Bitcoin Forum

I agree bitcoin is the best speculation ever.

However, your savings, your capital, serves to take care of you when you cannot work anymore. Due to old age, illness or an accident. If you risk it all in bitcoin, even if the chance is only 10% that it fails, this means you have 10% chance to have no savings when you would desperately need them, when you have an accident or when you are old.

We used to live in tribes, where our children and tribe needed to take care of us when we were ill or old. Not much freedom there was in such society. Then capital was invented. People started using special stones, unique shells and later precious metals. These items represented money. In contrast to meat, you could store it for the future, and exchange it in the future for meat. That way you became more independent from your tribe and children and could take care of yourself when you were ill or old.

Today half of society is living as capitalists, saving capital for old age and being independent. The other half are socialist, not really dependent anymore on their children, but for sure very dependent on the tribe (state) to take care of them when they are ill or old.

If you want to be a capitalist that wants to become independent and have capital for old age or illness. This means, you should never risk that capital in speculations. In contrast, you should continually work to build up more savings and protect those savings against any possible economic climate that could destroy them, like the permanent portfolio does.

Sure, you can decide to speculate also, but only with a part of it, and never forget to lock in profits into your 'savings' because if you don't you are not building up any savings but are taking more and more risk and can still end up having nothing when in the end it would fail.

We all need to make money, you can chose to do that via a job, entrepreneurship or speculation. All of them are hard work and come with a lot of risk and uncertainty. Make sure you are building up something that also builds your SECURITY so you can buy meat - always - and will not become dependent on your children or the state!

Am I making sense?

edit: spelling error

History shows saving in dollars to be foolish since the creation of the federal reserve.

I'll keep dollar cost averaging into sound money, thanks.

I agree. I did not advise saving into dollars but in a Permanent Portfolio.

Bitcoin at this point is not sound money. If it works out it will become sound money. Until then it is a speculation.

Hence, you are dollar cost averaging into a speculation.

I think all forms of saving are speculation, and there's nothing with as much upside as Bitcoin.

To protect yourself from loss you should invest in your earning potential. Diversify your knowledge, skills, and experience so that no matter what happens in the broader economy you'll be able to earn a living.

Learning how to weld is a better investment than buying gold because practical skills allow you to produce wealth, not just trade for it.

Then you think wrong. The Permanent Portfolio is not a speculation. It has empirically proven to preserve your purchasing power in different economic climates.


And what if you are not able to earn a living due to illness, accident or old age?

What do you do if an unprecedentedly severe economic disruption means the goods you want to buy aren't available at any price? How can the Permanent Portfolio preserved your wealth?

That is what I mean by "all saving is speculation". Nothing can guarantee the future ability of the economy to produce the goods and services you will want to buy with deferred consumption.

The majority of illnesses in the modern world are both chronic and preventable, so they can be minimized with appropriate lifestyle changes. For the risks that can't be eliminated you can hedge against by having a strong social network.

In the current worldwide fiscal climate the people who are already old are doomed, so there's not much they can do anyway besides speculate and hope. Those who aren't yet old have the opportunity to prepare before they end up in that position.

Even in a severe economic disruption all goods are available for some price, likely high. The Permanent Portfolio will preserve your wealth in such scenario because it holds 25% physical gold. This gold will in such scenario also be valued high. That is how you will be able to buy the goods you desire even during a severe economic disruption.

You did not answer my question: What if you are not able to earn a living due to illness, accident or old age?

i am going to agree with justusranvier on this one. the reality from which we live in right now is nothing like the golden years of america or the world, with technologically advances in a wide range of fields you will understand that the classic be safe investments and security's are obsolete in many perspectives and for many reasons bitcoin is new, innovative and thriving. you can't cure stupid idiots who waste money and don't know how to live within a budget or even know what damage they do to their independent future by deficit spending on credit. once credit was born to be used by the average user, many people young naive and not ready to live , interpreted the card or the loan as free easy money


EDIT


the government steps in and takes care of you that's how messed up it is because they enable and provide a safey netting for society, the mass majority doesn't understand the depth of despair once your living on complete poverty

Nobody will give a shit about your shiny rock if the shit really hits the fan.  Weapons (for hunting and defense), bullets, and food stores are the only sensible investments for such a time.

By the way, here is a link to an actual explanation, since your link is just a sales pitch with no details: http://earlyretirementextreme.com/wiki/index.php?title=Permanent_Portfolio

25% bonds, 25% cash sounds pretty dollar-heavy to me.  You are advising saving in dollars if you are pushing this allocation.

