What caught my eye this week.
While the world potentially inched closer to World War 3 this week, Bitcoin fans had a more exciting horizon in mind. One where their love-hate digital asset finally boasted a six-figure price tag.
Some $133m spent in election lobbying says Donald Trump will be a crypto-friendly president. Bitcoin was already having one of its bursts of enthusiasm, but Trump’s reelection was a lift-off moment:
Similarly, the then-imminent approval in the US of Bitcoin ETFs in early 2024 we talked about in January got this rally started. But any snapshot of a super-volatile asset like Bitcoin only tells half the story.
For instance Bitcoin’s price has more than doubled since February 2021, when I made the case for even sensible investors holding 1-5% in a diversified portfolio.
Great – but not long after that article Bitcoin lost around three-quarters of its value in a peak-to-trough fall that bottomed out in early 2023.
Or go back further in the Monevator archives and you’ll find me suggesting Bitcoin was probably in a bubble in December 2017. By some fluke that post did roughly coincide with a peak. The Bitcoin price went on to again slump 75%, this time to under $4,000.
But of course the price is now up five-fold since that particular bubble-frenzy. So the smart – or strategically dumb – move was arguably to hold – I mean HODL – throughout.
Fortunately my 2017 article was very open-handed about where Bitcoin could go next. Amid much prevarication I wrote:
A price collapse wouldn’t necessarily mean the end of bitcoin or blockchain, any more than the bursting of the Dotcom boom halted the Internet.
Bitcoin could go on to be a household name for the rest of our lives, something we all might use. Perhaps it is the future of currencies?
Maybe it is a new store of value?
Seven years later I’d say almost the same thing.
True, as I’ve written before I think the longer Bitcoin lasts the longer it will last. There’s a self-reinforcing quality to every climb out of the dumpster. So I judge it to be in a much stronger position than 2017.
All the same, this latest mania looks bubbly once again.
Some coins are gonna make it more than others
MicroStrategy is a poster child for the current Bitcoin bullishness. Founder and Bitcoin evangalist Michael Saylor has basically turned his software company into a Bitcoin fund with a side hustle in writing code.
It’s been an incredibly profitable strategy. MicroStrategy shares are up nearly 2,700% over the last five years alone. Approximately none of that is due to it selling software licenses.
MicroStrategy now has about $33bn worth of Bitcoin on the balance sheet. But as I tweeted on Thursday, the trouble is the market prices MicroStrategy’s stash at nearer $300,000 than $100,000.
Commenting on Bluesky:
For once the world listened. Yes, the very next day Microstrategy shares had cratered to under $400!
Okay, or ‘perhaps’ it was actually an announcement by the infamous short-seller Citron Research that it was betting against the stock that sent the shares south.
Citron’s position is the same as mine – no argument in particular here with Bitcoin, but no sensible reason why MicroStrategy’s coins should be worth three-times everyone else’s.
Adding to the personal drama for me, I actually own a little bit of MicroStrategy! Indeed I began the year with a fairly decent chunk, as a proxy for betting on the post-ETF approval Bitcoin price. But I’ve sold it down as the price has climbed throughout 2024.
Which – to be clear for anyone who struggles with graphs – was not the way to maximise my gains.
Number goes up. Right?
Anyway, MicroStrategy fanboys have an explanation for the to-me crazy premium on the stock, which Jack Raines summarises on Sherwood as:
Think about it like this: if MicroStrategy holds ~$30 billion in bitcoin and the company’s worth ~$100 billion, by issuing $1 billion in convertible debt (or equity) to buy bitcoin, its bitcoin holdings increase by ~3% while equity is only diluted by ~1%.
Buying pressure sends the price of bitcoin higher, MicroStrategy’s stock continues to increase as bitcoin grows more valuable, and the cycle repeats.
The crypto bros are calling this a ‘money glitch’. You don’t have to search hard to find Tweets and even videos where they claim this ‘perpetual money machine’ could be the solution to everything from student debt to solving the government deficit.
I know…
Anyway, older hands like me call it a ‘roll-up’.
And there’s nothing new about selling your own highly rated equity to buy low-rated stuff that gets re-rated on your balance sheet.
