Tulips come to mind!
Generally considered the first speculative “bubble”, investors and common folk alike bought into the never ending rise of tulip bulb prices way back in @1637 A.D.
Yes, this is as relevant today and a lesson to be learned.
It was coined “Tulip Mania”, where prices rose exponentially and deviated from any realistic intrinsic value of the actual bulbs. How much more? It was calculated that one single “bulb” was costing TEN times the annual compensation of a skilled craftsman. Another account was that 12 acres of land were offered for one single bulb! Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clothes women dabbled in tulips.
Ironically, the potential for government legislation to void contracts by buyers (lowering the risk to buyers) probably fuelled the frenzy.
Fast forward, I think it is safe to say that Tulip Bulb prices never recovered after the bubble burst. This also gives us an insight to the “crowd / herd” mentality, and has relevance to today like the 1929 crash, 1987 crash, Dot.com crash, and the next potential subject.
Let’s take a look at the newest game in town….Cryptocurrencies…aka Bitcoin.
I have some good clients and friends which got involved, “thank god”… early. One of them put $4,000 literally into the “back of a napkin” proposal (Ethereum…the competitor). He was able to take that $4,000 and see an $800,000 gain…fast. He was able to take a hunk out and is still there with some. I have begged him to get out!
Now needless to say I have tried…my hardest, to understand the vehicl
e. I have watched 45 minute videos; I have done searches to understand this beast; I have asked many professionals to explain. I wouldn’t say I am a financial prophet, but after 35 years in the both the commodity and private equity markets, I would like to think I can hold my own in a discussion.
I don’t understand it, any of it
So. I go back to my two friends(who are invested) and who admit they too don’t truly understand it either… just that there will be a finite amount of Bitcoin made. How do you rollout an international currency with like 21M pieces? You don’t!
Now comes the next two important parts
The Competitors and the Scams
Since the meteoric rise in the prices of both of the Bitcoin and Ethereum, I have seen a tsunami of imitators looking for investment and funding. Like a deadly cocktail, when you take an investor that turns $4,000 into $800,000, in something they can invest in; the cockroaches come out to play.
These are the same people touting Carbon Credits, buying stock for tax losses in companies that are defunct, Binary trading, Gold for $1, and the list goes on. I once got a beautiful brochure from a firm selling parts of trees (for replenishing the forest as an investment). I asked what about fire, insects, and drought. The salesman’s reply was “that’s the best part! The trees are insect repellent, fireproof, and need 1/10th the water”. Yes I replied…I think they call that “Steel”. By the way, remember when I said every walk of life got into tulips….. I was told about Bitcoin from a taxi driver last week. The kiss of death.
Now to my point
Buying Bitcoin is NOT Investing.
My friend seems to think the risks are the same. It is not venture funding. Grace Century is a group of Angels that works with Start-ups that are either disruptive technologies or new technologies. Yes, they are unproven firms and since they are young, there are risks. However, I can safely say that the future of healthcare will heavily feature information technology. I can safely say that stem cells hold tremendous promise. I can not only say these things…I can back it up. When I put my money into these firms, I can tell you where it goes and for what reason; whether it be for advertising, payroll, or toilet paper for the employee bathrooms.
Crypto currencies are pure speculation (if that). This is my warning!
I have seen it time and time again…Greed. If you made 1000’s of percent…get out and say thank you. Of course, I must now say my disclaimer and say this is our own opinion! Like noses, we all have one.
When these cryptocurrencies decide to drop… and no one is there to take the other side… just remember the Dutch in the 1600’s. Amsterdam is fun to visit, but I don’t think I would want to put my retirement potential into tulips.