Too Hot Investment Thread

It's stuff like this that convinces me that Financial Literacy should be a required subject in high school with at least as much time dedicated to it as Geometry.

 

Pretty much everything has been taking a beating across the board. I'm with @jeffbrig as far as the protection mechanism. I rarely look at it though I'm also fortunate to have a family friend who's much better at this kind of stuff than I am (even if he is a Dawg) to manage it.

 

This is more of an inflation hedge for money just sitting around, not for serious investors who have long-term views:

Treasury Direct
I Bond (Inflation Bond)
Individuals Only
Max = $10,000 per person per year
Cannot touch for 1 year
Years 2-5 have a last 3-month interest penalty for cashing in early
5 years and beyond = no penalty
Current Rate: 9.62% Annual / 4.81% semi annual
Projected new rate come November 1 = 12% give/take a few tenths
Bond sale rate adjustments on May 1 and November 1
Individual bond rate changes every 6 months based on purchase date

This isn't your emergency money or your long-term investment money. It's not available for IRAs and 401K plans.

Given the inflation we are experiencing and the too slow to react federal reserve, we're going to be experiencing high inflation for a while and especially so with congressional poor fiscal policy combined with the energy policies being pursued by the White House.

We bought a total of $20,000 in our household. We are retired with shorter term goals, so I Bonds are an excellent vehicle for at least some of our money to keep up with inflation.

Anybody retired or closing in on retirement should be looking to add I Bonds to their portfolios.

 

We bought some for the reasons you state (also retired). Just had another grandchild that I think I will purchase I-bonds for his college fund rather than the 529s I have bought for the other kids as they are in the dump.

 

Good for you. Ride the high I bond rates as long as you can. Even if inflation falls back to 2.5% to 3%, the I bond will outperform most safe and secure investments on an annual basis. Given retirement is on us, that is a good thing.

Surprisingly, I didn't know I bonds existed until a month ago. We'd have been in sooner if I had. I wasted a year of high secured growth not knowing these bonds existed. (shaking head) I just wish I had more sitting on the sideline money to buy more next year. Unfortunately, I don't see inflation falling significantly anytime soon.

 

Intrinsic value is based on the evaluator. Just like a buyer cannot exist without a seller.

If you are on an island by yourself then a gold bar is no more useful than a rock of the same size. (Who declared gold to have intrinsic value?) Gold is only valuable because people agreed that it has been valuable and will continue to be valuable in the future.....sound familiar?

In a short cliff notes version to your question without getting into details the answer to your question is supply and demand.....but it is actually more than that.

No one is answering your question because not all crypto currencies are the same.

There's a difference between Bitcoin and Dogecoin. Start by learning the difference and then you will start finding the answers to the questions you're asking.

If you're painting all crypto currencies as equal then that is your first problem.

For the sake of the thread here I'll talk about Bitcoin, since it is the most popular, and here are some "intrinsic values" of Bitcoin

Decentralization - no bank, no government, no one individual has the power to inact unilateral changes that can affect Bitcoin or a transaction between 2 individuals

Bitcoin is digital property - an individual can move Bitcoin anywhere on earth, into any major currency with an internet connection in a matter of minutes. This can't happen with real estate or gold or a number of other investments

Bitcoin can't be censored- i.e. Ukraine/Russia. Bitcoin can't be censored because of war, politics, race, religious beliefs etc

Settlement certainty- no one has the power to cancel settlements of Bitcoin. Once a transaction has certain confirmations then that Bitcoin transaction is basically irreversible

True scarcity - Bitcoin can offer what no other physical object can which is absolute scarcity. Bitcoin has a hard cap of 21 million coins. The Bitcoin supply can't be increased with a click of the button by a government or small group of "insiders". There are no "inflation targets" for Bitcoin.

Absolute wealth freedom - if you as an individual want freedom to make free choices regarding the use of your wealth without the threat of censorship, discrimination or even taxation with the ability to take all of your wealth with you wherever you go all over the world on a cold wallet the size of a thumb drive then Bitcoin has a lot of "intrinsic value".

