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(B)(N) Bitcoin & Company

December 10, 2017
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The Edible Bitcoin

Drama. Bitcoin is off the charts and well beyond the “Tulip Crazies” of the 17th century which lasted only a few years (1634-1637) but it might not go that way because, after all, it is “edible” (but please see below for our warning on “fast food”) and the advent of quantum computing could either kill the coin if the market for its use is too small or turn it into the “Common Coin of the Cosmos (CCC)”, good on any planet and out of the reach of any sovereignty (pending further legislation to the contrary).

We can trade it today at the current $15,000 or so and up from a penny ($0.01) in 2011 by establishing our usual risk price arbitrage but there aren’t any call or put options to protect our prices pending their debut with the CME Group on Monday, December 11, 2017 and, even then, liquidity, margin, and solvency guarantees will still be an issue if volatility is their only price point (Black & Scholes).

The market is currently trading for about $300 billion at the current prices but try to imagine a derivatives market that trades only in bitcoins and not just the pale dollars of your grandfather.

Bitcoin & Company

Bitcoins don’t have a balance sheet and they’re traded on air (hope and promise) but that’s basically like any other equity according to the societal standards of risk aversion and bargaining practice and, secondly – if they survive – they will eventually be benchmarked like any other currency according to what they might buy of what we might want and although one bitcoin buys USD$15,000 today, we have no idea what it might buy tomorrow and, for that reason, the answer might eventually be nothing.

For example, if you spent ten bitcoins in May to buy a car, the same car would cost you less than two bitcoins today.

Fairy Dust

Bitcoins Powered By The Pixel Dust

Nevertheless, in the real world there are about a dozen companies that are trading in the shadow of the Blockchain (Bloomberg, December 8, 2017, How to Make Money Off Bitcoin Without Actually Owning It) and we’ve traded them in the usual way in the (B)-Class Portfolio for returns of about +100% per year since 2014 with no risk at all.

Other than that and the simple fact that we quadrupled our money in them this year and still own most of them at the stop/loss prices (which we’ll need to keep a close eye on), we don’t have anything good to say about these companies that is not pro forma for almost any company in the market these days, and most investors will eventually find that out and that they would have been better-off just playing in The Street with the rest of us; please see Exhibit 1 below (and click on it and again to make it larger as required).

Exhibit 1 (B)(N) Bitcoin & Company - (B)-Class Portfolio

Exhibit 1: The RiskWerk Company Tulip Award

For more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”). The Canada Pension Bond®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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