I have to say, this entire thread is fascinating - and very educational. It's educational about one of the great mysteries of all investment markets: why, when the bottom of a bear market comes, do so few people step up to the plate and buy assets that (in hindsight) are screaming bargains? Why did so few people put money into bonds in 1981? Why so few in stocks in 1982? Why so few early adopters when the tide turns from long-term bear to long-term bull -
even when the plain numbers make it close to obvious that it's the time to buy?Thanks to this thread, I've got the answer that eluded me. In this sense alone, altcoin land is profoundly educational for any regular investor! It gives
real-time evidence of how people behave at turns in the tide - at crypto speed! I've seen so many bubbles here, I've got a "database" that I couldn't get in the regular asset markets unless I had lived as long as Methuselah - and I've been here for less than a year!
And thanks - in an abstract way - to the aggressive FUDing with respect to Supernet, I can now put teeth to why so few people put their money in at the beginning of a long-term bull market: investing when they should, really. To see what I mean, please go through this long-after-the-fact fable I reconstructed from the data. It's guaranteed to be 100% fabricated.
Anyhoo:
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Imagine, if you will, that you're a Canadian and it's 1981. The Government of Canada is offering Canada Savings Bonds to the general public, through the big banks as per usual. You stop into the bank, curious about 1981's rate, and your jaw drops when you find out the answer. For the first year, Canada Savings Bonds will pay a guaranteed 19.5%!
You're a man of some means; by street-level standards, you're reasonably sophisticated in financial matters. You know about double-digit inflation. But you also know that in 1981 so far, Canada's inflation rate has only veered
between 12 and 13%. Going easy on your mental-math module, you split the difference and subtract 12.5% from 19.5%.
And wind up with a full seven percent above inflation. You're old enough to remember the days when a 7%
nominal rate was considered usurious - and here's the Government of Canada offering seven percent above inflation for a year!
Since you're a reasonably sophisticated chap, you remember that - unlike Canada Savings Bonds - the Government of Canada offers straight bonds with a fixed coupon over the life of the bond. So, you get on the phone to your stockbroker and ask about them. "What kind of deals you got on long-term government bonds right now?"
You're disappointed to learn that you can only get about sixteen percent: seventeen if you settle for the shorter end of the long curve. That's a far cry from the seven percent real return that's burned in your mind's eye, but life is like that. Only a decent bargain, but it'll give you sixteen or so over the entire life of the bond. Four of one, a four-pack of the other. So, with the inevitable sigh, you order a nice haunch for your portfolio.
But your broker starts responding in a way that makes you wonder if the world has turned upside-down. He started off cautioning you, but you didn't pay attention because that's what the securities regulations and the brokerage house's compliance department make him do. You figured it was the standard boilerplate, so you only half-listened because you've already made up your mind.
Now you're listening fully - to the rare sound of a commission-paid stockbroker trying to wiggle out of earning a commission! Now wondering if some hippie-type mailboy slipped some LSD into the brokers' coffee machine, you find yourself actually selling the buy to your broker instead of your broker selling you! You're not in the least offended; you and him go back a long way, so you're surprised instead of irked. Finally, the broker accepts your sales pitch, puts through the buy, verbally confirms it to you, and promises that written confirmation will be sent to you soon - all the while sounding like he was preparing a eulogy.
When you hang up the phone after a few pleasantries that sound hollow, you're really baffled. Your broker was like a sick dog that tried to run away from a juicy piece of barbecued steak put in its bowl. So, at the end of your day, you go down to your favourite watering hole where people like you hang out. Reasonably sophisticated people of means.
After you tell the usual crew what you've done, you understand why the broker had been so oddly reluctant...
"Are you serious? Lord, it sounds like one of those UFOs flew by and froze your brain! Don't you know that modern democracy cannot work without rising inflation? As long as our leaders answer to the usual suspects on election day, they have to order up more inflation because it's the only way they can pay the bill."
"Whatever gave you that idea?... "Oh, the CSB campaign? Well, why didn't it occur to you that there's a good reason why the Government of Canada has to hold out the begging bowl by offering nineteen and a half?"
"Lord, man, everyone knows that 'bonds are certificates of guaranteed confiscation'. Mark my words: come 1985, you'll have much cause to reflect over your folly of 1981."