Sometimes it works for a long time and the roller-upper is able to eventually transition into creating enduring value. (e.g. Think companies like Constellation or WPP or even Berkshire Hathaway at a push).
But very often it blows up. (Numerous UK small-caps over the years, or the Valeant roll-up that caught hedge fund manager Bill Ackman out.)
Time will tell with MicroStrategy. But I hope Saylor is being very careful with its debt, because the one thing we know about Bitcoin is that the price does not move in a straight line.
Who’s zooming who
Monevator favourite Cullen Roche did a good job of explaining why MicroStrategy’s, um, strategy is both brilliant – you can’t argue with Saylor’s returns – and something that will only work until it doesn’t:
To some degree it’s all very Ponzi-like. MSTR is selling bonds to fund purchases of BTC and those purchases help drive the price of BTC up which allows MSTR to finance more bonds.
It’s magnificently brilliant as long as the price of BTC keeps going up. As long as it keeps going up.
Many things can be true at once.
You can believe that Bitcoin has established itself as a long-term asset, and still think the price looks frothy.
You can salute MicroStrategy’s lucrative capital allocation policy while believing it’s sitting on a box of nitroglycerine.
And you can think Trump will be good for crypto while wondering whether he’ll (reliably) be this good.
Heck, you can think Bitcoin is a resource-burning scam for dupes while still profiting from trading it.
As Finumus wrote in his excellent Moguls piece this week:
I’ve learnt not to let my beliefs get in the way of a profit.
Alas UK regulators are letting their beliefs get in the way of UK investors making a profit.
I have mostly owned MicroStrategy because as a UK investor I can’t buy a Bitcoin ETF in my ISA due to what seems to me an arbitrary decision not to approve such ETFs for retail investors in the UK.
(And let’s face it, with capital gains tax going the way it has, Bitcoin holdings kept outside of ISAs are now pregnant with gains headed to HMRC…)
Yet the same UK regulators enable us to buy triple-levered ETFs – on MicroStrategy no less – on some platforms.
And of course we’re free to buy Bitcoin outside of tax shelters.
I fail to see a consistent logic.
Too hard to HODL
The total value of all Bitcoin is currently around $2 trillion. While I don’t entirely dismiss that figure ending up closer to zero, I also think it’s very plausible that – on the ‘store of value’ thesis – that Bitcoin’s total value could eventually match gold’s ‘market cap’, which is was around $17 trillion last time I looked.
If that happens then the UK’s current regulations could cost Britain hundreds of billions if we collectively under-own Bitcoin as a result.
Finally, to be clear, all the environmental worries about Bitcoin remain legitimate concerns, the crypto space still feels over-hyped and under-necessary, and nobody needs to own any Bitcoin if they don’t want to.
Many things can be true at once.
Have a great weekend.
From Monevator
Our updated list of low-cost UK index funds – Monevator
A speculative education [Members] – Monevator [Moguls]
From the archive-ator: Coping with the guilt of losing money – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Rising energy bills push UK inflation to a six-month high of 2.3% – BBC
British firms report first contraction since 2023, PMIs show – Reuters
FTX co-founder Gary Wang receives no prison time for crypto fraud – Guardian
Italian village offers $1 homes to Americans upset by Trump win – CNN via Yahoo
Duct-taped banana artwork sells for $6.2m in New York – BBC
Labour share of GDP. The UK is an outlier with…Russia and Brazil – Klement on Investing
Products and services
Moving home costs £14,000 and it’s about to get more expensive – Which
Average annual energy bill to rise to £1,738 in January – Guardian
I have been using Thriva to monitor my health for many years now. Try it via my link and we’ll both get £50 off! Terms apply – Thriva
Banks accused of ‘ripping off’ customers as mortgage costs rise while savings rates fall – iNews
Trade shares? The (dopey) PTM levy rises to £1.50 from 2nd December – LSE
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Interest rates slashed on savings accounts after base rate cut – Which
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley. Terms apply – Charles Stanley
Homes for sale with electric car chargers, in pictures – Guardian
Comment and opinion
The ‘linked benefits’ of index investing – FT
