What caught my eye this week.

Back in March 2020, I got more than a dozen texts and emails from family and friends worried they were going to lose a lot of money from their investments.

As it happened, their portfolios quickly bounced back.

Many markets are now at all-time highs, and certain individual stocks – not to mention Bitcoin – are flying into the stratosphere…

…and I’m again getting text messages and emails from friends worried they are going to lose a lot of money from their investments.

If this is euphoria then it’s with a peculiarly masochistic kink.

By this time next year, Rodney…

The debate rages. Are we in a bubble or set for a roaring Twenties of high returns?

There surely are portents of market madness out there.

Take this Tweet that did the rounds on Twitter this week:

Jason’s mega-gains from Tesla are one thing – and good for him. It was his follow-up comment that rings alarm bells:

Soon I’ll be able to margin borrow about $3 million at less than 1%, but I will probably only borrow up to 8% of the value of my liquid assets. This way I never have to sell my shares.

Borrowing $3m against $12m in a volatile stock like Tesla isn’t something you see in a bear market, that’s for sure.

Then there’s Bitcoin.

I was discussing whether Bitcoin was over-priced with a friend on Friday morning. Its price was approaching $40,000, after all.

We couldn’t agree on whether it was a classic Ponzi scheme topping-out or the world waking up to the future of money.

By the time our text chat was over the price was nearer $42,000!

Don’t ask me

I don’t have much appetite for debating short-term market moves – and definitely not for giving my friends advice, other than to use index funds.

As blogger Michael Batnick writes:

Nothing good can come from giving casual investing advice. Nothing.

Especially when it comes to the future direction of an individual security.

They won’t remember what you said. They’ll only remember what happens.

There are four possible scenarios to the question, “Should I buy x?”

  • You say buy, and it goes down. You were wrong, and they’ll never forget.
  • You say buy, and it goes up. You were right, but they’ll forget.
  • You say don’t buy, and it goes down. You were right, but they’ll forget.
  • You say don’t buy, and it goes up. You were wrong, and they’ll never forget.

In the words of Adrian Balboa, “You can’t win!”

This is my experience in real-life, and in 99% of Internet discussions.

Calling tops looks easy. Monevator is riddled with thousands of comments from confident-sounding readers wrongly declaring this or that is overvalued, cheap, a bubble, or doomed to go to zero.

I remember a wager made here in 2012 that gold would beat the S&P 500 by 2020. The price promptly crashed and it has barely broken even since.

I recall that US shares were “obviously” doomed to crash (2015–) or that government bonds were “guaranteed” to lose money (2010–).

Oops.

Vanishingly few of these people stand up to be accountable for their comments years later.

So be hyper-wary of any tips or warnings you read on the Internet.

Or anything that you hear in the pub (or on a Zoom call these days).

And be wary of getting caught up in the debates.

It’s infinitely more important that you have a solid financial and investing plan than that you have an opinion.

Meanwhile if you’re paying somebody for advice or stock tips – or even just following them freely on the Internet – then judge them over the long-term.

That means years.

Not the last 12 crazy months, let alone their last Tweet.

One-off statements on Twitter or in a blog comment can be discounted to near-zero.

I say, I say, I say

Of course I’ve got plenty wrong, too, during my time spouting my thoughts.

However sharing your views on the same website for 13 years does make you somewhat more accountable.

If you’re paying attention to yourself, it makes you (slightly) more humble, too.

You eventually come to know that you don’t really know. Nobody does.

I have long believed Tesla is likely to be a $1 trillion company some day.

But after its recent vertiginous gains I’d agree it looks more likely to go back to $500bn before it gets there.

Will it? Who knows!

Bitcoin’s speedy price rise is equally astonishing.

It’s up 30% since New Year’s Day, and more than eight-fold since its coronavirus crash lows.

Bitcoin is weird. To my mind it gets more valuable as the price goes up. This should attract more people to the network, and also increases trust in it as a store of value. Which, in turn, are both supportive of the price.

Obviously this virtuous circle can’t go on forever.

However there’s around $10 trillion of gold out there, compared to Bitcoin’s $700bn pseudo-market cap. If we are seeing the birth of ‘digital gold’ then there could be a way to go.

Might it crash tomorrow, though? Wallow in the doldrums for years?

Absolutely.

As for stock markets generally, most do look superficially expensive – but that’s on the basis of depressed sales and profits.

If we see off Covid, earnings should bounce back. I believe rising bond yields are much more of a worry than high P/E ratios for global stocks.

But shares can do anything they fancy over the short-term. They could slump on Monday and not come back for years.

You see? Having opinions is easy.

You’ll know if you were right

All of this speculation is fun if you’re an active investor. Perhaps it’s even more fun if you’re a passive investor munching popcorn from the sidelines.

But what it isn’t, for me, is an argument.

Indeed I’ve probably debated politics more than this or that share in the Monevator comments over the years.

Investing is a wonderful hobby for me exactly because opinions come and go – as do those voicing them – but the market always keeps your score.

