Topic: Why going all-in is not financially responsible. Capital is your Security. - page 2. (Read 4181 times)

It looks like Bill Gates started selling off Microsoft shares from day 1 that it traded, continually diversifying his assets. Today only 15 billion USD is in Microsoft while his other 35 billion USD sits in his investment company very diversified. He started with, if I remember correctly 65% ownership in Microsoft and today he owns only 9%.

http://www.joshuakennon.com/cascade-investment-llc-the-secret-holding-company-of-bill-gates/

So maybe the best strategy is, go a lot in now, so that you can start selling ASAP?

You have eaten more cake from anthropological history then I have so thanks for correcting me on that. Great to see you agree with the high security the Permanent Portfolio offers. But you do devalue it by saying there is this small chance that the Permanent Portfolio fails. Although you are correct in that statement. If this is only 1%, it is the smallest chance from any possible investment, and thus you can say it is the safest investment you can do.

I also am for building social capital, strong loving and caring relationships, so that your children, friends and family care about you too and will be motivated to take care of you when you strike bad luck or grow old.

Though this does not invalidate my point that building financial capital so that you have your own safety net is a responsible thing to do. I'm sure your children, friends and family will be very happy if you did that job properly. Do you object that?

Your new definition of capital is incorrect. Financial assets are capital. And they do build new wealth. A stock, is nothing else than a part of a business you own. - If - the business creates wealth, the stock will go up in value and will be new wealth. A bond is a loan with an interest that if done well, is profit, profit that the borrower shares with the bond holder/lender. That interest is profit coming from new wealth that is created.

Building up financial assets is building up true capital.  Speculation is the - art - of building new wealth by buying and selling the right assets. The art comes down to selecting/betting on assets that have a higher chance of winning / building new wealth than losing. With gambling you have a lower chance of winning than losing. Gambling is just to feel the excitement of winning, without too much effort, and you pay a fee for the quick fix.

If he really is good at predicting the future than it actually is responsible.

It is however unlikely he really is good at predicting the future. Humans generally suck at predicting the future and have the tendency to vastly overestimate their ability. May be we overestimate our ability so much due to http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect ?

It's amusing that OP equates ancient tribal living with the modern socialist state: "Tribe" automatically equals "socialism" automatically equals "less freedom."
I would argue that in many instances, living in a tribe actually provided one with more freedom than living individually in a quasi-capitalist (socialist) modern state, even with the permanent portfolio to boot.

Why? Well, OP makes numerous unspoken assumptions about the hierarchy in an ancient tribe. Sure, some tribes and societies had rigid hierarchies and resembled a socialist state in limiting the freedom of members. However, many other ancient tribes (according to anthropological record) had absolutely NO HIERARCHY, nothing resembling a state, and were completely voluntaryist. Yes, voluntaryist, like many of our freedom-loving Bitcoin brethren. So we have a system in which individual freedom isn't hampered by any involuntary contracts enforced with violence, yet there is still a large group of people ready to take care of you if you fall ill and lose your wealth. So it's not necessarily the trade-off that you portray it as. Please, don't make assumptions where anthropology is involved.

I obviously agree that socialism/statism inherently hampers one's freedom, but don't make the mistake of assuming that (1) because you have a safety net in your community/family/tribe, (2) your freedoms are therefore limited. And, don't assume that all tribes/families/communities must be socialist and have some form of a state or hierarchy limiting individual freedoms.
In many cases it is true, yes, but in some cases not.

So what's my point? Sure, the permanent portfolio might have been proven in 100% of historical cases to protect wealth, short- and long-term, in any economic situation. But there's still a chance of all of those forms of wealth being obliterated. A small one, yes. But in addition to that small chance, there is still the indisputable fact that humans are social creatures and our brain chemistry evolved in a social environment, one of a close-knit tribe or extended family unit that stayed together for life. Again, don't assume that this necessarily limits freedoms or is a form of socialism. One can be voluntaryist and not reject the "safety net" that a community or family provides. So don't worry, OP, some day if you're too old or frail to get on the computer and withdraw your bitcoins to pay the home-care nurse, you won't lose your "v-card" by asking your kids for help ;-)

I fully agree with first part. I might be wrong but I think it is not responsible for a young adult with a job and without any savings, neither. Because that's his primary goal is to build up savings/secure capital. Going all-in in bitcoin means he will also lose all his capital if it fails. Why do you make an exception for such person? I also have a part that wants me to go all in so part of me would be very happy if you could give good reasons why it does not apply to such person.