How millennials are rewriting the American Dream – Sherwood
The farmers’ furore shows why it’s so hard to reform taxes – Guardian
How does UK pension drawdown work? [Podcast] – Merryn Talks Money via Apple
Investors eye gilts as markets have ‘overreacted’ – This Is Money
Talking the 4% rule with creator Bill Bengen [Podcast] – Financial Samurai via Spotify
Six ways to cut inheritance tax on pensions – This Is Money
Investors obsession with round numbers – Optimistic Callie
Is the Australian pension system really better than ours? – This Is Money
Placing guardrails on your portfolio – A Wealth of Common Sense
Return on Effort (ROE) is the key to a better life – Financial Samurai
The keys to financial success as a couple [Podcast] – The Human Side of Money
Naughty corner: Active antics
Which asset has the biggest bubble potential? – Behavioural Investment
How to deal with noisy markets – FT
Fees matter. Frequent fees matter more – Klement on Investing
Hargreaves Lansdown has sold at a low-ball price – UK Dividend Stocks
Shorting credit – Verdad
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle
Eat That Frog! Get More of the Important Things Done by Brian Tracy – £0.99 on Kindle
Growth: A Reckoning by Daniel Susskind – £0.99 on Kindle
A Confederacy of Dunces by John Kennedy Toole [A fav, not about money] – £0.99 on Kindle
Environmental factors
Heat pump grants offered to more UK homes – This Is Money
COP29’s $250bn climate fund proposal dismays developing nations – Sky
How to (eventually) remove a dam – Hakai
Why Vanguard is enabling shareholders to vote for profits over ESG – FT
Plagues, taxes, storms, and the Jet Stream – Nautilus
Robot overlord roundup
Humans are about to get smarter like never before – Raptitude
AI’s Holy War over scaling laws – The Generalist
ChatGPT can predict analyst forecast changes – Klement on Investing
Some of Substack’s biggest authors rely on AI writing tools – Wired
Bluesky mini-special
X Out – Hola Papi
The great migration to Bluesky – 404 Media
Come join us… – Monevator on Bluesky
…and watch it grow, live! [Counter] – BCounter
The Bluesky bubble – The Atlantic
Is it ‘federated’ enough, though? – Cory Doctorow
Off our beat
Plutarch and the ancient art of saying no… – Art of Manliness
…and how having money can help with that – Of Dollars and Data
The John Stonehouse affair [Podcast] – A Long Time In Finance
Could humans hibernate? – Aeon
The case for RFK Jr as US healthcare sec, vaccine issues aside… – Guardian
… [also, he’s another manifestation of] Down vs Up – The Honest Broker
Is being a mum bad for your career? Maybe not – Reason [h/t Abnormal Returns]
How to stay healthy in your 50s – Guardian
James Meek finds war-weariness in Ukraine – London Review of Books
Do people actually hate Forrest Gump? – Stat Significant
And finally…
“The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course.”
– John Bogle, The Little Book of Common Sense Investing
Like these links? Subscribe to get them every Friday. Note this article includes affiliate links, such as from Amazon and Interactive Investor.
I will leave this link on the Farmer inheritance tax issue here as a link that gave me pause for thought. https://www.youtube.com/watch?v=s9J0GpnXNhY
JimJim
Bitcoins value is fake. There is so much manipulation by Tether, which claims to have 1:1 backing for $130 billion despite refusing to have a proper audit by a big 4 company for the last 10 years. It’s basically “trust me bro”, for a dodgy company based in the Bahamas.
Even if bitcoin wasn’t massively manipulated I could never bring myself to invest in something which is backed by a square on an excel spreadsheet and causes a massive waste of energy.
I suppose if bitcoin did become a global currency you could use anywhere as seamlessly as Applepay I would use it, but this is just never going to happen.
I’ll just have fun staying poor with my global equities. There’s probably some bitcoin in there somewhere, although I’d rather there wasn’t.
The other day I was looking at the market depth on Coinbase, and there was a $70M wall of asks at $100K waiting to be matched.
I have absolutely no doubt the price will top $100K now, but it’s certainly strange how it’s suddenly met resistance.
Given the absolutely insane momentum of the last few weeks there must be selling pressure to hold it away from that psychological price level that those with diamond hands will inevitably go nuts over, and half of r/bitcoin literally have champagne on ice for.
The $6mn banana sale signals the top on this cycle imho.
