This thread has gotten so weird with the battle over terminology happening at the same time as the math formulas and the occasional updates on bitcoin price sprinkled in.
There seems to be a disconnect between
@sol and
@Indexer and
@phil22 that I think matters, and this quote seemed as good as any to try to capture it.
I consider myself a value investor. I have read the books that LAS assumed I've read. I own VTSAX and it is my primary investment. In case all of my recent posts haven't made it really clear, I care about intrinsic value and know how to calculate it. If something doesn't have intrinsic value or if the price has no relation to the value, I'm not buying it.
I still don't understand what informational advantage anyone here has over the bitcoin market. I say that not to advocate for bitcoin investing, but to understand how we claim to have an informational advantage or to "know" that bitcoin is incorrectly priced.
I don't understand a "value" investor and an index investor to be the same. Indeed, I think they are often functionally the opposite. My understanding of a value investor is one who believes that a company's value (as measured by future earnings stream, etc.) has been incorrectly assessed by the market, and thus the current market price is too low. That presupposes that someone "knows" more than the market, and can act on that information.
Generally, an index investor is one who claims not to know more than the market, and thus is confident to let the market follow its general upward trend. Sure, the market price is set in the way that
@sol and
@Indexer describe, but the more important point is that the index investor believes he/she does not have any additional information or advantage over the market to determine whether the price is correct, and therefore just buys the market. Thus the top-is-in thread, where everyone points out the fallacy of trying to call out the over-valued nature of the market, and by extension, the companies that make it up.
I included a quote from the OED earlier in this thread about speculation that defines it as pretty much any investment where there is hope of gain and risk of loss, contrary to the common use of the term to suggest high-stakes gambles, and that might be adding to the confusion.
At a basic level, do people here believe that: (1) bitcoin has no value, and therefore any market price for it is too high; or (2) they have information that allows them to know that bitcoin's value is something different than the market price?
I know
@sol provided an explanation above of why he believes gold has no value (other than industrial uses), but I think the fact that there's a consistent, developed market for it contradicts that position. Gold might have no inherent value (other than industrial uses, etc.) but in the long run assuming an efficient market, shouldn't value and price converge?
Also, someone else mentioned the tech bubble and how price greatly outstripped the value of the companies, thus creating a bubble. That is true, but the one more step in the analysis is that the prices were determined by the future prospects of the companies, and there was a chance that the companies would be worth gazillions of dollars. It turned out not to be true (mostly), but the money being bet on it wasn't entirely "speculation" (in the take-a-flyer sense of the word) insofar as there was a possible outcome that tech would completely displace retail as we knew it, and those companies would capture the retail market.
All of which is to say that bitcoin certainly looks like a bubble, but I'm not sure what information I have or anyone here has to say that definitively in a way that we cannot say about other markets.
@maizeman provided what appears to be a fantastic mathematical analysis of bitcoin's value (although I didn't understand any of it!), but are we suggesting that if the Winkelvoss twins just joined an MMM forum and applied
@maizeman's math, they would immediately pull out and the market would move towards an efficient price?