Coping: Second Leg UP for Bitcoins?

Reader Doug – a Peoplenomics subscriber for a long time – apparently didn’t read o9ne of our recent reports closely enough.

Reason?   He apparently may have missed this from the Peoplenomics October 28 report:

Time to Buy Bitcoins

Right about here, I was going to launch into a long discussion about how the U.S. is Babylon from biblical accounts – and the Tower of Babel is what we are building with an information society.

But we will save that for the second part of this report because the main thing I want to point out is this chart:  Think of it as a surprise ending to our report this morning.

All I will do is point out the area with the yellow highlight.  That’s the volume of BTC’s changing hands (or more properly, computers…).

This may, or may not be significant yet, but it is interesting enough that I am no longer dead-set against Cyrptocurrencies.

They may have their place…but I am still suspicious.

Remember how it went with gold and silver rushes in previous eras.  First there was a gold rush to Sutter’s Mill and  then, about 50-years later, there was a fresh herd of people on their way to the Yukon (poet Robert Service, among them).

I’m not sure what the meaning is to the recent increasing volume in BTCs but it’s time for us to start paying attention to them.

As is sometimes the case, our timing on this call was pretty good.  If a person had purchased a Bitcoin the day that report came out, they could have gotten in around $300 papers to a single BTC. 

As of this morning – when I looked – the BTCs were around $391 and had been as high as $430, or so.  However, a pullback to $380 was also evident.  The main thing to look at is volume and someone seems to be accumulating.

Not that I am planning to play this next bubble up – but it has every chance of being a great one and it could take BTCs up to the vicinity (and this is very rough) of $1,690 to $1,710 and possibly higher.  Time frame?  More problematic..  and it may not happen at all.

This is all about risk.

I want to be clear that I am not recommending you open a BTC account.  However, we do track a lot of different assets around here and., as the Peoplenomics headlines from last week noted:  Time to Buy BTCs may be here now. 

Of course, they could come screaming down and I would look like an idiot with egg all over my face.

The difficult  problem is whether BTCs are nothing more than yet-another modern analog to Tulips.

In case you’ve forgotten the Tulip Main from Holland circa 1634-1640, here’s the short version from Wikipedia:

Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.^[2]

At the peak of tulip mania, in March 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble),^[3] although some researchers have noted that the Kipper- und Wipperzeit episode in 1619–22, a Europe-wide chain of debasement of the metal content of coins to fund warfare, featured mania-like similarities to a bubble.^[4] The term “tulip mania” is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).^[5]

The 1637 event was popularized in 1841 by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay. According to Mackay, at one point 12 acres (5 ha) of land were offered for a Semper augustus bulb.^[6] Mackay claims that many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock. Although Mackay’s book is a classic, his account is contested. Many modern scholars feel that the mania was not as extraordinary as Mackay described and argue that not enough price data are available to prove that a tulip bulb bubble actually occurred.

That book, Extraordinary Popular Delusions, can be found over here at Project Gutenberg.

Since it is available in HTML for your phone,  and as an  epub and Kindle for other devices, you really have no excuse not to read it, except of course, you’re too busy sniping bids for BTCs – which is exactly when you should be reading Mackay…

This rolls me around to one of the cornerstones of sane personal investment policy. 

As you may infer, I believe each of us operates much like the board of directors of a major insurance company in this sense:  We get to pick the kind of assets we wish to hold in life.

Unlike the big insurance company investment policy committee, though, we are all pretty independent when comes down to it.  Some investments work out nicely and provide for sound sleep.  Others will keep you up all night with either worry or that glint in the eye that not everyone gets to see in this life.

The glint first. 

It was best described by my brother-in-law when he and a buddy had been off dry-wash gold mining. They had been helping a third person who owned the claim and showing him the fine points of dry-washing.

Well, pretty quick along comes a good-sized nugget – about the size the fingernail of your pinky finger.

Suddenly – describes my BIL – there was like a cloud  coming over this man’s countenance and the next words out of his mouth were “Get off my claim!!”  Most miners are armed.  And you don’t argue with a man who has that glint.

You will see that rarely – gold fever it’s called. 

But you can sometimes spot it when people talk a bout BTCs, Iraqi Dinars, diamonds, and whatever this week’s internet marketing pyramid franchise is.  Juices and miracle juices work well.

When these topics come up, Ures truly sits down with his personal Investment Policy Committee and begins to ask serious questions.

“What kind of assets do we wish to exchange this silly pile of stacked paper for?”

This is at once easy – and hard – to sort out.

Usually I start by asking the fundamental questions about any investment option:  Is is tangle, divisible, desirable, transportable, energy-independent, and something people need? 

