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> Now fast-forward one year. In March of 2020, I bought a large amount of Bitcoin. At the time, I saw a market dislocation and the likelihood of significant dol
by Majromax 6y ago
> Now fast-forward one year. In March of 2020, I bought a large amount of Bitcoin. At the time, I saw a market dislocation and the likelihood of significant dollar inflation due to the US Government’s likely response to the unfolding pandemic.
I'm frustrated by this statement. If you predict inflation in the USD that is not currently priced into the market, then there are already plenty of conventional ways to make money on the prediction.
For example, go long on real-return (inflation-adjusted) bonds, and go short on nominal bonds. Or purchase call options on commodities (preferably ones like food or energy that would be directly part of the predicted inflation). Or just invest in less-speculative equities like utilities or transport.
There's no need to structure investments to also bring in the entire unhinged, speculative nature of cryptocurrencies just to place a bet on inflation. Bitcoin (vs the USD) has had tenfold increases (year-over-year) and larger than 50% drops, all against a USD that has not in fact experienced abrupt price-level swings (expressed in terms of consumer goods).
- optimiz3 6y agoMy favorite way to short the dollar is to use fixed-rate debt to buy productive assets (real-estate, etc.). Double whammy. Assets in general should keep pace with inflation and fixed-rate debt gets inflated away.
- throwawaypali 6y agoDoes this actually work if you're being paid a salary in USD that wont likely rise with inflation?
- optimiz3 6y agoNot to be flippant, but it's on you to negotiate better salary terms if that's how you get paid.
- throwawaypali 6y agoUh, like most people I get around a 5% raise per anum, if inflation is higher than the CPIU estimates I'm treading water, like most people. If you're getting 10% per anum those are very unusual terms even for a high performer
- JSavageOne 6y agoYou're frustrated by the fact that he invested in an asset that 4-5x'd his money in 10 months? Ok...
- Majromax 6y agoYes, because it did so for the wrong reason. "I thought that Apple stock was overvalued, so to short it I bought a lottery ticket" is nonsense, even if the lottery ticket wins. Portfolio construction isn't about picking the biggest winner. It's about finding the optimal rate of return for a given amount of risk tolerance. "I think we're due for hyperinflation" is a statement of risk aversion; bitcoin is not usually the risk-averse answer because it's correlated with so many other risky things as well.
- JSavageOne 6y agoI'm sure he's dying to hear your analysis as to why he should've invested in another asset that would've made him less money.