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I would love for someone to find holes in the reasoning in this article (my own Macro Econ skills are not that good). The author is a major voice in bitcoin ci

I would love for someone to find holes in the reasoning in this article (my own Macro Econ skills are not that good). The author is a major voice in bitcoin circles (search their name with the word "bitcoin" or "crypto" on youtube). And I find it notable that they don't mention bitcoin or crypto anywhere in this post.

dustintrex 5y ago
Lyn is one of the more thoughtful crypto bulls out there (admittedly a low bar), and the following post with its updates shows how her thinking has evolved. https://www.lynalden.com/cryptocurrencies/ https://www.lynalden.com/cryptocurrencies/ TL;DR stance as of July 2020: I like it as a small position within a diversified portfolio, without much concern for periodic corrections, using capital I’m willing to risk.
- paulpauper 5y ago
  She always says small portion. That way if she is wrong it is not a problem, but can still take credit anyway if it works.
jadbox 5y ago
Just a few thoughts of my own. It seems to me that BTC is starting to more and more follow the trend of the S&P macro movement swings. As traders become scared of the stability of the future, they reduce their investment purchases (or sell) across all their speculative assets. This global 'market fear and exhuberance' may end up impacting BTC as much as it does wall street, compounded by automated cross-market bot trading that occurs. (I tend to follow behavioral economics)
- paulpauper 5y ago
  BTC is highly correlated with the S&P 500 to the negative and not to the upside. A good hedge shorting BTC and going long S&P 500.
  - dustintrex 5y ago
    Except that's next to impossible to short BTC without incurring major exposure to the crypto market as a whole in process. In other words, you can gamble that BTC will go down all you like in the wonderful world of DeFi, but if your gainzzz are in $random_shitcoin then the fiat value of that will also go down the toilet. The closest you can do is shorting BTC-adjacent regular stocks like MSTR, MARA, etc.
    - paulpauper 5y ago
      put options on BITO or sell calls
      - tobltobs 5y ago
        BITOs current holdings consists out of ~30% CME Bitcoin Futures, ~40% Treasure Bills and ~30% Cash. Why would that be a good proxy for Bitcoin?
invalidname 5y ago
Most of what she says in this particular article seems pretty on the money. It looks like the Biden admin is very aware of these things and trying to gently tame the stock market to bring it under control. The alternative is a bubble burst. I'm not sure if that's doable, but I don't see another option.
paulpauper 5y ago
I don't think it's a good source of investment advice. Endorsing Bitcoin for example is a major flag. She is being paid to promote bitcoin services. I see this as a conflict of interest. She makes assumptions that are wrong. like: The danger comes, however, if interest rates start going sideways, or even start going up, structurally. except that stocks rose in 2016-2017 even as interest rates were rising. Same for the 90s.
georgeecollins 5y ago
I am not sure I disagree but one thing I think is a little misleading is the comparison between the US havin 23% of world gdp and and 60% of world market capitalization. One small problem with that is that countries gdps are often compared by ppp (as in this case) and market capitalizations are compared in dollars. A more serious issue is that the US markets really represent much more than just the US economy. All the biggest corporations listed in the US have huge busnesses outside the US that count toward other countries GDP. I would guess WallMart is the most US based, but even they have stores in other countries. Apple is a US company that manufactures in China, buys important components in Asia and has employees and sells products all over the world.
- bobthepanda 5y ago
  To that effect, it's also not uncommon for foreign companies to list in New York for the prestige, and because of much higher trading volumes. China was doing this until recently.
nostrademons 5y ago
I generally love Lyn Alden's writing but I think this is one of her weaker articles. Better long-term perspective can be found here: https://www.lynalden.com/fiscal-and-monetary-policy/ https://www.lynalden.com/fiscal-and-monetary-policy/ Along with a recent article (which I can't find - I think she takes them premium once they've been out for a while) where she said that the Fed is probably structurally unable to raise rates above inflation, but that won't prevent them from trying, and we can expect major stock market crashes each time they do. That's pretty much all you need to know: long term, the stock market is going to infinity because the dollar is going to zero (or at least, a value much less than today), but in the short term the stock market could easily see drops of > 50% because it is so heavily levered on zero interest rates right now. I'd say that the the biggest hole is that her writing ignores coupling of political risk and financial risk. (Probably out of necessity, given her audience. Investing is pointless when you can't enforce property rights.) Historically, when you get hyperinflation, you get disrespect for rule of law, civil disorder, collapse of infrastructure, and revolution in very short order. Commerce can't survive in these conditions, let alone finance. (This is one of the factors that accelerates inflation into hyperinflation - as predictability disappears, so does production, leading to even more scarcity.) Lyn's predictions exist in the uncanny valley where the petrodollar system collapses and the dollar loses its reserve currency status, but we still retain Internet access, orderly financial markets, bank accounts, property rights, and physical security. I'm not sure this is a given. Historically, transitions to a major new economic system inevitably require a war or at least a revolution, because the winners of the previous economic system will not give up without a fight. There's no guarantee that the new government will honor property rights guaranteed by the old one. (In fact, in most cases the new government explicitly strips property from the previous wealthy elite, and that's a major part of its appeal to the common people.)
- md_ 5y ago
  Agreed, though I think the causality is a little more nuanced than that: political disorder tends to be a necessary component of bad central banking policy, and thus is a cause as well as an effect of hyperinflation.
- stereolambda 5y ago

dustintrex 5y ago

Lyn is one of the more thoughtful crypto bulls out there (admittedly a low bar), and the following post with its updates shows how her thinking has evolved. https://www.lynalden.com/cryptocurrencies/ https://www.lynalden.com/cryptocurrencies/ TL;DR stance as of July 2020: I like it as a small position within a diversified portfolio, without much concern for periodic corrections, using capital I’m willing to risk.