I simply don’t get it. Where is the underlying value of the assets here? To me this is the blackjack table on a Friday night.
The value of Bitcoin is in the code, the sunk energy cost, and the shared conviction.
One can say it’s not worth X or you think it is in a mania or the price delusional or whatnot, but by this point in 2024 we really shouldn’t still be arguing about whether it’s ‘fake’ IMHO.
With respect, if one still thinks a distributed blockchain = a spreadsheet cell then one hasn’t made the effort to understand it.
The two may be (are) functionally equivalent in some respects, but in other ways radically different.
Again this is not to say it’s ‘worth’ $100k or even $10! 🙂
As I’ve said before, most of the anger about Bitcoin is really anger about the price. If one Bitcoin was worth 10 cents it’d just be a cute novel bit of code.
Of course I understand we wouldn’t be talking about it here then, either! 😉
@all — Due to fat thumbs I accidentally deleted a few dozen spams without checking for real posts that had been mislabelled. If you commented and your comment vanished, apologies!
Thanks for your weekly posts as always TI.
I myself have always been very anti crypto in general. I think a lot of it stems from the crowd that mostly surrounds it and the beliefs a lot of them have. My gut more emotional reasons are as follows;
– It seems to be anti government, anti regulation, anti FIAT
– It seems to be pro Wild West type freedom of a world
– Fosters a get rich quick mentality from most
– I don’t understand how people think it can a currency and at the same time a route to riches unless it eventually becomes stable is the thought process. Is it a currency or digital type commodity?
– Crypto is often argued as being for the average Joe out there but to me it’s far more unequal in ownership than normal finances
– The use of it as an actual currency seems laughable in the sense of the wild price fluctuations, no ability to control it in a good sense centrally and it being backed to me simply by sentiment and the belief it will go higher. The image of walking around Tesco and waiting for the live prices to go to something you prefer as they change every minute or so.
– The lack of privacy if someone knows your address, the laughable transactions per second, the constantly rising size of the local databases of transactions, the environment concerns
My more rational calmer side just thinks the following:
– I don’t want to invest large sums in individual stocks or sectors as I think it’s too risky
– I don’t want to invest even 1-5% in this sector because it really goes against what I believe in
– I don’t invest in Gold or commodities as it stands anyway
– I can’t shield it in an ISA or a Pension in an easy way, I know you can invest in certain companies like Micro Strategy however but in general that point is true.
– The risk of losing all your money, having no real recourse or safety nets in the traditional ways is worrying
I really do hate the crypto space personally, it’s not about people getting rich from it, I don’t even mind people doing a YOLO and becoming millionaires on meme stocks or other things (good for them!) but crypto doing well really gets to me and I can only think it’s because it seems to be against so many other things I believe in.
I understand the original motivation behind it and what it’s now become is very different. I know some of the criticisms are made less impactful as people use centralised exchanges and don’t really send crypto to others in the original way it was intended. Most of it just seems like hype to me. Number goes up! Is not enough to get me to invest I am afraid. I will stay clear and pick up any of it naturally if it ends up more part of the world via my ownership in the world governments and companies I already invest in.
TFJ
@TFJ — Cheers for thoughts.
Just on this: “Is not enough to get me to invest I am afraid.”
I’m *never* trying to get anyone to invest in anything on this site, with the arguable exception of a global tracker fund.
But that goes triple for Bitcoin! 🙂
As I conclude in my intro, I don’t think anyone *needs* to own this. Sure there might be an opportunity cost, but as some of the crypto bros don’t seem to understand, even a Bitcoin price of $1m per coin doesn’t put bread on the table, fuel in jets, or TV shows on Netflix. (Though of course you’d rather own some BTC than not in such a world…)
I think it will never got to zero now or even particularly near to that, with the exception of a code hack/failure. But who knows what the real value is. Personally I’m pretty amenable to the gold equivalent, as I’ve said a few times. I don’t see why it can’t be a digital proxy for gold. Most of the complaints about it hold for gold too, one could even argue the environmental costs (which I don’t dismiss) over the history of gold mining.
I do think some people are a bit closed-minded though. Sure it might eventually go to zero and then they can take their victory laps, but personally I’ve allowed my position to evolve over the last decade or so, as the facts have changed and I’ve better understood what’s going on here.
