Pythagorean said:
We are talking about both claims...
Ok...well, then let's back up because I don't see that you've addressed what I said at all, unless you misread it, which is what I initially suggested. I said:
Russ said:
...some people got rich off of Beanie Babies an gold rushes, but the vast majority did not.
Then you said:
Pythagorean said:
What do the vast majority get rich off of?
It appears you read my claim to be saying that the majority got rich off of something else. That isn't what I said, nor did I intend to imply it, nor do I think there is much ambiguity in my statement that could enable such an interpretation (I don't think I worded it in a way that would imply that). Still, it would have been better for me to say that the vast majority lost money in these fads.
In either case, since your question is based on a premise I didn't say/intend, your question had no relevance. I hope by now you understand that.
Then you said:
The point is that for any investment strategy to be successful, the "vast majority" can't be.
So as per above, that claim is only barely related to what I was saying:
1. I was saying that most people lose money in fad investments.
2. You are saying that most people lose money in
all types of investments. The subtext perhaps is that we shouldn't be concerned about this feature from Bitcoin investing.
Your claim remains wrong and your additional development hasn't changed that - and has mostly been unrelated to your claim. So:
...a unique investment strategy can't be carried by the majority of others at the same time.
This appears to be an attempt to restate your claim in a different way. The above sentence is basically empty and false, but it doesn't relate to your previous claim. Your explanation is poor and shows the flaw:
If everyone wants to sell at the same time, there's no one to buy. If everybody is buying beanie babies just to sell them, no one is going to make money off of them!
Having the same strategy does not mean they are all buying and selling at the same time because the buying and selling is determined by the minutiae of judgement of current conditions, not by the general strategy.
It is also not true that "no one is going to make money off them" because some people did. Perhaps you are just using exaggeration for emphasis there though.
In short, almost everyone lost money investing in Beanie Babies. The few who made money mostly did so by luck. But almost all had essentially the same strategy: Beanie Babies are going to keep growing in value, so I'll just keep buying them one day and selling them the next.
This is not zero-sum, it really comes down to supply and demand networks and market saturation.
Well, in point of fact, the Beanie Baby market was
negative sum since the Beanie Babies entered the market by being purchased from a manufacturer. But that value is so low that it is for practical purposes almost zero sum.
I don't disagree that there is a bubble in bitcoin and that it is currently overvalued. What I disagree with is the claim that, like beaniebabies, it's only value is in trading it. The value of crytpocurrency is anonymous transactions.
How much is the ability to do anonymous transactions worth? Clearly, for black markets there is much value in that, but for the regular economy there is almost nothing.
But again, if Bitcoin is to be valued as a currency, then all this talk about it as an investment is void: it shouldn't be expected to appreciate. And the fact that the value is not stable makes it a very poor currency.
Graham explicitly differentiates getting in early from value-based investing. You don't need to get in early, you just need to get in when the stock is under-valued, due (largely) to the practices of other investors. If you want to be more speculative, then you do as you yourself suggested, and try to ride the fad wave and get out early... but note, again, if everyone else decides to do that too, then your chances of getting out while it's still overvalued become much lower because everyone will be selling it and driving the price down right when you wanted to sell it. You have to have a strategy that differs from the majority!
No, you have to have
knowledge different from the majority. The strategy is "ride the fad wave and get out early". The knowledge is when the fad is ending. That's true of any competitive type trading, but that isn't what is typically defined as "investing". Real investing is not about following fads, it is about stable, long-term growth. So:
...you just need to get in when the stock is under-valued...
Agreed. So when dealing with something that has
zero value, such as a Bitcoin or a Beanie Baby, the time to get in is
never.
