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Yes - the vision of bitcoin going really high is twinned to the dollar - and by extension £, €, etc - basically sinking. People wishing for bitcoin to go to the moon might find out that the destination is not a very comfortable place!
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I agree with much of that (@andyfallsoff). It's basically financial engineering.
My opening point was that it's not as different to what lots of companies do as people posting seemed to believe. And I think the same applies here because the fortunes of many companies are higly dependent on a particular indicator heading in the right direction. eg the oil price, or price of other commodities if they are mining them, interest rates for lots of financial services businesses, etc.
My view is that the main difference is not the principle of what he is doing vs loads of other big corporates, but that he has had a lot more success as measured by financial metrics than others.
Does that necessarily make him a nice person, a force for good in the world, guaranteed to be successful in the future - no to all of those.
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So wile we were talking about it yesterday, they announced another $500m fundraising.
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These are a couple of good articles on the diversifying point
https://monevator.com/assume-every-investment-can-fail-you/
https://monevator.com/investor-compensation-scheme/TLDR there is risk in all your eggs being in one basket - mainly from fraud, breach of regulations or IT systems failure. The main risk is not that all your money will disappear but that there would be disruption and you wouldn't be able to access it for a period - which might be exactly when you want/need it, and that some of it would disappear to cover administrator's costs.
The last comment on the second one actually talks about HSBC being fined £57m the other week for not classifying investments as being covered by FSCS when it should have done.
But it doesn't seem to be a major deal and most people don't seem to fuss about it.
I think I'll split it between two funds as that is very easy to do and costs me like £5. Ideally I'd also split between two platforms in case Iweb (owned by Lloyds) dies, but I CBA to do the transfer, and it will be more admin down the road, so I'll live with that.
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Is it "developed a system" so much as "continued taking the same one way bet"?
this will seem like a good idea while prices are going up but a bad one if they don't sell before they go down again
It is a system - they've refined it by using different ways to get the cash to buy bitcoin. eg selling more shares when they feel their own share price is overvalued. The hard bit was not buying the bitcoin, but getting enough money to have been able to buy the amount of bitcoin that they have done.
And they started in 2020 so they've been through a cycle.
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Sounds daft when you put it like that, but if you developed a system which enabled you to successfully run across the road with your eyes closed every day for four years and, in doing so, created nearly $30bn of shareholder value, I would be forced to conclude that you might be on to something!
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Coulda, shoulda, woulda had the balls/smarts to buy bitcoin it seems.
I guess most of us wish we had invested in it, or invested in it earlier, or more. But it will go down too and then not look so rosy!
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OK, so people don't invest in multiple funds purely to diversify against fund manager risk?
That was the answer I was looking for! -
Iweb - but the funds are mostly the same across them all.
It's certainly the case that 'global' equities is basically US +
Denmark is surprising, and UK normally slightly bigger than France. And no Germany / Japan - that can't be a global tracker can it?
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That seems to be the current thinking
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On the face of it it doesn't look bad. But you would need to compare it to benchmarks to make a proper assessment - ie what have global equities done over the same time period?
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I believe if HSBC were to go under you would be entitled to a portion of the underlying equities that are wrapped up in the index fund
That sounds messy!
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Also you would have bigger, more pressing problems in that situation
While not wanting to be complacenet about global anihillation risks, bank failure is hardly as unthinkable given we had the whole lot of them failing 16 years ago. And the government has put in place scheme for precisely that thing happening again so they must reckon it is the kind of risk that people should take into account!
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I've been rejigging my pension - to bin the UK tracker funds based on the above! I'll switch to a global tracker - a few years too late, but probably better than never.
Is it OK to just put everything in one fund, eg HSBC FTSE All-World Index, which Monervator reckons is the best / cheapest one, or is it a thing to split it between a few, in case HSBC goes under?
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a lot of poor decisions turn out well
Learn something every day - I always thought that a decision that turned out well was a good decision!
I don't claim to know much about Microstrategy and I am only going on the info available to me, which is what is out there plus what was in that linked article, which I found interesting.
I get the idea that some people think Saylor just punted on bitcoin on a whim. It's a public company so he will have had to think it through, develop a coherent strategy, model it and describe it, and get it past his board. You, or I, may not agree with it - and it might be different from what every other company (barring maybe Tesla) has done, but that provides no basis to say that it isn't thought through and that it isn't credible. And, if the goal by which you judge it is increasing the value of the company, it's hard to argue that - based on what we know now - it hasn't been very successful.
Of course it may well fall apart tomorrow, but there are certainly plenty of reasons to believe that it might not. If you really think it is bullshit, you can always short it!
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Interesting article - everybody is deserting UK funds.
LONDON, March 8 (Reuters) - If the British government is trying to steer more domestic investors back into unloved UK stocks, it has a mammoth task on its hands given the scale of the desertion over recent years.
In his budget speech this week, finance minister Jeremy Hunt unveiled a new "UK ISA", or Individual Savings Account, that allows individuals to invest 5,000 pounds ($6,403) tax-free in UK equities annually, in addition to the 20,000 pounds allowed under existing tax-free ISA schemes.
Hunt reckoned this meant that "British savers can benefit from the growth of the most promising UK businesses as well as supporting them with the capital to help them expand".
Downplaying the impact of the tweak, many experts reckoned the added incentive to stay local would only likely appeal to a small proportion of investors already maxed out on ISA limits.
But what it did serve to do is spotlight just how increasingly unwanted British stocks are even among Britons - who, unlike Americans for example, appear to be abandoning any sense of 'home bias' as they drift away from actively managed UK funds to cheaper and more globally-spread index trackers.
