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Author Topic: [2017-10-24] Bitcoin is not a classic bubble, but still be 'suspicious'  (Read 3457 times)
rabeh boukhnona (OP)
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October 24, 2017, 03:53:02 PM
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Bitcoin is not a classic bubble, but still be 'suspicious,' says investing expert William Bernstein

Bitcoin doesn't show textbook signs of a bubble yet, but there are other reasons not to buy it, says investing expert William J. Bernstein.

The digital currency has "no intrinsic value," Bernstein said in a phone interview with CNBC.com. It's "awfully suspicious on that criteria alone."

The "fact the price keeps rising, that's a very bad sign," he said.

Bernstein is a neurologist who began writing about investing in the 1990s, soon becoming a best-selling author and drawing the admiration of legends such as Vanguard's Jack Bogle for his clear and rational analysis. He is best known for books such as "The Intelligent Asset Allocator" and "The Four Pillars of Investing" that show independent investors how to manage their money for the long term. He is currently retired as a doctor, but co-principal at Efficient Frontier Advisors, a money management firm for the very wealthy.

"Bitcoin is not something I want to waste my time on," Bernstein told CNBC. "Unless [you are] an expert on blockchain technology and bitcoin, stay away. Don't invest in things [you] don't understand."

Bitcoin topped $6,100 this weekend to hit a record high and has a market capitalization of close to $100 billion, larger than Goldman Sachs' $94 billion. The digital currency is created through a "mining" process in which computers solve a complex mathematical equation and receive bitcoin in reward. Although use in commercial transactions is limited, bitcoin can be traded on exchanges around the world. A surge of interest in bitcoin from investors, including some institutional investors, has helped the digital currency multiply six times in value this year.
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Despite those gains, bitcoin doesn't quite fulfill all four criteria of a bubble, Bernstein said.

First, the digital currency hasn't yet become the primary topic of social gatherings, he told CNBC.

And second, most people aren't quitting well-paying jobs to speculate in bitcoin.

Also, skeptics of bitcoin aren't yet met with anger.

The only sign of bitcoin being in a bubble that Bernstein can see are some "whiffs" of extreme price predictions.

The most outspoken digital currency proponents forecast bitcoin at least quadrupling in the next five years.

Digital currency investors may benefit from understanding how bubbles have played out over the centuries.

The "most important" chapter, as Bernstein says in his 2002 book "The Four Pillars of Investing," is a history of manias. He roams in his book as far back as 1687, to a proliferation of worthless stock issues for diving companies after one New England sea captain salvaged 32 tons of silver from a wrecked Spanish pirate ship.

"Of the four key areas of investment knowledge —theory, history, psychology, and investment industry practices — the lack of historical knowledge is the one that causes the most damage," Bernstein writes. "In finance, there is no controversy: the same speculative follies play out with almost clock-like regularity about once a generation."

The largest group of Americans alive today — 26-year-olds, according to Deutsche Bank — have never been full-time working adults during a bear market, or a stock drop of at least 20 percent from a recent high. However, most have a clear impression of the financial crisis, during which the Dow Jones industrial average fell about 54 percent from October 2007 to March 2009.

Perhaps as a result, younger Americans are more inclined to invest in bitcoin than stocks, polls indicate.

Bernstein suggests the young learn about what happened in the aftermath of the 1973 to 1974 stock market crash. The stock market became so unloved that, as he quotes in "Pillars," BusinessWeek ran a cover story in August 1979 entitled "The Death of Equities." Younger investors were avoiding stocks, then too, while those above age 65 were still holding them.

Then Bernstein gives his analysis, no emphasis added:
Quote
Did the elderly stick with stocks in 1979 because they were out of step, inattentive, or senile? No! They were the only ones who still remembered how to value stocks by traditional criteria, which told them that stocks were cheap, cheap, cheap. They were the only investors with experience enough to know that severe bear markets are usually followed by powerful bull markets.

To avoid the stock market would be to miss out. The Dow has climbed about 254 percent to record highs since the financial crisis.

Bernstein told CNBC he recommends young investors buy stocks through a "target retirement fund that is fully indexed" with an expense ratio of less than 17 basis points.

His book offers a final mantra Bernstein says investors should repeat to themselves "at least a few times per year":
Quote
"The market is much smarter than I will ever be. There are millions of other investors who are much better equipped than I, all searching for the financial Fountain of Youth.