One of the beautiful things about buying bitcoin right now is that there is NO NEED to go all in! It is such an asymmetric bet, that in a truly ridiculous upside scenario, investing even a small amount at today's prices will make you very very wealthy. If you invested 5% of your net worth, and bitcoin went up 100x, you'd be 84% in bitcoin at THAT point, but at that time, it would actually be a much safer holding by virtue of the implications of its successful history.

There are a lot of unknowable risks still lurking out there. At this time, unless your net worth is extremely low compared to your salary (i.e. you're young and you basically haven't saved much), going all in is just a recipe for panic-selling when the inevitable volatility rears its head. In general, if you can't sleep at night because of your bitcoin holdings, you have too much invested.

Great to hear  


If you are good at predicting the future and speculating you are able to estimate your chances of success. Even with the best speculations, like bitcoin certainly is, there is always a small chance that it doesn't work out. So logically betting all your life savings on it is not responsible. You not agree?  

i bought a 1000 bitcoins back at $ 5 a year ago for $ 5200 and am now almost at $ 50000 :D:D:D:D

i am hold because i think bitcoin is a very good investment and i am a profressional trader already from before bitcoin

i think that bitcoin is safe investment for me because i am good at knowing the future

Congratulations on your very successful speculation.

Ofcourse you are free to chose not to be financially responsible but why does it not matter what financially responsibility is?

I agree bitcoin gives you a good chance to become rich. Especially if you don't balance out of it and hold on to your coins tight.

But indeed very quickly this becomes a large % of your capital. And it would be untrue to say for example that you risk only 20%, as today you risk losing 50% of your capital if bitcoin fails.  

It doesn't matter what is, and what isn't, financially responsible, since not every person would want, or need, to be financially responsible.

If your personal priority is security, you are free to invest into proven assets.

What I needed was a decent chance to become moderately rich, while helping a just cause, not risking too much, and not speding too much time trading. So I went 20% in Bitcoin (it should now be closer to 50%).

I would perfectly understand if a young professional with no family went all-in.

Since cash was the same as gold then the Permanent Portfolio in Russia 1917 would have consisted of 33% stocks, 33% bonds and 33% cash.

Do you have numbers/prove that the values of stocks and bonds were zeroed?

The Permanent Portfolio consist of 25%/33% physical gold. It is also strongly advised to store part of it outside your country. If you did the Permanent Portfolio well that should have allowed you to preserve part of your capital and even flee the country.

Will I still have internet access in this scenario?

Strong convictions/belief in bitcoin I have no problem with. High risk tolerance also not. However, false statements, untruths, ignorance, and denial I don't like.

I have yet to meet the first person here who goes all-in, and at the same time is consciously recognizing he is risking to not have any savings if he were to become incapable to work due to illness, accident or even old age.

That period has not been tested to my knowledge. Though many other periods and crises have been tested with the permanent portfolio and it worked.

Can you show me that the permanent portfolio failed to preserve your purchasing power in Russia 1917, or any other period/crises?

I thought the answer was going to be that you need something with which to buy coins if a better deal is offered.

I agree with bullioner about the definition of capital.

Financial assets are not capital. Factories, energy, skills, and abilities are capital. Financial assets have been used for a long time to control and direct capital but that does not mean they are capital. Financial assets produce nothing. People, machines, energy, skills, and knowledge produce everything.

My argument is that your primary focus should be building true capital: the ability to produce new wealth, and treat speculation as what it really is - gambling.

My argument is that you should have savings. When you risk it all in bitcoin and it fails you will have no savings or a lot less then what you need to support you.

Once you have savings you can buy in the market. Sure all those goods are produced by people but I don't see how this point has relevance in our discussion?

If you have no savings, you indeed depend on others to take care of you. If you have build strong relationships that means you have a lot of 'credit' with them and they will give you back. This is the tribe solution.

Also, do you really believe you have build up such credit that they will give back to you in such an extend that they will take care of your bills when you are, say, terminally ill?   



Why 'does one need to predict what anonymous producers will want in the future' in order to save capital?

Why is building social capital a sufficient replacement for building financial capital?

I think it is not this or that. It is this - and - that. Building strong personal relationships can help you very well in times of difficulty. Building financial capital can also help you very well in times of difficulty. One however is credit, the other one is capital. A big difference.

I think you'll find that in an early adopter environment such as bitcoin still is, a lot of people have strong convictions and a risk tolerance that more traditional investors would find insane  .