Finally, to be clear people say ‘crypto’ but I have no conviction about any of the other traded coins apart from Bitcoin. I understand the intellectual case for, say, Ethereum or Solana or whatnot, the great flexibility, the code-on-chain etc. But I don’t think it’s necessary to get most or even all of the benefit (such as it is) that Bitcoin can deliver. (Basically a countable once-spendable decentralised digital token with finite supply). So I couldn’t pick between them.
I do happen to still have some Solana that I picked up somewhere that was worth very little in 2022 and is now a small four-figure sum. This is a crazy space. Anyway maybe that’s my tiny hedge against my Bitcoin maximalism.
I’m sure the very occasional posts we do on Bitcoin rub some up the wrong way, but it is a feature of the landscape currently, Bloomberg quotes the price next to USD and gold and oil, and retail investors occasionally go mad for it, so it’s going to stay in the discussion now and then for the foreseeable. 🙂
I’ve finally made an effort to my head around bitcoin. It’s just an incredibly clever bit of coding that proves you can run a secure ‘currency’ without a trusted third party (ie a bank) vouching for transactions (this is the distributed block chain encrypted with a one way mathematical function) or without the currency being devalued by over-production (the code adjusts the rate of production, governments or a central bank can’t intervene). But it’s only value lies in what people want to pay for it and that is massively volatile and unpredictable. There’s no future income stream or physical use from owning bit coin – at least for gold there has been demand for millenia based on its physical utility for producing jewellery. I can’t see it as anything other than a speculative bet based on the next person paying more. Not quite a Ponzi scheme or a chain letter but ver similar and sharing lots of the negative features. Perhaps if people start trading goods with bitcoin the volatility would settle down but it is telling that people haven’t yet and given that economies need to increase the money supply as they grow in size, how bitcoin would cope with that I don’t know – macro-economists may understand this. The huge electricity costs will always be a problem as the cryptographic security will always require a massive amount of computing time to be necessary for decryption. So for what its worth I am massively sceptical and I am no more likely to invest in bitcoin than ‘invest’ my pension in the casino.
@Jimjim
Excellent video on farming economics, well worth watching. Unfortunately few people vote for making their assets worth less
@JimJim — Thanks for that link. As is probably obvious by my not featuring dozens of links about the farming protests, I’m of the view that the inheritance tax changes overwhelmingly impact huge landowners, who often bought farmland expressly to avoid IHT and mostly don’t impact the small family farmers that are being showcased to gain public sympathy, and who the exemption was initially in place to meet the needs of.
That is not to say there aren’t winners and losers, or the final word on the rights and wrongs of inheritance tax et cetera. But from what I can see (not an expert) it is a phoney war, as currently being waged.
@TI – Did you ever do an article on Thriva? Would be fascinating to hear of your experience. Have you gone down the Zoe rabbit hole as well?
The main win I can see in bluesky is that it isn’t run the the sociopath Elon Musk. It will be owned by some other sociopath in the fullness of time. Everyone has their price. Doctorow deconstructed it
> While there are many independently maintained servers that provide services to Bluesky and its users, there is only one Bluesky server.
The end to end principle that enlightened the original internet protects from that. To live that is inconvenient as hell, and people hate running servers which is why platforms happened. Bluesky will enshittify in the fullness of time, because you aren’t paying for it.
Did anyone listen to this weeks Merryn Talks Money? The proposed new kent to essex tunnel. Planning app docs extend to over 300k pages with a cost upto now of over 300mil. Thats for the application alone not building costs! Apparently norway built a massive tunnel for less than half this application cost. We are so knackered as a country. We need some kind of Trump 2.0 / Milei movement to campaign on slashing bureaucracy and red tape.
The Lex Friedmam Milei podcast was also interesting although not as easy to listen to.
Another great selection as always.
I made the mistake of reading the comments under the Daily Mail article on heat pumps. It’s amazing how the topic of heating can become politicised and attract vitriol.