OP of course your advice is sensible, for me personally I could reduce it to something like:"to support bitcoin is hard work, not easy money",only it's hard work that I like.

Besides, I think I should add that the bitcoin rally is creating opportunities for non-bitcoin low-risk investment as well, it's almost guaranteed that someone would be more risk seeking than you and want to borrow your fiats at high interest rate to buy BTC, a very good way to hedge your risk.

You obviously did not study any economic crises. Yes, the shiny rock will go up in value/purchasing power during severe economic crises. Such was the case recently in Iceland and Argentina, as in Germany and Russia during the hyperinflations.

all your citing is coming from one single site, i agree with notme, guns bullets and food are where power comes in when shit hits the fan. you going to trade some gold or some silver to people with guns? no they have no use for that. gold is used by astronauts and deemed a value because of its limited supply and its high class value in our society. someone correct me if i have gaps in my arguement

You forgot to mention the 25% stocks and 25% physical gold that are also part of the Permanent Portfolio. But agreed, the Permanent Portfolio is very fiat heavy with his 25% bonds and 25% cash. This however does not matter. What matters is whether the Permanent Portfolio succeeded in preserving your purchasing power in all economic climates. And yes, it succeeded in beating true inflation in every climate, even in the short term! (3-5 years).

Might as well go all in on Bitcoin. If it fails that means that the government won, and they will take care of you in your old age.

God bless socialism.

Saving means consuming less that you produce in the present in order to accumulate that which you guess the producers of what you want to consume in the future accept for trade. It presupposes those producers will be willing and able to trade with you, and that whatever you accumulate now will still be in your possession when you want to consume.

Saving is much more speculative than maximizing and diversifying your own ability to produce new wealth because in the latter case more of the variables are under your control.

Hiya RS. I don't think the Permanent Portfolio is 100% guaranteed to preserve your capital (what if a disruptive technology such as bitcoin takes over the role of gold and cash), but I do believe it is the best attempt at preserving your capital as risk-free as possible in diverse economic environments, based on historic data.  At present however, I would hedge the strategy with a few bitcoins.

Agree with the general sentiment.  However, I think you would benefit from knowing what real capital is.  It's stuff that produces, cutting down the amount of labour and other production factors that need to be used to produce a certain amount.  Think machinery in a factory.  That is capital.  Savings in cash is not capital in that sense.  If referring to it as capital, it best to talk about financial capital, to distinguish it from real capital.

Savings is a way of taking value forward through time, and is not a production factor.  

Again you ignored my vital question:
What if you are not able to earn a living due to illness, accident or old age?

Also you repeated the same false argument 'all savings are speculative' and ignored my argument why the permanent portfolio is not a speculation.

It feels like talking to a wall.

I did not ignore it.

I'm sorry. You did address my question. Your answer is that you will depend on others to take care of you. That is the tribe/socialist solution. I have rejected that solution in my opening post as it limits your freedom and the freedom of others.

I just know that if I converted all my savings into bitcoin when it was at 0.10 a piece, neither I nor any one of my relatives would've had to work again, ever. Probably grandchildren would've been covered, as well.

Completely risky and crazy, sure, but it would it have been totally worth it. But yeah, I'm a chicken :) I prefer security as well, as OP. So that means doomed for mediocrity.

Pardon my French, but: fuck security. Nothing is safe, nothing is secure, enjoy the thrill and live.

I think we may have cross-posted.


Any time you consume more than you produce (spending your savings) you depend on others to take care of you. The only difference is whether you are depending on anonymous producers in a market, or depending on people you've built up personal relationships with.


Is it less speculative to depend on your ability to predict what anonymous producers will want in the future, or is it less speculative to maximize your own productive ability and to build social capital with people you know and trust?

This is not to say that saving and speculation are bad, but I just don't think they are the best long term strategy to rely on.

False argument. The Permanent Portfolio is safe.

I don't think you'll enjoy the thrill if you lose your lives work.

I think you'll find that in an early adopter environment such as bitcoin still is, a lot of people have strong convictions and a risk tolerance that more traditional investors would find insane  :) .

My argument is that you should have savings. When you risk it all in bitcoin and it fails you will have no savings or a lot less then what you need to support you.

Once you have savings you can buy in the market. Sure all those goods are produced by people but I don't see how this point has relevance in our discussion?