"Oh, I know what put you up to it. You heard a lot of good things about that American fellow, Paul Volcker. I have to say that the fellow has shown a lot of grit, which does make him an admirable figure. But simple political sense will tell you that once the American lunchbucket get really hurt, he'll yell at his Congressman and Mr. Volcker will be put out to pasture by that new boy Ronald Reagan. I can't see why you don't grasp this: that Reagan has the perfect excuse because Mr. Volcker was appointed by the same President Carter that Mr. Reagan rubbished so successfully. Once Mr. Volker hurts the Republicans' chances, it'll be as easy as anything to effectively fire him. And then, President Reagan will put in a compliant successor just like President Nixon did. And five years hence, inflation will be well over that nineteen and a half percent of yours. I can understand buying Canada Savings bonds, as the rate will be adjusted upwards once Mr. Volcker suffers the fate of leaders who were too brave for their time, but I can't understand why you'd be drawing to the inside straight by buying long-term fixed coupons."
"Good God, man, had I not known you I would have been completely sure that you had just arrived in a Greyhound from some hick town! How have you managed to forget the last ten years?"
And these are the
politer responses!
As you go home to a boozy night's sleep, you ruminate on an even more baffling mystery. You made your buy solely on the grounds that the raw numbers look good. The politer criticisms show sophistication, but they all rest on forecasting: they don't speak to the numbers that you saw. More to the point, they all rely on a re-run kind of forecasting: your chums seem absolutely immune to the alternate possibility that the 1980s will not be a replay of the 1970s. In fact, as you dive further into your ruminating, they sound an awful lot like those self-assured folks who in 1971 assumed that the 1970s would be a replay of the prosperity-drenched 1960s.
Of course, you're a regular at that water hole and you know you'll be back. You were aught but the Idiot Of The Day; the chummy crew will move on to something more current. A few of the wags will use you as a running gag for a while, but they'll just confine it to ribbing and boozy jocularity. And even they'll get tired of the running gag and drop it when something more fun comes along.
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Fast forward to 1985 and 1986. You find yourself in the odd position of being treated with a respect and even deference in your usual watering hole. As you expected as you had drifted off in your Scotch-aided sleep back in '81, you were ribbed for a while but it basically died off as 1981 turned into 1982. Sure, in 1981 there were whispers about you delivered to the respective listeners with merry eyes. All of this, you took in stride.
What unsettled you was how your status changed as 1982 unfolded. Truth be told, you had unassumedly assumed that 1982's inflation rate would be the same as 1981's. You would have gotten a decent return, but nothing more than that. In all honesty, the plummet of the inflation rate and a corresponding huge bull market in bonds didn't gratify you. It made you uneasy, as did the whispers that you saw about you when you entered the good old watering hole. Their eyes no longer merry, the people whispering about you look stonkered. And you're beginning to get real praise as some kind of minor investing genius - which also makes you uneasy.
God's own truth be told, you were nothing more than a humble numbers man who bought in 1981 solely because the numbers made sense. As for the substantial capital gain you're sitting on, as for collecting a rate that everyone would kill for in '86, you know very well that you were just in the right place at the right time. No-one, including you, foresaw that Ronald Reagan would be so surprisingly loyal to his Carter man Paul Volcker. As everyone expected, Volcker was the Number One Foe Of Labour And Small Business in 1982's depressed economy. But no-one expected President Reagan to more-or-less punt on his party's chances in the 1982 congressional elections by standing steadfast with his Carter man. Since you have very good reason to remember 1981, you still remember Mr. Volcker being thought of as an intrepid fool. So the recent praise of him and President Reagan himself as inflation-besting heroes leave you bemused.
But you're in no way bemused when, in your own little way, you're introduced as some kind of inspired investing genius. You have good reason to remain uneasy. Six months after your were the Idiot of the Day, one of the wags - who was a very shrewd early buyer of gold stocks starting in 1971 - sadly had to sell his beloved family cottage to meet his margin debts. He had bet heavily that inflation would come back in 1982, and your unexpected good fortune had been his shocking misery. When you heard of his sale, your heart broke right in two. For a time, you matched him drink for drink; one night, you had even matched him tear for tear. It was an awful time - a time you'll never forget so long as you live, even though your misery-struck friend did bounce back later.
Yes, the simple truth is that you're nothing more than a humble numbers man who bought when the numbers told him to. That's precisely why, when you're introduced as some kind of inspired bond maven, you not only get uneasy but also get a little bit nervous. You know very well how easy it is to waste a real fortune solely through getting self-assured and cocky...
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As you might have guessed, the excitement over Supernet has given me the humble opinion that James has had a hand in bringing the current altcoin bear market to an end. Frankly, as the rise in Dogecoin has shown, we were due for a turnaround anyway - but James (and the Monero pumpers, believe it or not) have had a hand in it too. Bear markets don't turn into bull markets automatically; we have to decide for ourselves that the dark is the kind that precedes the dawn. And seeing people boldly step up to the plate when all around is gloom does influence us.
That said, this last part is only my humble opinion. Like so many bottom-pickers, I may well be too early. Ye hast been warned...