Is anyone concerned about the sale of HL to private equity? My, perhaps unreasonably biased, view of this type of deal is that it seems to make big bucks for the PE company but leaves the target crippled with debt and hence vulnerable. I had placed HL in the ‘too big to fail’ bucket of brokers, which gave me some (psychological) comfort in using it at a home for my ISA. But after this deal goes through I’m not so sure. Time to look elsewhere?
@TI
Just to be clear, the remark about its not enough to get me to invest is not aimed at you or this website. It’s that ‘Number goes up’ is not reason enough for me to personally invest. I know you never push certain types of investments :).
I have watched the crypto space a lot over the years as well and have certainly evolved some of my opinions on it. I still think it could go to zero or there about but that it’s also less likely now than I thought before. I have always thought that some unknown fundamental flaw/hack in it or some shift of opinion or move against it could affect it as well.
There are people of course that believe in it in ways that I do not and a lot of my dislike for the type of person who thinks it will replace all FIAT money and hates the government does not apply to all investors by any stretch. I also share the opinion that 1-5% is fine as well or to use some fun money to throw at it.
Please continue to discuss it as it’s certainly apart of the financial world – for now at least!
TFJ
@1485153 #2, @159F #4 & @TFJ #6: true. @TI #5 & #7: likewise. As per the (as always) excellent w/e reading intro from @TI (“Many things can be true at once”) and @Finumus’ recent Moguls’ piece (“I’ve learnt not to let my beliefs get in the way of a profit”) cash & conscience are not mutually exclusive. Channelling a trio of le Carré characters (substituting ‘investor’ for ‘artist’, investing for spying, & paintings for belief based investments, per the linked ‘Which asset has the biggest bubble potential?’ piece):
Roy Bland: “An artist is a bloke who can hold two fundamentally opposing views and still function. Who dreamed that one up?” George Smiley: “Scott Fitzgerald”.
Roy Bland: “Well, Fitzgerald knew a thing or two. And I’m definitely functioning. As a good socialist, I’m going where the money is; as a good capitalist, I’m sticking with the revolution, because if you can’t beat it, spy on it! Don’t look like that, George. It’s the name of the game these days. You scratch my conscience, I’ll drive your Jag, right”.
George Smiley : “Ever bought a fake picture, Toby?” Toby Esterhase : “I sold a couple once”. George Smiley : “The more you pay for it, the less inclined you are to doubt its authenticity”.
@Jim #12 That factoid comes from the Foundations report that TI linked to a few weeks back IIRC. Well worth a read, deeply concerning but with a glimmer of hope courtesy of its clearly described diagnosis and some suggested remedies.
https://ukfoundations.co
@Rhino
RFK Jr. rabbit hole >>>>> Zoe rabbit hole
Zoe seems to be run by someone who wants us all to eat low nutrient density food (i.e. not meat & dairy).
@ PJ >Is anyone concerned about the sale of HL to private equity?
yeah, me too. Private Equity is only ever good for private equity – not for the firm, the customers or the employees, due to the foul debt inflation modus operandi you highlight. Problem is where do you run to, I’d like a platform listed on the stockmarket, and fixed fee. And not iWeb, where I have far too much already/ Absolutley nothing against iWeb, I am a happy customer, but I want at least 1+1 redundancy
@ermine
> Problem is where do you run to, I’d like a platform listed on the stockmarket, and fixed fee. And not iWeb
How about AJ Bell?
I think you’ve expressed the scene very well, and despite not liking Bitcoin one tiny bit, I can find little to object to in what you’ve said.
Typically commentators can’t resist describing it (still, in 2024) as ‘new’ when in tech terms it’s practically a dinosaur, and also as if it’s 50/50 as to whether we’re all suddenly going to find it useful in day-to-day life somehow. That’s the sort of thing that usually bugs me in such articles.
I won’t bother listing my reasons for not liking it personally, @TheFIJourney captured them all beautifully I think.
One thing I’ll add I’ve not seen mentioned yet. Dogecoin is absolutely trouncing Bitcoin in price on a monthly, yearly, and 5 year basis. They seem to have equivalent levels of functionality (i.e. little) , so why isn’t everyone foaming over that crypto asset and suggesting a 1-5% allocation?
Bitcoin is essentially a brand nowadays. They can probably evolve, even replace, the underlying technology (and may have to with the advent of quantum computing) – and it will continue. The highs and lows may even be a part of the brand appeal now. I only wish all of that energy had been expended on something useful (like maybe a training run for an AI?)