paulpauper 5y ago
She always says small portion. That way if she is wrong it is not a problem, but can still take credit anyway if it works.

jadbox 5y ago

Just a few thoughts of my own. It seems to me that BTC is starting to more and more follow the trend of the S&P macro movement swings. As traders become scared of the stability of the future, they reduce their investment purchases (or sell) across all their speculative assets. This global 'market fear and exhuberance' may end up impacting BTC as much as it does wall street, compounded by automated cross-market bot trading that occurs. (I tend to follow behavioral economics)

paulpauper 5y ago
BTC is highly correlated with the S&P 500 to the negative and not to the upside. A good hedge shorting BTC and going long S&P 500.
- dustintrex 5y ago
  Except that's next to impossible to short BTC without incurring major exposure to the crypto market as a whole in process. In other words, you can gamble that BTC will go down all you like in the wonderful world of DeFi, but if your gainzzz are in $random_shitcoin then the fiat value of that will also go down the toilet. The closest you can do is shorting BTC-adjacent regular stocks like MSTR, MARA, etc.
  - paulpauper 5y ago
    put options on BITO or sell calls
    - tobltobs 5y ago
      BITOs current holdings consists out of ~30% CME Bitcoin Futures, ~40% Treasure Bills and ~30% Cash. Why would that be a good proxy for Bitcoin?

invalidname 5y ago

Most of what she says in this particular article seems pretty on the money. It looks like the Biden admin is very aware of these things and trying to gently tame the stock market to bring it under control. The alternative is a bubble burst. I'm not sure if that's doable, but I don't see another option.

paulpauper 5y ago

I don't think it's a good source of investment advice. Endorsing Bitcoin for example is a major flag. She is being paid to promote bitcoin services. I see this as a conflict of interest. She makes assumptions that are wrong. like: The danger comes, however, if interest rates start going sideways, or even start going up, structurally. except that stocks rose in 2016-2017 even as interest rates were rising. Same for the 90s.

georgeecollins 5y ago

I am not sure I disagree but one thing I think is a little misleading is the comparison between the US havin 23% of world gdp and and 60% of world market capitalization. One small problem with that is that countries gdps are often compared by ppp (as in this case) and market capitalizations are compared in dollars. A more serious issue is that the US markets really represent much more than just the US economy. All the biggest corporations listed in the US have huge busnesses outside the US that count toward other countries GDP. I would guess WallMart is the most US based, but even they have stores in other countries. Apple is a US company that manufactures in China, buys important components in Asia and has employees and sells products all over the world.

bobthepanda 5y ago
To that effect, it's also not uncommon for foreign companies to list in New York for the prestige, and because of much higher trading volumes. China was doing this until recently.

nostrademons 5y ago

I generally love Lyn Alden's writing but I think this is one of her weaker articles. Better long-term perspective can be found here: https://www.lynalden.com/fiscal-and-monetary-policy/ https://www.lynalden.com/fiscal-and-monetary-policy/ Along with a recent article (which I can't find - I think she takes them premium once they've been out for a while) where she said that the Fed is probably structurally unable to raise rates above inflation, but that won't prevent them from trying, and we can expect major stock market crashes each time they do. That's pretty much all you need to know: long term, the stock market is going to infinity because the dollar is going to zero (or at least, a value much less than today), but in the short term the stock market could easily see drops of > 50% because it is so heavily levered on zero interest rates right now. I'd say that the the biggest hole is that her writing ignores coupling of political risk and financial risk. (Probably out of necessity, given her audience. Investing is pointless when you can't enforce property rights.) Historically, when you get hyperinflation, you get disrespect for rule of law, civil disorder, collapse of infrastructure, and revolution in very short order. Commerce can't survive in these conditions, let alone finance. (This is one of the factors that accelerates inflation into hyperinflation - as predictability disappears, so does production, leading to even more scarcity.) Lyn's predictions exist in the uncanny valley where the petrodollar system collapses and the dollar loses its reserve currency status, but we still retain Internet access, orderly financial markets, bank accounts, property rights, and physical security. I'm not sure this is a given. Historically, transitions to a major new economic system inevitably require a war or at least a revolution, because the winners of the previous economic system will not give up without a fight. There's no guarantee that the new government will honor property rights guaranteed by the old one. (In fact, in most cases the new government explicitly strips property from the previous wealthy elite, and that's a major part of its appeal to the common people.)

md_ 5y ago
Agreed, though I think the causality is a little more nuanced than that: political disorder tends to be a necessary component of bad central banking policy, and thus is a cause as well as an effect of hyperinflation.
stereolambda 5y ago