Up, Up and Away? It’s been two weeks since we wrote on the Bitcoin bubble and whether investors should consider jumping on the train to never-never land. Our case against such action was that Bitcoin is volatile, doesn’t behave like a currency, isn’t backed, is extremely expensive, and could become banned.
I asked myself that very question as the price of Bitcoin doubled from $200 USD to $400 USD over the first two weeks of November 2013. My conclusion was to stick to the investing principle I had been taught by my father at a very young age: never buy into something that is hype-driven.
Ben Bernanke popularized the term “global saving glut” in March 2005 when speaking to the Virginia Association of Economists in Richmond, Va. In his statement, he argued that several forces had created a high volume of global savings and that this “saving glut” helped explain the many years of historically low yields. And that was long before the Fed and its fellow central banks, through their coordinated actions, engineered the virtual extinction of interest rates!
Definitive statements tend to separate “legends” from “losers”. “Legends” live in lore as women or men with the clairvoyance and courage to make a bold (and correct) prediction in a time of uncertainty. Think of Winston Churchill’s stirring speech: “Men will still say, ‘This was their finest hour.’ ”
The relative absence of borders limiting participation in global markets has enabled internationally-minded investors to find opportunities that domestic-minded investors might miss. Much like the Silk Road, which opened opportunities to traders throughout Asia, Europe, and Africa, those willing to invest internationally have generally been rewarded for doing so.