What caught my eye this week.
Perhaps it’s too early to tell what category the Coinbase IPO falls into.
The companies that choose to go public in a mature stock market boom often make interesting watching.
At one extreme you get the flakier – sometimes borderline fraudulent – firms cashing in on giddy investors who’ll pump up the price of anything.
At the other end you have demonstrable juggernauts and cash cows. Very successful companies that float because… if not now, then when?
Roblox – the computer game creation kit that’s bewitched a generation of kids – and Bumble – the dating app that’s sowing the seeds for the next-generation – come to mind.
Coinbase is coining it
With many investors still skeptical that they should own any cryptocurrency, the public listing of the dominant platform in the space may well seem chum for the credulous.
On the other hand Coinbase has already been valued at around $100bn, pre-IPO.
That’s a loot of moolah for a firm trafficking in supposedly made-up money.
Clearly, present conditions seem exuberant for blockchain technology.
Bitcoin flirted with a new high near-$58,000 this week. Coinbase boasts $90bn in assets under administration. And the NFT (non-fungible token) craze continues, as I cover in a second mini-special in our links this weekend.
I wonder why Coinbase is IPO-ing right now?
I would suggest anyone interested in learning more about cryptocurrency has a read of the Coinbase’s S1 filing. This pre-IPO document is a primer on the entire crypto ecosystem, with pretty graphics and all.
You could also check out The Conventional Investor’s Guide to Bitcoin, published by Morningstar this week.
Can Coinbase cut charges?
I don’t think I’ll be racing to pick up Coinbase shares. I like and use the business, but I can’t stomach the forecast valuation.
Coinbase’s fee margin is enormous, and seems unsustainable. It’s not clear to me whether it can achieve the scale presumably needed for fees to come in closer to what we’re charged for trading securities on other platforms.
Still, $100bn eh? That’s almost as big as Lloyds, Barclays, and Natwest combined!
Have a great weekend everyone. Hope you manage to legally meet a chum for a coffee on a park bench somewhere.
From Monevator
Back-up plans for living off a portfolio – Monevator
Should you invest in a buy-to-let property through a limited company? – Monevator
From the archive-ator: Do you count your own home in your net worth ‘number’? – Monevator
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1
UK exports to European Union drop 40% in January – BBC
“We are trapped”: Residents hit with soaring service charges at luxury London homes [Search result] – FT
UK GDP falls 2.9% in January amid third national lockdown – Investment Week
Home prices tipped to rise by twice as much in Yorkshire as London – Guardian
Renters pour back into cities ahead of lockdown easing – ThisIsMoney
Football Index gambling platform suspended as firm enters administration – Independent
The five major costs the cladding crisis is piling on homeowners – Which
Soaring prices for rhodium and palladium are fueling the theft of catalytic convertors worldwide – Global News
Owning individual stocks versus owning the market – A Wealth of Common Sense
Products and services
UK homebuyers offered first 40-year mortgage from Habito – Guardian
You can now bookmark and share custom Portfolio Charts – Portfolio Charts
Investing in freedom: an EM fund that downgrades autocracy [Podcast, US but compelling] – The Irrelevant Investor
Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade
Seven in 10 freelancers have been refused a mortgage – ThisIsMoney
25% Lifetime ISA penalty is back in April, so is it worth getting one? – Which
Homes for sale renovated during lockdown, in pictures – Guardian
Comment and opinion
The coronavirus crash was a short one [Great graphics] – Morningstar
What’s the long-run rate of return on equities? – The Evidence-based Investor
Drawdown in retirement: from saver to spender – Fire and Wide
More decumulation: Frustration – Indeedably
Why inflation tends to feel higher than it really is – Klement on Investing
Don’t learn the wrong lessons from the Dotcom Crash – Intrinsic Investing
Why you should be wary of claims the market is in a bubble – Time
Chart distortions that drive me crazy – Investing Motherlode
Cash can be a simple and effective short-term inflation hedge – AWOCS