A spiral seems to have ensued as persistently lagging UK performance merely tempts savers further into overseas funds - cutting demand for new UK equity fund launches, which have dwindled in favour of shiny new global offerings instead.
The problems of the British economy over the past decade are well documented of course - not least due to outsize hits from the banking crash of 2008, the protracted and messy exit from the European Union, and the pandemic and subsequent energy shock more recently.
For many global fund managers, UK exposure has become a far less significant part of portfolios and many even bat away questions on the whys and wherefores of British markets.
At its most basic, the startling underperformance of both the blue-chip FTSE100 (.FTSE)
, opens new tab index of largely globally-exposed UK stocks and the FTSE250 (.FTMC)
, opens new tab index of mid-sized domestic-facing stocks over the past decade speaks volumes.
In sterling terms, both the FTSE100 and FTSE250 have gained a meagre 13-17% over the past 10 years compared to the 260% boom in Wall Street's S&P500 (.SPX)
, opens new tab, a near quintupling of the tech-laden Nasdaq (.IXIC), opens new tab, a 140% rise in Japan's Nikkei (.N225), opens new tab and even a 62% jump in the euro zone benchmark (.STOXXE)
, opens new tab.
While those major markets surge anew since 2022's interest rate setbacks, UK indexes are still in negative territory for the past 12 months - and also for 2024 to date.
The valuation discount of the FTSE All-Share index (.FTAS)
, opens new tab versus MSCI's World index (.MIWO00000PUS)
, opens new tab is now at a record near 40%, and UK weightings in that World index have more than halved to just 4% over the past 15 years.
It may be 'cheap' of course - but investment flows are streaming in the other direction."EXISTENTIAL CRISIS"
Numbers released by the Invest Association on Thursday show the scale of what's happening.
UK savers took 24.3 billion pounds out of all funds in 2023 - the second consecutive year of net withdrawals and the only two such years ever recorded. The relative attraction of higher interest rates in cash savings accounts was partly to blame.
But the really alarming bit is a record 14 billion pound exit from UK equity funds - the eighth straight negative year since the Brexit vote in 2016, outstripping a dire 2022 outcome and continuing a bleed that long precedes the recent rise in interest rates.
While there was some switching to money market and fixed income funds last year, index tracking funds also saw a healthy 13.8 billion of inflows.
It's the whopping 38 billion pound record outflow from actively-managed UK funds that's particularly stark.
And it didn't end last year. Net retail and institutional fund sales of the 1.42 trillion pound industry were both negative at more than a billion pounds each again for January.
"The UK funds industry is going through a dark age," said Laith Khalaf, AJ Bell's head of investment analysis, commenting on the IA figures. "The scale of these withdrawals is absolutely unprecedented."
"This doesn't augur well for confidence in the UK stock market, which is leaking members and performance to overseas competitors," he said, adding that it was an "existential crisis" for UK active funds, where less than a third have outperformed passive equivalents over the past 10 years.
That "crisis" partly reflects worldwide changes in asset management trends toward passive, process-driven and more global strategies - and an exit of many 'star' fund managers from the UK scene. Rising annuity sales, which jumped 46% last year, may also have taken from those seeking UK equities in pension pots.
But there's a clear unwinding of 'home bias' among British investors too, Khalaf noted, showing the share of UK equities in the average balance fund has almost halved since 2009 to just 27% while U.S. equity holdings more than trebled to 39%.
The mere 4% weighting of UK equity in the MSCI World could spell much further reductions ahead if the global index tracking boom continues.
And to the extent that higher interest rates may have exaggerated the issue over the past couple of years, hopes for rate cuts ahead seem unlikely to give the UK much of an advantage over anywhere else this year.
The Bank of England is currently expected to start cutting rates later than its U.S. or euro zone counterparts, around August at current pricing, and also deliver fewer cuts over the course of the year.
Tweaking ISA rules won't do any harm of course, but may just be a cotton wool ball to soak up a flood. -
All CEOs gamble. They make one way bets with other people's money which make them very rich if they come off, and leave them comfortable if they don't.
'On the face of it' seems to have been a trigger phrase which wasn't my intention. What I meant by it was 'based on the results we can see today'.
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increasing the value of your company
Saylor has increased the value of his company!
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What I mean by that is, objectively, he has increased his company's market cap way more by buying bitcoin than he would have done by buying back his own shares. I'm not saying anything about the future, only the past. Whether it was foresight, skill, luck or whatever isn't relevant to the result.
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re-investing in the company
Buybacks are reinvesting in the company only in a financial engineering sense, it's not investing in productive capacity or anything useful. They are aiming to push up the share price.
I'm not a banker, but both are investing in a financial asset, rather than in productive capex, to increase their share price. I don't see such a big difference.
If you asked your CEOs if they wish they had invested in bitcoin rather than in buying back their own shares you might not get the answer you are assuming.
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We did that at my daughter's birthday party. But on a much smaller scale
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debatable
You think Saylor would have been better off to have done share buybacks...?
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They've been buying a thing with the intention of increasing the perceived value of the thing, which will make the perceived value of their company increase, giving them more clout to buy more of the thing.
Sounds exactly like bybacks!
I'm not saying MicroStrategy is a model of effective use of resources to produce useful stuff, etc, but I'm not sure what it's doing is worse by objective measures than current standard corporate practice. -
Interesting article.
Basically, while every other corporate has been 'investing' any spare capital and borrowings in buying back their own shares as a means to increase their EPS, he has used it to buy piles of bitcoin.On the face of it seems like a smart move. Is it more of a pyramid than leveraged bybacks? I'm not sure it is.
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Historically it did but they changed insurers a few years ago and, last time I looked, it didn't.
May have changed again though.