When people talk about investing, they usually say to leave as little cash in the bank as possible, especially in times of low to zero interest rates, and a rapidly evolving certainty of escalating inflation. With stimulus Money flooding the economy, where’s a good place to stash our cash?
Most people live in a world where they think assets increase in value. In that world, they think there’s nothing wrong with fiat money, and that the assets they have (real estate, equities, precious metals) just magically increase in value over time, because they are assets.
The reality is they are not so much assets that increase in value because they are inherently valuable. They are valuable relative to fiat money, because ALL our currencies are decreasing in value.
I don’t value my cup of kopi siewdai any more this year than last year. But how come i’m being charged $1.30 this year, instead of $1.20 like last year? This is simply because my medium of exchange is a shitty coin that loses value every single year without fail.
When you finally get it, and look at things the other way round, fiat money is losing value against everything else.
All I want is to be a millionaire (30 years ago)
I remember 30 years ago, when I was a kid, all everybody wanted was to be a millionaire. It meant a life of opulence, of untold riches and limitless possibilities.
These days, as a millionaire, congratulations, you’ve got yourself a pretty nice HDB flat (Singapore government subsidized public housing).
When I was a school going kid, a daily $0.50 pocket money was good enough to buy a piping hot bowl of noodles ($0.30) and a cup of diluted flavoured water ($0.10).
Today, the going rate is $2 minimally.
An ever inflationary environment makes no sense (or savings)
I thought I was smart when I managed to sell my property for close to double the price I paid for it, a mere 8 years earlier. I thought I was a shrewd investor. I was just unwittingly preserving my wealth, and once I realized it, I quickly put the excess in a second property in the popular sell one buy two properties strategy.
I also wrote an ebook about property investment from a Singaporean perspective. Click on the image to download the ebook for free.
The way I see it, an inflationary currency that is consistently worth less year on year, is simply the government’s way of keeping the poor poor, and allowing them to inflate their debts away. Those who manage to quickly stash their cash in other vehicles such as stocks or property or Gold will at least see their value being retained.
So then, the race (for a start) is not about getting into stocks or Bitcoin or property. It’s simply about getting out of Fiat. As long as you get that, you’re on the right track to really saving your money.
Bitcoin – An asymmetric opportunity
In the booming 60s 70s and 80s, even until the last decade, a great form of investment has been real estate. It had consistently outperformed the market especially for properties in the cities and urban districts, where demand constantly outstripped available supply.
In my current condo, I’ve had long time residents who purchased their units at S$220,000, where it’s currently valued north of $1M.
The equities market, over the long term, has also been a sure bet, and index investing is a popular tried and tested method of getting rich slowly but surely over time. As markets reaches frothy heights amidst money printing while the Covid pandemic rages and the virus mutates into new strains (Japan’s just reported a new strain that differs from the UK and South African one), we have to ask ourselves what do we do with our money to best protect, and hopefully, grow it?
Bitcoin is a really young “asset”, and I put it in quotes, because even though it has proven to be the best performing asset by far in the last decade, I would say at least 80% of the world’s population is still a sceptic.
Bitcoin’s current narrative is that it is a gold replacement. A digital store of value to displace a physical and cumbersome store of value. Can it happen? Gold is currently valued at about $10T, while Bitcoin, even with it’s amazing 2020 run, is still only about $700B.
From a population and economy’s perspective, the young always front runs, and then takes over the old. Trends are picked up by the young, and then becomes the norm over time. Think about when Facebook started, it was college kids and then adoption to young working adults. Soon, it took over the world, with parents and grandparents coming in last.
We have long held onto gold as a store of value, because there had been nothing better. But bitcoin has all the properties of gold, and then some. It is verifiably scarce, almost infinitely divisible, and can easily be distributed and received (much more so than gold).
If you were to ask any young adult today, if they would prefer to receive $1,000 equivalent in gold or bitcoin, what do you think their answer would be? Extrapolate this by population shifts, demographic trends and the global transfer of wealth from the old to the young, and you’ll see just this tsunami of demand coming for Bitcoin.
The above can be summarised in this tweet below that did not age well at all.
At the time of this tweet, Bitcoin was trading at USD$10,270. At the time of writing this post, Bitcoin is trading at USD$36,300.
At the time of this tweet, Gold (Peter Schiff’s main business) was trading at USD$1,930. At the time of writing this post, Gold is trading at USD$1,828.
I shall rest my case here.