Learn how not to lose – Retirement and ETF Maven
Investing: the greatest show on Earth – Morgan Housel
Coping with a ‘crazy’ stock market – Humble Dollar
Can indexers break the rules, if there are no rules to break? [On ETF regulatory compliance, nerdy and US but relevant] – ETF Action
Naughty corner: Active antics
Capitalism’s greatest dividend is solving problems – Krueger & Catalano
BB Healthcare Trust: curing the health system – IT Investor
Cliff Asness has once again come to Value’s defence – Institutional Investor
How inflation drives asset prices and how to predict inflation – Verdad
Snoop Dogg, investing genius – Crunchbase
The Grayscale Bitcoin Trust crypto roach motel [US but interesting] – ETF Trends
How ARK’s Cathie Wood disrupted investment management – MarketWatch
Value isn’t back yet. It’s the size factor that’s driving returns – Valididea
Coronavirus corner
Israeli’s raise a glass to Pfizer as lockdown ends [Search result] – FT
In 2018, diplomats warned of risky coronavirus experiments in a Wuhan lab. No one listened. – Politico
How Covid-19 has hammered women’s financial health – Pension Bee
The three major variants of Covid-19 [Infographic] – Visual Capitalist
Long Covid more likely in working age women than men – Guardian
How Covid spread through Westminster a year ago – Guardian
NFT mini-special: reprise
Jack Dorsey is selling his first Tweet – as an NFT – for millions – The Verge
In defense of non-fungible tokens (NFTs) – Of Dollars and Data
Power to the Beeple [Podcast] – NPR
Will NFTs revolutionize the art market or repeat its failures? – Artnet
Why NFTs are here to stay – Continuations
NFTs are a dangerous trap – Seth Godin
Kindle book bargains
Keeping your Dividend Edge by Todd Wenning [Time-limited deal!] – £0.99 on Kindle
Business Adventures: 12 Classic Tales from Wall Street by John Brooks – £0.99 on Kindle
Money Saving Book: Simple Hacks for a Happy Life by Holly Smith – £0.99 on Kindle
Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth – £0.99 on Kindle
Billion Dollar Loser: The Epic Rise and Fall of WeWork by Reeves Weideman – £0.99 on Kindle
Get a Kindle and dramatically reduce your risk of suffering paper cuts.
Environmental factors
Electric vehicles & future mobility: hockey stick growth mode [Click up/past pop-ups for a great overview] – Krane Shares
‘Default effect’ sees massive green energy switch – BBC
The fight for the Galápagos: race to expand reserve as fishing fleets circle – Guardian
Off our beat
What happened to me was nothing. The nothing women know all too well – Marina Hyde
Scientists unlock mysteries of world’s oldest ‘computer’ – BBC
John Kay: The rise of the ghost PLC – Prospect
How to put out democracy’s dumpster fire by remaking the Web – The Atlantic
The microwave economy – Dave Perell [hat-tip Abnormal Returns]
How a text saved singer Dan Reynold’s marriage – BBC
Excel never dies [Long, nerdy] – Not Boring
Thought-provoking and slightly terrifying dive into the past, present, and future of war [/defence, podcast] – Invest Like The Best
And finally…
“Along with longevity and climate change initiatives, farming forms part of the ‘Holy Trinity’ of investment opportunities in the next 50 years.”
– Jim Mellon, Moo’s Law
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My own experience of Coinbase has been abysmal so far, and just check out their horrific reviews on trustpilot. Thankfully they have none of my money (after waiting several weeks to verify payment method and having zero response from their support in nearly two months) and won’t be getting any.
It seems to be even worse for people trying to withdraw money.
Anyway, on a massively selfish perspective it is good to see UK residential property outside London continuing to climb at a decent lick, as it fits in with my 2025 downsizing plan to finally clear the pesky mortgage.
Need a good differential for the move to be worthwhile.
The more crypto is naturally in the index, the less reason for long term investors to hold some individually – could a public listing be the demise of crypto?
Because we have to ask ourselves, ok we now have that asset class too, and the market is defining how much we should be exposed, should we be overweight in it? What does a long term investor expect out of crypto? Are there better ways to be active or to leverage a passive portfolio instead?