If you have no savings, you indeed depend on others to take care of you. If you have build strong relationships that means you have a lot of 'credit' with them and they will give you back. This is the tribe solution.

Also, do you really believe you have build up such credit that they will give back to you in such an extend that they will take care of your bills when you are, say, terminally ill?   



Why 'does one need to predict what anonymous producers will want in the future' in order to save capital?

Why is building social capital a sufficient replacement for building financial capital?

I think it is not this or that. It is this - and - that. Building strong personal relationships can help you very well in times of difficulty. Building financial capital can also help you very well in times of difficulty. One however is credit, the other one is capital. A big difference.

I agree with bullioner about the definition of capital.

Financial assets are not capital. Factories, energy, skills, and abilities are capital. Financial assets have been used for a long time to control and direct capital but that does not mean they are capital. Financial assets produce nothing. People, machines, energy, skills, and knowledge produce everything.

My argument is that your primary focus should be building true capital: the ability to produce new wealth, and treat speculation as what it really is - gambling.

I thought the answer was going to be that you need something with which to buy coins if a better deal is offered.

That period has not been tested to my knowledge. Though many other periods and crises have been tested with the permanent portfolio and it worked (http://europeanpermanentportfolio.blogspot.be/p/permanent-portfolio.html).

Can you show me that the permanent portfolio failed to preserve your purchasing power in Russia 1917, or any other period/crises?

Strong convictions/belief in bitcoin I have no problem with. High risk tolerance also not. However, false statements, untruths, ignorance, and denial I don't like.

I have yet to meet the first person here who goes all-in, and at the same time is consciously recognizing he is risking to not have any savings if he were to become incapable to work due to illness, accident or even old age.

Will I still have internet access in this scenario?

Since cash was the same as gold then the Permanent Portfolio in Russia 1917 would have consisted of 33% stocks, 33% bonds and 33% cash.

Do you have numbers/prove that the values of stocks and bonds were zeroed?

The Permanent Portfolio consist of 25%/33% physical gold. It is also strongly advised to store part of it outside your country. If you did the Permanent Portfolio well that should have allowed you to preserve part of your capital and even flee the country.

It doesn't matter what is, and what isn't, financially responsible, since not every person would want, or need, to be financially responsible.

If your personal priority is security, you are free to invest into proven assets.

What I needed was a decent chance to become moderately rich, while helping a just cause, not risking too much, and not speding too much time trading. So I went 20% in Bitcoin (it should now be closer to 50%).

I would perfectly understand if a young professional with no family went all-in.

Congratulations on your very successful speculation.

Ofcourse you are free to chose not to be financially responsible but why does it not matter what financially responsibility is?

I agree bitcoin gives you a good chance to become rich. Especially if you don't balance out of it and hold on to your coins tight.

But indeed very quickly this becomes a large % of your capital. And it would be untrue to say for example that you risk only 20%, as today you risk losing 50% of your capital if bitcoin fails.  

i bought a 1000 bitcoins back at $ 5 a year ago for $ 5200 and am now almost at $ 50000 :D:D:D:D:D

i am hold because i think bitcoin is a very good investment and i am a profressional trader already from before bitcoin

i think that bitcoin is safe investment for me because i am good at knowing the future

Great to hear  :)


If you are good at predicting the future and speculating you are able to estimate your chances of success. Even with the best speculations, like bitcoin certainly is, there is always a small chance that it doesn't work out. So logically betting all your life savings on it is not responsible. You not agree?  :)

One of the beautiful things about buying bitcoin right now is that there is NO NEED to go all in! It is such an asymmetric bet, that in a truly ridiculous upside scenario, investing even a small amount at today's prices will make you very very wealthy. If you invested 5% of your net worth, and bitcoin went up 100x, you'd be 84% in bitcoin at THAT point, but at that time, it would actually be a much safer holding by virtue of the implications of its successful history.

There are a lot of unknowable risks still lurking out there. At this time, unless your net worth is extremely low compared to your salary (i.e. you're young and you basically haven't saved much), going all in is just a recipe for panic-selling when the inevitable volatility rears its head. In general, if you can't sleep at night because of your bitcoin holdings, you have too much invested.

I fully agree with first part. I might be wrong but I think it is not responsible for a young adult with a job and without any savings, neither. Because that's his primary goal is to build up savings/secure capital. Going all-in in bitcoin means he will also lose all his capital if it fails. Why do you make an exception for such person? I also have a part that wants me to go all in so part of me would be very happy if you could give good reasons why it does not apply to such person.