I heard two young guys working in my local healthstore discussing crypto, and the entire conversation was beer economics (ie should they forgo their crate of beer on Saturday night so they could put the money into crypto, and what they would do if it 10x, or 1/10th its value – and whether they’d rather have the crate of beer under each circumstance). It was a salutary reminder of the average member of the public’s level of financial education. If past history is suggestive, this will not go well – but probably has further to go. I genuinely wonder that the world looks like if Bitcoin goes to $1m – will be tramps be begging for it on the streets or offering crypto tips?
G, that’s sounds like a rational economic discussion around marginal utility, substitution, option payoffs and risk aversion. Any good economics/ financial theory undergraduate course will contain discussions of the same topics… With maybe a greater degree of sophistry.
@Jiffy #21 > How about AJ Bell?
I’ve never had dealings with them, but looks good, FTSE250 firm, established and a similar philosophy to HL in being a percentage fee platform but capping fees on shares, in their case at £42 p.a, lower dealing costs that HL. Looks good for an ISA transfer out of HL – thanks!
@cantab #18
Thanks for the link. I don’t check every week so may have missed on here. It must’ve been one of the authors on the podcast as were all points which got mentioned. Scary stuff. When is the tide going to turn and all this stuff get fixed? The world (uk) has truly gone mad with all this ott regulation. Speakers to play noise to stop fish getting killed by nuke cooling systems! Whats the consensus for Argentina going forward?
I agree with the diagnoses in “Down vs Up – The Honest Broker”. The whole left vs. right trope never did work well. It’s just not about capitalism vs. socialism.
He mentions a good book, Ortega’s Revolt of the Masses, where a key concept is, simply, the masses hate experts. If forced to choose between the advice of the qualified and learned and the vague ideas of other people like themselves, the masses invariably agree with the latter. We saw this in Brexit, expressed by Gove (“I think the people of this country have had enough of experts”). We see it again with the election of Trump.
Ortega’s book, based on articles the late 20s, may be almost 100 years old, but it’s a timely reminder. The wisdom of the crowd looks like bunkum. More the tyranny of the masses. Driving humanity backward for no better reason that that they feel their beliefs and faith are looked down upon.
@ZX #27: Politicians aren’t looking to fix problems. They’re looking to win arguments by appealing to subjective preferences over objective reality (both those of the voters and their own). Jan-Werner Müller said of populism that it has a “set of distinct claims and . . . an inner logic” with two essential features: ‘the People’ are locked into conflict with outsiders, especially experts and the elites, and that nothing should constrain the will of the true people, as mediated through a chosen interlocutor. So, just fix the blame, not the problems. Couple that with the propensity of the brain to try to fit data to its pre-existing, internalised and simplified model of the world (optimised for quick decision making, not for rigerous enquiry) – and to exclude evidence to the contrary (until it becomes overwhelming) – and very bad things can happen to the world.
At the risk of being contrarian for the sake of it….!
It seems to me that the current elites are the ones that hate the masses -sadly-and not the other way round as Honest Broker and ZX postulate
H.Clintons “Deplorables” and Biden,s “Garbage” being recent manifestations of leaders who having lost the confidence of the people they are leading chose to blame the populace and not themselves-usually not a very successful policy!
In the difficult situation we currently find ourselves in – possibly rapidly approaching a warlike scenario (Ukraine etc) it was always customarily dealt with in the old days by “shooting “ the current crop of generals and replacing them with hopefully more successful ones
Generals are replaceable but the troops are not . We are stuck with them!
This scenario seems to be currently playing out in Europe and America at the present time
xxd09
At some point we need to talk about the US yield curve. A year ago it was predicting a recession in 2024 but nothing happened. More than that, actually — the US economy is not even bumping along the bottom (see: UK) but is actually doing very well. Does this mean the leading indicator is broken? Please discuss (next weekend’s reading, perhaps?).
@hosimpson #30: Charles Goodhart’s ‘law’ at work? To paraphrase and adapt, when an observed correlation is used as a predictive measure it ceases to be useful.