Have a great weekend, wherever you’re locked down.

From Monevator

The Slow and Steady passive portfolio update: Q4 2020 – Monevator

Should you sell your global tracker fund for UK shares? – Monevator

From the archive-ator: Nine underrated tools to help you achieve financial independence – 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!

Housing minister announces reform of ‘medieval’ leasehold laws – Financial Reporter

Halifax: soaring house prices in 2020 likely to slow this year – BBC

Consumer finances at risk as 4,000 City firms face collapse in Covid crisis – Guardian

London unlikely to recover lost EU share trading [Search result]FT

Customers in Europe hit by post-Brexit charges when buying from UK – Guardian

[Click to enlarge]

Why Vanguard expects US stocks to underperform over the next decade [Research, PDF]Vanguard

Products and services

What you need to know about moving home in lockdown – ThisIsMoney

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Lockdown to get dearer with Netflix and Disney Plus price hikes – ThisIsMoney

Harry Potter and Michael Bublé fuel UK online reselling boom – Guardian

Homes to beat the stamp duty deadline, in pictures – Guardian

Comment and opinion

10 market predictions to count on in the new year – The Evidence-based Investor

Today’s bond markets are in uncharted territory – Morningstar

The state of portfolio construction in 2021 [Podcast]Animal Spirits

Those messy humans – Humble Dollar

Chasing returns will always involve some risk [Podcast] – via aCast

The surprising effect of a one-time cash gift – Reasons to Be Cheerful

Factor Olympics 2020 – Factor Research

Naughty corner: Active antics

Morningstar’s influence on style returns – Klement on Investing

What the shipping industry can teach investors about cycles – Verdad

Jeremy Grantham says he’s certain the stock market is in a bubble – BI

An investor’s 2020 portfolio review, via seven key questions – FireVLondon

Another investor reviews his 2020 stock picking returns… – Maynard Paton

…and here’s how a portfolio of investment trusts performed – IT Investor

Reflections on 40 years in the markets – Man Institute

As I age: active portfolio management in retirement [US but relevant]Mutual Fund Observer

Bitcoin mini-special

What’s driving the Bitcoin price boom? – Axios

Is it a mania, or the new gold? [Search result]FT

Bitcoin’s biggest fans are hedge fund managing baby boomers – Bloomberg via Yahoo

Bitcoin is not the 9th most valuable asset in the world [Search result]FT

Why I’ve changed my mind on Bitcoin – Of Dollars and Data

More UK Coinbase customers see their accounts locked for weeks – ThisIsMoney

Covid corner

18.9m vaccination shots given so far worldwide – Bloomberg tracker

Covid “out of control” in London, up to one in 20 infected – BBC

Why is it so bad now and when will cases decline? – Guardian

The scientific basis for delaying the second Covid shot – Guardian

Tim Harford: Is ‘first dose first’ the right strategy? [Search result]FT

‘Risky’ to delay second shot, says former FDA director – CNBC

Britain has two key advantages in the vaccine race – The Spectator

The secret sauce behind Israel’s successful vaccination program – Brookings

China hits city of 11 million with tight restrictions as more than 100 COVID cases discovered – CBS

“Nationalism has consequences” as patients reject Pfizer vaccine to wait for ‘English’ jab, warns doctor – The London Economic

Politics and insurrection

Inside the US Capitol as Trump supporters storm building: excellent ITV News report – via YouTube

The siege of congress, seen from inside – Politico

Twitter permanently suspends Donald Trump’s account – BBC

Deep risk in the United States of America – A Wealth of Common Sense

Trump fans cry betrayal as he rebukes Capitol violence – Guardian

BBC fact checks its own interview to highlight Boris Johnson’s bogus Brexit claims – BBC

As the US descends into chaos, what better time for Britain to go the same way? – Guardian

Kindle book bargains

Why the Germans Do it Better: Notes from a Grown-Up Country by John Kampfner – £1.69 on Kindle

Essentialism: The Disciplined Pursuit of Less by Greg McKeown – £0.99 on Kindle

The Organised Time Technique: How to Get Your Life Running Like Clockwork by Gemma Bray – £0.99 on Kindle

The Wealthy Retirement Plan by Vicki Wusche – £0.99 on Kindle

Don’t have a Kindle? Buy one – they’re great and save a ton of space!

Off our beat

How [a few] YouTubers make [a lot of] money – Business of Business

The lost history of Yellowstone – Smithsonian

Fishing boats bottom trawling protected seabeds around the UK  – iNews

OpenAI’s DALL-E creates plausible images of literally anything you ask it to – TechCrunch

How Europe’s economy changed after the Black Death [Podcast]OddLots

And finally…

“Nothing is more wonderful than the art of being free, but nothing is harder to learn how to use than freedom.”
– Alexis Tocqueville, Democracy in America

Like these links? Subscribe to get them every Friday! Like these links? Note this list includes affiliate links, such as from Amazon, Unbiased, and Freetrade. We may be  compensated if you pursue these offers – that will not affect the price you pay.



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