It's amusing that OP equates ancient tribal living with the modern socialist state: "Tribe" automatically equals "socialism" automatically equals "less freedom."
I would argue that in many instances, living in a tribe actually provided one with more freedom than living individually in a quasi-capitalist (socialist) modern state, even with the permanent portfolio to boot.

Why? Well, OP makes numerous unspoken assumptions about the hierarchy in an ancient tribe. Sure, some tribes and societies had rigid hierarchies and resembled a socialist state in limiting the freedom of members. However, many other ancient tribes (according to anthropological record) had absolutely NO HIERARCHY, nothing resembling a state, and were completely voluntaryist. Yes, voluntaryist, like many of our freedom-loving Bitcoin brethren. So we have a system in which individual freedom isn't hampered by any involuntary contracts enforced with violence, yet there is still a large group of people ready to take care of you if you fall ill and lose your wealth. So it's not necessarily the trade-off that you portray it as. Please, don't make assumptions where anthropology is involved.

I obviously agree that socialism/statism inherently hampers one's freedom, but don't make the mistake of assuming that (1) because you have a safety net in your community/family/tribe, (2) your freedoms are therefore limited. And, don't assume that all tribes/families/communities must be socialist and have some form of a state or hierarchy limiting individual freedoms.
In many cases it is true, yes, but in some cases not.

So what's my point? Sure, the permanent portfolio might have been proven in 100% of historical cases to protect wealth, short- and long-term, in any economic situation. But there's still a chance of all of those forms of wealth being obliterated. A small one, yes. But in addition to that small chance, there is still the indisputable fact that humans are social creatures and our brain chemistry evolved in a social environment, one of a close-knit tribe or extended family unit that stayed together for life. Again, don't assume that this necessarily limits freedoms or is a form of socialism. One can be voluntaryist and not reject the "safety net" that a community or family provides. So don't worry, OP, some day if you're too old or frail to get on the computer and withdraw your bitcoins to pay the home-care nurse, you won't lose your "v-card" by asking your kids for help ;-)

If he really is good at predicting the future than it actually is responsible.

It is however unlikely he really is good at predicting the future. Humans generally suck at predicting the future and have the tendency to vastly overestimate their ability. May be we overestimate our ability so much due to http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect ?

Your new definition of capital is incorrect. Financial assets are capital. And they do build new wealth. A stock, is nothing else than a part of a business you own. - If - the business creates wealth, the stock will go up in value and will be new wealth. A bond is a loan with an interest that if done well, is profit, profit that the borrower shares with the bond holder/lender. That interest is profit coming from new wealth that is created.

Building up financial assets is building up true capital.  Speculation is the - art - of building new wealth by buying and selling the right assets. The art comes down to selecting/betting on assets that have a higher chance of winning / building new wealth than losing. With gambling you have a lower chance of winning than losing. Gambling is just to feel the excitement of winning, without too much effort, and you pay a fee for the quick fix.

You have eaten more cake from anthropological history then I have so thanks for correcting me on that. Great to see you agree with the high security the Permanent Portfolio offers. But you do devalue it by saying there is this small chance that the Permanent Portfolio fails. Although you are correct in that statement. If this is only 1%, it is the smallest chance from any possible investment, and thus you can say it is the safest investment you can do.

I also am for building social capital, strong loving and caring relationships, so that your children, friends and family care about you too and will be motivated to take care of you when you strike bad luck or grow old.

Though this does not invalidate my point that building financial capital so that you have your own safety net is a responsible thing to do. I'm sure your children, friends and family will be very happy if you did that job properly. Do you object that?

It looks like Bill Gates started selling off Microsoft shares from day 1 that it traded, continually diversifying his assets. Today only 15 billion USD is in Microsoft while his other 35 billion USD sits in his investment company very diversified. He started with, if I remember correctly 65% ownership in Microsoft and today he owns only 9%.

http://www.joshuakennon.com/cascade-investment-llc-the-secret-holding-company-of-bill-gates/

So maybe the best strategy is, go a lot in now, so that you can start selling ASAP?

;)

What do you mean with the wink? :)

OP's suggestion looks good in retrospect, seeing what had happened. There are unique problems with bitcoin as with any other investment, so diversification most probably can't go wrong.