 Moreover, is it consumable?  Does it have both monetary as well as utility value?  How would this “investment” fare is the world was EMP’ed or if due to disease, half the people in the world died off?  If you had this “investment” alone, how well could you eat in 4-hours?  Does it bring water…

Every investment has different answers. 

I tend to owning machinery, rural land, a bit of food, and maybe a gun or five.  (Or 10.)

Although not particularly fungible or transportable, they each have some utility value and around the table of my investment committee, those are mighty important characteristics.

Since you hold your own investment policy meetings, your decisions may be  different.

Another question you may wish to ask is “Can this investment be taken away from me?”

Suppose for a moment that someone invests what I call “The UniVirus.”

As far as I know, this has never been done.  But the core concept – from studying the weaknesses of the Internet – would be a multi-operating system virus that could infect in one pass not only the whole Windows platform series, but also the Mac and Linus platforms as well.

Thus, if I were to invest in a cryptocurrency, I would make triple-damn sure that my keys were kept on three platforms (Win, Mac, Linux) and that two out of three were never connected to the net.

Oh, I would store my public and private keys on different machines and no backing up over the Internet.  Paranoid?  Uh….not exactly….or is that how denial works?

Even if a backed-up copy in multiple OS’s is done, there is still the matter of the root internet itself.  I outlined some of my concerns in my book Broken Web. but it should be obvious that an attack on the net’s core DNS system, backdoor exploits of routers, and even EMP are real risks with larger to zero exposures to consider.

On the other hand, if a few BTCs are just there are a trading/gambling tool, then fine business.

Around my investment committee, there are lots of other considerations, but the core concept is based on chess.

It takes a little explaining, but in the game of chess, there are certain openings that work.  The first few decisions in a game make all the difference in the outcome.

As I’ve said before, you have two ways to run this investment committee of yours:  You can preside over maximum potential gain OR you can play defensively for minimal potential loss.

In chess, the difference would be an aggressive opening, hoping for checkmate in 8-10 moves.  Or, the alternative which is established when every piece is “covered” by another making attack much more difficult.

In the everyday play of life, the stakes are different, but at the end of the game what are you holding?

Getting into Bitcoins, Federal Reserve Notes, or Gold/Silver all depend on a common element:  The Greater Fool Theory.  Will there be a computer available and the network up when I want to trade 170 BTCs for a new Corvette?  Or, will the banks be open when I want to move $70,000 as a wire transfer?

In the worst of cases outcomes in this world, the answer is Neither will be up.  But in that case, since we’ve gone with a more traditional and more defensible opening, we will still have 29-acres of land, the means to grow food, the energy for lights and coms, a water source, and a tractor with diesel and lead-slinging tools to actively discourage others from taking without compensation.

Once a person has a paid-off home, a bit of stored food, exit plans, a way to keep on eating, well, heck yes then BTCs are fun.

And there is nothing wrong – even if you don’t have all those things assembled to guarantee your continued existence. “I can skip that defensive posturing now and make a bunch of money!”“” is a good argument.

I’m merely suggesting that as you sit around this coffee klatch in your head weighting this stuff out, you at least admit that everything in life is a gamble and making good decisions is something defined by circumstances and always well after the fact.

Would I ‘Bet the payroll” on a few spins of a roulette wheel?  Nope.  Similarly, would I bet the payroll on BTC’s?  Again, no.

When we visit casinos (and we will be visiting four or five of them this month!) we know that if we walk in with $100 and walk out with $150, the major skill developed will be learning to spot when an excursion from the normal distribution has occurred and leave promptly at that point.

I’m getting better at it – the sign of a professional gambler is money management and an understanding of the odds.  When I hear from BTC supporters, many of them have “that glint in the eye”  that comes with being a True Believer.

Us?  Casinos exercise that part of the brain.  And they tend to have better restaurants and shows that, say, the BTC exchanges…

On the other hand, BTCs can be played on your phone and it will be a matter of further research as to whether more people play BTCs or Fantasy Football.

The real gambles in life (marriage, diet, choice of doctor, accountant, or which Medicare Plan) are much less sexy, but most often, far more impacting on your future; financial and otherwise.

Another Save for Cirrus

It’s called the BRS – ballistic recovery system.  And it is not available for many small airplanes, but here’s a story about a Cirrus SR22-t (the turbo version of the a/c) that ran into an oil pressure issue and the pilot (former CEO of Wal-Mart) was able to deploy and walk away from what could have been an unhappy outcome…

The BRS is not worth putting on an old plane like ours; it would cost about what the plane does.  But the BRS (and the training to use it right) is definitely something I will get if we every get the personal budget up to where we can afford that kind of airplane…

Write when you break-even – on any of it.

George   george@ure.net