On average a Bitcoin transaction can be settled in 10 minutes. So in 10 minutes an individual can move millions of coins anywhere in the world at anytime of day, any day of the week, without interference from a 3rd party. Then convert those coins into whatever currency of their choosing and move forward with their wealth building/preservation.

No other asset or equity has this capability.

 

hope you haven't lost too much. digital currencies like these will eventually go the way of the dodo bird. they add no value and consume tremendous amounts of resources in the process. Billions of dollars are moved daily without the need for these digital currencies that have no backing of substance

 

Billions of dollars are moved every day by a bank, government or financial 3rd party. If you don't see how Bitcoin is different than dealing with a bank or government then there's not much of a discussion to be had here. I guess you're saying that fiat currencies have "backing of substance" because the government says so if that gives you the warm and fuzzies then that's good I guess.

I've already stated in this thread that I'm never selling any of my crypto. So where the price is today doesn't really matter. Just like it didn't matter when Bitcoin was at $69k.

I mainly buy Bitcoin but I do have some other coins. Bitcoin isn't going anywhere. They've been calling for Bitcoin's death for 13 years now and it's alive and well. Great time to buy actually.

Bitcoin has been the best performing asset and it's not even close, giving an annualized return of 230% a year over the last 10 years. That's 10 times more than the second best performing assest the NASDAQ 100. Large caps during the same time period? 14%. Gold in all of gold's intrinsic value during that same time period 1.5%.

While Bitcoin is a very volatile asset in the short term, the numbers say that it is definitely an asset worth holding for long periods of time.

Perhaps the risk or lack of regulation is too much for you that is fine and that's completely understandable but Bitcoin isn't going anywhere and the technology behind crypto is going to change/disrupt a lot of industries.

If you still believe that Bitcoin is going away and is nothing more than hocus-pocus then why did Fidelity start mining Bitcoin in 2014? Why did Fidelity start offering Bitcoin/crypto investing opportunities in 2018? And why has Fidelity added Bitcoin as an option to their 401ks just this year in 2022?

And this is just an example of one financial institution adoption of Bitcoin, there are many more.

Are Fidelity investments a bunch of clowns that don't know what they're doing? Do you really think Fidelity would be mining Bitcoin, creating Bitcoin investment products and adding Bitcoin to 401ks if Bitcoin was going to "go the way of the dodo bird"?

You already know the answer to these questions so maybe you should ask yourself some different questions.

If you were witnessing the best and fastest performing asset anyone has seen in their lifetime what would that asset have to do to convince you to buy it?

Answer that question for yourself and then look at Bitcoin's performance.

 

I actually agree with a lot of this. There are benefits to digital currency, But it’s not asking the important question. Folks should be asking “What are those premiums worth”? Put another way, in July 2014, to use Bitcoin as an example. It was at about 456 dollars per coin. Today it’s at 22k roughly. So the premium you are willing to pay to have it in BC and reap those benefits is almost 5000 percent higher than it was 8 years ago. Doesn’t seem terribly likely that fiat currencies are at that big a risk - the dollar would have to deflate 5000 percent for that increase/risk to pay off, and that after the massive run up to even get to 456. And even that’s after a 70 percent drop that could be reversed over time.
As far as what’s changed in the last year, I was pretty clear that I thought it was in a bubble and got beat up here for it. But with the drop now I don’t know what the next few years hold. However pessimistic I am on digital currencies generally, I recognize that they are part of the ecosystem now and aren’t going away anytime soon. It’s a question of whether they become yesterday’s news and slowly wither as the outsized returns dry up and the big whales who made the real money cash out, or they become a long term slow build investment. Time will tell.

 

And despite previous disagreements with you on the topic, I agree with most of this. I share your view that most cryptocurrencies will in fact become yesterday's news. A small percentage will survive based on legitimate value, and I suspect that value will be in the blockchain technology more than the coin itself. It's why I'm personally more bullish on Etherium than Bitcoin.