   My chances of being the first to find it are not that good. If I can't beat the market, then the very best I can hope to do is to join it as cheaply and efficiently as possible."
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October 25, 2017, 08:59:23 AM
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The fact is that the more we have people like investing expert Mr. William J. Bernstein warning people about the possible pitfalls of Bitcoin, the more that we have people who are flocking to take a hodl of their Bitcoin. Right from the very start, Satoshi Nakamoto made it sure that he was not influenced by any banking or investment expert because had it been then we would not have the Bitcoin we have today.

Many investment experts would be trying to use their name and influence to stop the rise of Bitcoin by warning people or rather scaring people that soon Bitcoin can be a big bubble and can left many people holding empty bags with air inside. Behind the names, we should be asking this big question: Are they really experts on things related to Bitcoin or are they just speaking of the experience they have not related to Bitcoin at all?

Experts, experts and many more experts will do their best to stop people from getting into Bitcoin but will they succeed?
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October 25, 2017, 02:14:52 PM
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Well he has a point.But bitcoin has come this far and been known and used globally. Each and everyday, people are getting to be interested about bitcoin.If ever there will be downfall which I guess is very little posibilty, it will be gradual and not instant.
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October 25, 2017, 02:31:53 PM
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Bitcoin was created and managed by very smart way and it has many things alike to bubble, besides high and fast growth. Bitcoin is not going to pop as bubbles do, but there is a power that can finish it, it is worldwide banning by governments. Let's be honest, that is the only thing which can finish bitcoin both as currency and asset. For now many countries stay neutral to digital currencies and we don't know exactly what next few years will bring to us. I hope the neutrality will stay in the priority.
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October 25, 2017, 05:42:04 PM
 #5

The "fact the price keeps rising, that's a very bad sign," he said.
Come on, cut the crap. It's completely normal for a very limited and unknown asset to be going up in value as people are learning about it. Bitcoin wasn't offered on a stock exchange like it's done with normal shares. It was introduced to a very small community of coders and people interested in cryptography, not investors.
I thought an "investing expert" would be aware of it.

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October 25, 2017, 09:10:29 PM
 #6

Bitcoin survive more than 6 years and who made it is very smart so that not think it will be end soon or  "bubble"

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October 25, 2017, 09:14:17 PM
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I like the fact that he says mos't people aren't quitting their jobs to get into Bitcoin. But we do seem to be getting there.  Grin
Lot of Wall Street guys are experimenting with trading crypto.
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October 25, 2017, 09:36:06 PM
 #8

Don't know if he's really a smart investor but I think he should know what the future lies in on crytocurrency he's just making some wrong speculation about bitcoin.
Quote
And second, most people aren't quitting well-paying jobs to speculate in bitcoin.
Well, this time around it ain't gonna happen since bitcoin is just that young but future may tell that what you ought not to happen is on the run by now. Don't know if he know that many housewives helped by bitcoin even just staying at home and many unemployed people are sticking to it also because they can gain financial freedom because of bitcoin. Let just be patient and it will happen, bitcoin can survive.
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October 25, 2017, 10:04:51 PM
 #9

I thought an "investing expert" would be aware of it.
Most of the traditional 'experts' tend to overestimate their understanding of Bitcoin by a huge margin. Just because they have done well in their part of the industry, doesn't automatically mean that they know how Bitcoin works.

It however doesn't seem to be that they actually realize this. The only thing these 'experts' are doing is making a fool of themselves by speaking out like they know it all ~ the crypto community is quite harsh on these entities.

It seems to be a new trend where one expert after the other pops up to share his opinion. It just doesn't add anything of value, and especially not when they try to act like they understand this market ~ get lost already!

BSV is not the real Bcash. Bcash is the real Bcash.
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October 25, 2017, 10:26:43 PM
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Unless [you are] an expert on blockchain technology and bitcoin, stay away. Don't invest in things [you] don't understand.

Well, that's a solid advice, but I could extend it to don't voice your opinions publicly on things you don't understand. It really looks like the author didn't bother to learn more about Bitcoin and instead just gives typical arguments about "no intrinsic value" The argument that people invest in Bitcoin because they don't like stocks is not very convincing, because Bitcoin is a new technology and people would like it regardless of what's happening with other assets.

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