I joined the X/bsky exodus today, very easy. Over the last few years my follows feed has dwindled from about 40 posts a day to 4 (with 2-3 ads), and everyone I followed is already over there so the cord was cut. I’m sure X will zombie along for a while until Musk grows bored with it, but it now feels as functionally dead as Facebook.
@ermine #20, #25 & Jiffy #21
Just to agree with you on the logic of reducing AuM in an HL account in favour of AJB. AJB is now unique in the UK as the only listed, pure play broker with no debt on it’s balance sheet, ideal for holding that low turnover, high value ETF portion of a portfolio. Clearly the likelihood of HL collapsing is marginal but as you say, as a leveraged buyout it now compares poorly in terms of solvency risks and importantly with a listed broker you have total transparency, it is only prudent to allocate to accounts accordingly. I would be curious how much AuM they are losing for this reason, and of course the more they do lose the lower the profitability and the higher the solvency risk…
It is curious how cost dominates discussions on broker selection and counterparty risk and cybersecurity are barely touched on. I also think FSCS protection is often wrongly considered a substitute for having a basic awareness of a broker’s solvency risks.
It’s like people wandering the deck of a boat in rough weather safe in the knowledge they are wearing life jackets. If you end up in the sea it’s much better to have the life jacket than not have it, but the presence of it shouldn’t reduce one’s focus on not going overboard in the first place. Also the fact the lifejackets are limited to small sizes and don’t inflate for non UK domiciled funds (stretching the analogy too far?).
In my humble view broker selection should be a matter of solvency, security, functionality and cost. In that order. And diversification of course.
@AoI (#33):
Re: “In my humble view broker selection should be a matter of solvency, security, functionality and cost. In that order. And diversification of course.”
Interesting take. How do/would you go about assessing these parameters?
BTW, I take it you meant diversification across brokers?
@ ermine, How about Interactive Investor, which is owned by Abrdn a listed company. I have my SIPP with HL and have been considering a move andd II look like a good choice.
@ Al Cam
In terms of assessing solvency, if it’s listed just a review of the accounts – leverage, profitability, access to liquidity etc. If I have a lot of cash sat in a brokerage account I’d be interested in the panel of banks the platform uses for cash management. A look at credit ratings if applicable.
Practically speaking I would personally take the view that the lowest risk are the listed investment platforms with unlevered balance sheets, stable profitability and the simplest business models e.g. AJB & II.
Probably followed by blue chip high street banks and the platforms owned by them (IWeb etc), arguably implicitly government backed but with leverage, loan books and trading books
Margin lending at something like IBKR has its tail risks
HL from debt free with public accounts to an opaque leveraged PE buyout strikes me as material
Privately held fintech platforms don’t appeal personally given the lack of transparency
Yes I meant diversification across brokers, eggs in multiple baskets
Just my view and all very subjective as to how relevant the different factors are of course
@AoI (#36):
Thanks for the reply.
For some folks this is a perennial concern.
IMO it is always good to get other folks views – so thanks again for your thoughts.
IIRC some years back @Finumus wrote a very helpful note at his own (extant?) blog.
There is also IMO some interesting chatter at: https://simplelivingsomerset.wordpress.com/2022/04/05/seeking-a-new-isa-platform/ and the link I provided therein remains, IMO, essential reading.
In essence, I feel it comes come down to a trade-off of risk vs additional cost/complexity that diminishes as the #brokers/platforms and funds/etfs used increases. That is, in extremis, the more brokers you use the more likely you are to encounter one that fails. On the other hand, +1 redundancy probably offers in a lot of cases (ie size of overall Pot vs FSCS limit) the largest benefit.
There are, of course, other reasons why one might choose to split your holdings/providers, e.g. traceablility, but that is a whole other story!
P.S. FWIW I think functionality is very subjective
P.P.S. the @Finimus post at: https://monevator.com/which-investment-platform-do-i-use-and-why/ is very good, but not what I am referring to at #37.
Case against a BTC reserve:
https://open.substack.com/pub/fallacyalarm/p/strategic-bitcoin-reserve
Any lessons for Saylor’s ambitions in the Hunt brothers’ saga?:
https://open.substack.com/pub/thebubbleblog/p/silver-dreams-turned-dust-the-rise