Why going all-in is not financially responsible. Capital is your Security.

[BitcoinAshley]

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 ;-)

[wachtwoord]

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

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?  

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 ?

[RationalSpeculator]

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

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.

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.

[RationalSpeculator]

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 ;-)

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?

[RationalSpeculator]

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?

[notme]

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?

[RationalSpeculator]

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?

[oakpacific]

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.

[notme]

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?

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.

[RationalSpeculator]

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.

[notme]

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?

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.

[RationalSpeculator]

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? 

[notme]

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.

[BTC Books]

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?

[Spaceman_Spiff]

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...

[Monster Tent]

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.

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.

[Vladimir]

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.

[justusranvier]

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.

[wachtwoord]

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.

[wachtwoord]

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?