I expect somewhat that it’d be thought of like mining for various metals/minerals/oil – dividend paying exposure to a commodity with the risk of the company itself
Thanks for all those links TI, so many to go through this weekend now hehe.
I have enjoyed the one I read previously from Time on how bubble hunting is essentially its own industry now. I really felt confident in my long term ability to cope with large losses due to the what turned out to be almost a flash crash during COVID last year. Even though I had lost more money than I ever had, I really didn’t feel too bad about it. I enjoyed investing whilst it was down to be fair. That really tested me for sure and I think I passed. Let’s see how I cope with a bigger more sustained loss :D.
I was also told by multiple friends over the last couple of years that a crash was coming globally, it was a guarantee. You need to get out of the stock market now…move to crypto, gold or cash etc. I really just tune all this out now. I really feel I am simply not going to be able to time the market and if I try, I will likely end up severely burnt!
Thanks again
TFJ
Coinbase could be a great short term opportunity as investors look to get their hands on anything crypto.
I haven’t had any issues with Coinbase, but agree their fee structure is horrible. I don’t pay “fees” for trading stocks, so not sure how that is going to sustain for the long haul either.
If anything though this will continue to supercharge Bitcoin’s price. But who really knows??
At my stage of life, speculation should be nothing more than small sport bets, NFT may or may not be a great thing. I don’t need volitility so I will watch with interest from afar. After a hellish year with the pandemic in my working environment, the drawdown trio of articles on this site have made me evaluate more than a few things about life. Fire and Wide had me intrigued, I have always travelled, rather than vacationed, (without the encouragement of Mrs JimJim that would not have been the case, eternally grateful for her abilities to extend my comfort zone) and took a year out to do that mid career in my late twenties. Every other year we do exotic. Last year would have been Peru… But… Perhaps it is time to risk all again. Another two years on the treadmill at most. Good article fire and Wide. And @TI, lots to read this week. Top job.
JimJim
The prospect of long-fixed mortgages in the UK is fascinating. 30 year fixed is the standard in the US and has been for half a century. Seems like a good thing? Until recently there you could lock in <3% for the life of the loan. ThisIsMoney seemed pretty dismissive of the offering though.
Thank you for an excellent selection of articles to make this weekend more enjoyable. I deeply admire your work and I am grateful for all the advice read on this website. Your recent focus on drawing down the funds accumulated after FI is very useful as I approach my retirement date ( Still more than 2 years away). I appreciate the Politico article about the origins of the SARS-2 coronavirus, an interesting and plausible scenario. The NFT thing seems mad to me , but hey I am a creature of the 20th century and it shows.
Best wishes for what remains of the weekend.
@JimJim
Ha, I had Peru booked for May 2020, and had been getting a bit nervous about going ahead when it was taken out of my hands. ‘Interesting’ to read about British people stuck there through the early summer: seemed a nightmare.
I wonder when we will be able to resume that sort of trip?
@TI @TA, many thanks for the recent active retirement info. After the death of a relative I expect I’m going to have to talk to their spouse about all this in the near future.
@Devonico, I expect NFTs are a repeat of art tax avoidance without the inconvenience of physical picture frames.
Thanks so much for the Freedom ETFs article.
It makes a mix of a case for their approach, as I understand it – part moral, part financial. So you could, for example, agree with the moral case, even if you’re not entirely convinced with the financial argument.
Emerging markets have crept into mainstream holdings as they have grown – presumably some of them will count as “developed” one day, and I’ve often wondered if there is an official line you cross between frontier/emerging/developed.
For my part, I decided some time ago I was uneasy about investing in the racially-motivated detention and violence which reportedly takes place in Xinjiang. It’s remarkably hard to extricate yourself once you are invested in index funds or funds of funds. You are essentially on your own with this one. There are also few funds or ETFs to help you. ESG, as the speaker in the podcast said, is irrelevant – you might pay a higher fee and get a self-righteous glow, your fund manager might talk about fossil fuels or diversity on company boards, but you can still invest in genocide or ethnic cleansing.
As for the financial argument, I’ve usually gone along with the idea that we just use market cap indexes and let the market do it’s work. But you do wonder about risks linked to a lack of transparency and reliable statistics. Nor is it clear to me that the same approach works for sovereign bonds (where you are lending money to potentially autocratic governments?).
