will be used in the future. That's a risky move if you fail. Are the rewards desirable? That's an interesting discusion. Historically, it has allowed humanity to switch to better forms of money: https://en.wikipedia.org/wiki/Gresham's_law https://en.wikipedia.org/wiki/Gresham's_law
    - rjknight 6y ago
      But that doesn't answer the question. If I buy shares in a business, I am helping that business to grow, and I am rewarded if it does. If I buy Bitcoin, nothing changes except that the price of Bitcoin goes up.
      - diegocerdan 6y ago
        Basic economic rules are not designed but result of trade. If you buy in the present what others want to own in the future, you create value for yourself as the price of the asset rises. You can also understand Bitcoin as a business. Assuming it's a better form of money, it allows any agent of the system to better store or transfer money. By owning Bitcoin you are assuming a risk, but also making the total value locked (TVL) bigger, through making the token less volatile. That helps. :-)
      - jerrymiller 6y ago
        You are helping the world to transition to a better money, which will have tremendous positive effect on the society: https://www.youtube.com/watch?v=8zYg4E4zbPo https://www.youtube.com/watch?v=8zYg4E4zbPo
vmception 6y ago
As of 2020 Bitcoin can almost-instantly be used as an interest bearing and yield producing asset, which is what "productive" means in this context. There are both centralized custodial options as well as decentralized permissionless but custodial options, as well as decentralized permissionless noncustodial options. And yes, the yield is risk adjusted.
wcoenen 6y ago
Note that TIPS currently have a negative yield for all durations. So even though they protect you against potential inflation as measured by CPI, there's still a cost. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield https://www.treasury.gov/resource-center/data-chart-center/i...
xiphias2 6y ago
Because the inflation definition is changing all the time (look at shadowstats). The CEO likes yachts and houses on the beach, and how he describes it: inflation baskets contain what you don't care about, and miss the scarce assets that you really want.
ur-whale 6y ago
Because TIPS is denominated in USD. Even if there is an actual yield, you're still a net value loser.
csomar 6y ago
I'm not sure if you are being sarcastic. If you have been investing for a while, you'll know that the official numbers are a scam. TIPS pay less than 0.1% yearly. If you have been paying your bills, shopping for a house, or buying new stuff; you should know that real inflation is probably in the 5-25% range depending where you live. Heck, even in this crisis house prices can't get down. The world economy is inflating like crazy.

formalsystem 6y ago

TIPS is measured via CPI not Asset inflation Sure they can invest in something more productive but the whole point of having reserves is to be more robust to negative changes e.g: COVID or jump on new opportunities (some company goes up for sale).

diegocerdan 6y ago

Value sitting on dollars or government bonds is being devaluated. Not all value can be invested in the present, thus people want to invest in the future (savings theory). If governments do not offer fiat money or bonds as savings vehicle, assets like Gold or Bitcoin will inevitable soar. MicroStrategy, and others, understand the situation and want to get in early to make multiply their actual savings.

bluedevil2k 6y ago
You sound like you think Bitcoin will only go up. The last 4 years have shown that to be WILDLY incorrect. Bitcoin price history has shown 0 correlation to the market or macroeconomic conditions. Gold, as well, is not a safe haven either. The US Government keeps printing money, yet gold is nowhere near it's all-time high (adjusted for inflation). You shouldn't offer these statements as inevitabilities when history has shown them to be completely wrong.
- diegocerdan 6y ago
  I'm just reasoning why it will happen. Macro markets do not always react fast to these kind of trends. I agree with your description of the present and close past, thus calling an imminent bull market. The more time this present situation holds, the bigger is the buying pressure. I'm guessing you have a computer tech background and still don't share my view: imagine all the macro-investors not having this knowledge. They can't predict magic-internet-money eating their lunch. Cool thing about free markets: they find out the correct solution out of the greed and collective inteligence of the group. <3
- rjknight 6y ago
  "Zero correlation to the markets" is one of the things that makes Bitcoin desirable. Diversifying your portfolio is all about having things that do not move in the same direction at the same time.
  - joosters 6y ago
    And yet Bitcoin plummeted in value at the same time as everything else at the start of the pandemic, so it's hardly uncorrelated. Buying lottery tickets would be uncorrelated. And you've less chance of being scammed or hacked when you do that...
    - christophilus 6y ago
      A lot of things were correlated then that aren’t always / normally. Bonds, stocks, gold... basically everything was sold to move into dollars. That doesn’t mean that those assets are all correlated over the long haul.
  - ineedasername 6y ago
    It is important to have a variety of uncorrelated assets, but in the case of Bitcoin it's still quite volatile, not always for clearly apparent reasons. It seems to be developing a place for itself, but I think it still needs a few years of less volatility for it carve out the niche many people want it to have.
rjknight 6y ago
This is the thing I don't understand. Why should savings automatically hold value or appreciate in value? If I invest my money in something risky, I get a reward for taking the risk. My reward comes from the value created by the things I invested in, so if I invest in a business which succeeds, some of that success comes back to me. If I don't make any investments, but keep my cash under the mattress instead, I lose out. If I buy Bitcoin, what value-creating activity occurs that pays for my reward?
- diegocerdan 6y ago
  You are basically being first choosing the store of value that will be used in the future. That's a risky move if you fail. Are the rewards desirable? That's an interesting discusion. Historically, it has allowed humanity to switch to better forms of money: https://en.wikipedia.org/wiki/Gresham's_law https://en.wikipedia.org/wiki/Gresham's_law
  - rjknight 6y ago
    But that doesn't answer the question. If I buy shares in a business, I am helping that business to grow, and I am rewarded if it does. If I buy Bitcoin, nothing changes except that the price of Bitcoin goes up.
    - diegocerdan 6y ago
      Basic economic rules are not designed but result of trade. If you buy in the present what others want to own in the future, you create value for yourself as the price of the asset rises. You can also understand Bitcoin as a business. Assuming it's a better form of money, it allows any agent of the system to better store or transfer money. By owning Bitcoin you are assuming a risk, but also making the total value locked (TVL) bigger, through making the token less volatile. That helps. :-)
    - jerrymiller 6y ago
      You are helping the world to transition to a better money, which will have tremendous positive effect on the society: https://www.youtube.com/watch?v=8zYg4E4zbPo https://www.youtube.com/watch?v=8zYg4E4zbPo

vmception 6y ago

As of 2020 Bitcoin can almost-instantly be used as an interest bearing and yield producing asset, which is what "productive" means in this context. There are both centralized custodial options as well as decentralized permissionless but custodial options, as well as decentralized permissionless noncustodial options. And yes, the yield is risk adjusted.

wcoenen 6y ago

Note that TIPS currently have a negative yield for all durations. So even though they protect you against potential inflation as measured by CPI, there's still a cost. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield https://www.treasury.gov/resource-center/data-chart-center/i...

xiphias2 6y ago

Because the inflation definition is changing all the time (look at shadowstats). The CEO likes yachts and houses on the beach, and how he describes it: inflation baskets contain what you don't care about, and miss the scarce assets that you really want.

ur-whale 6y ago

Because TIPS is denominated in USD. Even if there is an actual yield, you're still a net value loser.

csomar 6y ago

I'm not sure if you are being sarcastic. If you have been investing for a while, you'll know that the official numbers are a scam. TIPS pay less than 0.1% yearly. If you have been paying your bills, shopping for a house, or buying new stuff; you should know that real inflation is probably in the 5-25% range depending where you live. Heck, even in this crisis house prices can't get down. The world economy is inflating like crazy.