 

We bought 15k back around May. Do you know if the rate is adjustable, or is your yield fixed, based upon the buy-in rate? If it's fixed, will wait until November to add the last 5k we are eligible for.

 

I agree that the blockchain technology has tremendous upside and will be extremely disruptive. Potentially wiping out entire industries.

I'm bullish on Ethereum and I have created a "basket"(ADA, DOT, SOL, etc) of other platforms similar to Ethereum with the understanding that most will fail but one will come out on top and whichever one does come out on top will win big. I have recently been looking at NEAR and will probably add that to my crypto assets

 

I agree that digital currencies are part of the ecosystem and aren't going away.

In fact, I believe that in the near future (10 years or so) all major governments will have their currency as some sort of digital currency. The blockchain technology gives governments a lot of flexibility and control. (One thing the government doesn't currently have and the other thing the government loves)

Here is an example, imagine if the government could provide targeted stimulus?

Covid pandemic happens, restaurants get hit hard and could use a "boost" to help them through these unprecedented times. A digital currency would allow the government to say every American gets $500, this $500 has to be spent at restaurants and at the end of 3 months if this $500 has not been spent at restaurants then the government will take back the remaining balance. This can all happen within seconds on the blockchain

OR

PPP loans - here is a $500k loan that can only be used on existing payrolls....that's it. These parameters can be set in place before the money is ever sent. The IRS won't have to audit anyone. No boat buying, no keeping the money while firing employees, no fraudulent forgivenesses.

Those are just a couple of examples of how a digital currency would benefit a government....not to mention tracking capabilities, reducing tax fraud and many other examples.

 

The purchase rate changes on November 1 and May 1, but you have the rate at purchase for 6 months. It becomes adjustable every 6 months based on your purchase date, semiannual compounding. Projections have the rate going up to 12% come November, will have more clarity when the CPIU is released on August 10. I really can't think of a good reason to wait other than to give some separation time on the purchases since you are locked out of the money for the first year.

 

Great, thanks. Will be maxing out the Ibonds asap.

 

if you have a business and file a schedule C, that business can also purchase $10k as can trusts

How to buy more than $10,000 in nearly risk-free I bonds this year (cnbc.com)

People who run businesses or have a living trust can also extend the I bond purchasing limit by buying the assets on behalf of the entity.

“There are several entities that are allowed to buy I bonds,” said John Scherer, a CFP and founder of Trinity Financial Planning in Madison, Wisconsin, including LLCs, corporations and sole proprietorships.

That means that even if you’re self-employed and file taxes on an IRS Schedule C as a small business, you can purchase up to $10,000 I bonds annually for that business. This purchasing power also applies to living trusts, through which people can purchase an additional $10,000 in I bonds per year.

So, a married couple, each of whom own a business and have living trusts, could buy up to $60,000 in I bonds annually, as well as buying $5,000 per person in paper bonds, bringing their yearly total to $70,000. If that couple had two children, they could purchase an additional $20,000 of I bonds on their behalf.

 

Thanks! I'm quite ignorant about investing, etc. My wife and I have no kids. Could we still set up a living trust? Presuming my wife would be the beneficiary, who would be the Trustee? Also, would those bonds only be cashable upon the owner's death?

 

you should talk to an estate planner. we set up living trusts to avoid probate in the event that something happened to one, or both, of us. And besides, I get to be a Trustee, I just always wanted somebody else to have to fund it though...ps..if you do any side gigs (tutoring/music lessons/selling on ebay??) and handle the income properly, you can qualify for the biz one too but talk to a professional to verify..

 

You guys will get a kick out of this. Market's been good this month, right? I woke up this morning to a notification on my phone that dividends posted to my ETrade account. Normal stuff. I clicked to open the app and it loads my account.

Balance $346,683,389. Holy shit!

Had to take a screenshot and share it with a few friends. Nice to be filthy rich - for a few hours at least, before they corrected it...

 

A few hours? And you didn’t initiate any transfers?