I understand that the MSCI index (and others I think) did remove some Chinese companies when forced to do so by executive orders, issued by the Trump administration. Otherwise the funds that track them would not be able to sell in the US. They still produce another index with the “problem” companies, though, and it’s hard to find out which emerging market funds follow which version of the index. There are emerging markets funds which are ex-China. But I thought the more thoughtful approach of the Freedom ETF was interesting. It’s probably hard to buy in practice for UK investors, though?
First – huge thanks for including my post on drawdown – that was a very welcome surprise when reading! My tiny blog has had a crazy time but hopefully it’s helping a few folk.
@jimjim – cheers for the comment – love getting feedback. Yep – travel is totally different to vacationing, right. Peru sounds a great plan. South America in general is totally on our plan though I suspect it’ll be one of the harder places to get back to for a while yet. We’ve done a house-sit & the Quilatoa loop hike in Equador but really looking forwards to being able to explore further as/when we can do so. Glad you enjoyed the post, it was a great challenge – and obviously inspiration from here
@SemiPassive — Two months is ridiculous, they should really just close themselves to new accounts while they catch up if that’s how long it’s taking now. A family member managed it in after about three weeks recently, so maybe you’ve been unlucky? I was lucky to do it years ago, and even then it still took surprisingly long. It’s a tricky space, given money-laundering issues and all the hacks elsewhere. But Coinbase hasn’t been hacked (yet?), and I’d rather it was hard to get on than easy to get off with my assets. 😉
@Matthew — Well yes, if the crypto bulls are right it will slowly integrate with the rest of our systems. (As I’ve written before, if you believe crypto will persist you can still buy Diageo and Burberry stock, because crypto owners will obviously still want ‘things’.) But I wouldn’t expect to profit from getting close to the point where it’s established from an S&P 500 index fund just yet.
@TFJ — Last year was so odd, I’d be wary of drawing any conclusions about anything from it, personally! Though the evidence is strongly that nearly everyone will do best (presuming appropriate asset allocation etc) with where your thinking has ended up, as you know.
@Accidentally Retired — Agreed.
@JimJim — Cheers. Maybe too much to read!? 😉 I’ve failed to rein this list in, clearly…
@Learner — I believe fixed rate mortgages are always about insurance. People get a bit too caught up about rate-guessing. If I could fix for 25 years at 3% I think I’d take it. But the most popular fix is still two years, so I’m an outlier!
@Michelle @Devonico @AJ — You’re welcome. 🙂
@Kraggash – I have a friend who has been traveling about South America throughout Covid. (He’s very skeptical of lockdowns etc. I am not condoning, though I can understand why he felt returning to the UK wasn’t hugely appealing). I get the feeling there’s trapped and then there’s ‘trapped’ in that part of the world.
@Haphazard — I see all sides on ESG investing. I believe I understand the motivation but can also fully see the point of those who invest in global tracker funds (/anything legal), the complaints of those who say the market isn’t giving them *their* idea of ESG, and even being contrary I can see there’d be attractions by investing in pariah stocks like Big Oil if/when they get that way again. I did think the Freedom ETF woman (Perthe?) was very compelling.
So-called direct indexing may provide a better solution to all this. Individually ex out the companies you are sure *you* don’t want exposure to, rather than trying to shoehorn your idea of ESG into someone else’s fund. But we’re a way from that in the UK, too…
@TI (#12):
Re: “If I could fix for 25 years at 3% I think I’d take it. But the most … ”
Interesting comment.
Possible subject for a future post?
Habito’s 25 year fix is only 3.84% at 80% LTV and goes down to 3.49% with 60% LTV, so not ‘far off’ 3%
@Andrew — Morning. My problem is the “I” in my sentence; I don’t get mortgages easily.
Details here:
https://monevator.com/i-asked-the-chief-executive-of-a-bank-to-give-me-a-mortgage-and-he-did/
With that said, 3.84% is quite a way above 3% at today’s low rates.
Still, worth a thought I believe for anyone outside of the safest income professions.