Because you described exactly what I've been doing.  All the metals I now have and most if my IRA came from bitcoin profits, but keep telling people not to buy.  I'm still dollar cost averaging, and will continue to do so until I finish my masters degree and go back to freelance programming.  Then, I will work for bitcoin only (or fiat with a 10% surcharge), and continue to diversify when my holdings get too large.  The slower the price grows, the more bitcoin I will end up with.

Are you suggesting that I am telling people not to buy bitcoins?   ???

You seemed very anti my message to not go all-in and to diversify bitcoin profits, but in your actions you did exactly that?  >:(

Also, how can you diversify away bitcoin profits, and at the same time aquire more bitcoins? That would be like Bill Gates saying, yes I sell Microsoft shares, but I also dollar cost average to acquire more shares!?!

I'm confused.

I only got to where I am by going all in.  Before bitcoin I had no savings.

I diversify when my bitcoin holdings get too large due to price increases.  I buy the same dollar amount every time I get a paycheck.  It's not so complicated.

Happy for you that it worked out so well. I mean that. 

Looking back on it do you think that it was a good strategy of you to go all-in? I'm asking honestly. I'm conflicted about it. Do you think you would have gone all-in if you had considerable amount of savings when you discovered bitcoin?

Now I understand but isn't that unnecessary work. If you need to sell bitcoin due to price increases from time to time. Why not simply stop buying more btc with your paycheck? 

If I had significant savings, I probably would not have gone all in, but I probably would have dumped any extra fiat (or bonds) I had sitting around.  Selling hard assets to buy bitcoin would be harder to do, although some people have done fantastically doing just that. (see cypherdoc's "Gold collapsing, Bitcoin UP" thread).

Sure, it is unnecessary if you are buying and selling at the same time.  However, I usually buy twice a month and I buy some gold/silver/copper or sell some to fund my IRA only every few months.  For the metals, I buy directly with bitcoin, but if my objective is to get fiat to buy stocks, I will just skip a buy or two.

This "Permanent Portfolio" thing seems like just another buzzword, waiting on copyright approval and the rights to it sold off to a gaggle of lawyers.

Look...  people are different.  Situations are different.  Nothing works for everyone.

If you're a healthy twenty-something with a secure job, going all in and giving it a year or two makes perfect sense.  Perfect.

Even at my age (50+), if you're healthy and calm and not particularly risk-averse, putting a majority of assets into it isn't an entirely stupid play.  The upside is ferocious; and the truth of it will play out quickly.  Odds...

But hey dude... you gotta try to sell your shit, right?

He is not selling anything except for an idea...

Maybe people dont want to support the current system at all as they see it as life destroying for the planet ?

Even gold mining causes devastating environmental issues. The best investment you can make is learning how to grow your own food etc.

Today's events in Cyprus make it kind of financially irresponsible in some countries to have any non-trivial amount of money in a bank account.

it's going to happen to every country, and it's irresponsible to hold any assets which can be plundered in this way. They'll do it to bank accounts, stock portfolios, retirement accounts, and bonds. The only thing safe is something they can't remotely seize.

Stocks are pieces of a company. How could they seize entire stock portfolio's? I know companies can be nationalized but that happens on a individual company basis not a stock portfolio one. Even if my stock broker goes bankrupt I still own all my stocks as they aren't part of the inventory of the stock broker.

I'll check this again later but I actually checked and Interactive Brokers does not own my shares I do. If I goes bankrupt I lose my balance in fiat (USD and Euro) but keep my stocks as they cannot be seized by creditors.

Am I totally wrong in this?

I asked about it once, and IB indeed does not own the shares, it's a specialized firm that holds it for them.  On the other hand apparently that firm can loan out the stocks for shorting too, so actually its not really safe either.  At least that is how I understood it.

The last portion I am certain is inaccurate. I joined their "Stock Yield Enhancement Program" 1.5 years ago. This program gives IB the right to loan out my shares to people willing to short and IB and me split the fees. When stocks in my portfolio are loaned out collateral is placed in my account matching the value of the stocks exactly (which is corrected every night) and I receive payments in lieu of dividends which match the dividends exactly. Without me joining their program they could not loan out my stocks (otherwise, why pay me for the privileged?)

Your understanding what the law says is correct but you still don't get it.

The law doesn't matter in "exigent circumstances". And every situation is exigent when following the law would benefit you instead of someone with more political clout.

Well, I don't have a direct IB account, but through a local 'middle-man' company for IB, maybe that is the difference.  (I am willing to provide you the emails in pm if you are interested).

I am interested so please do. Thank you.

just thought it's a good time to bump this thread ;)