This week is the 30-year anniversary of the 1987 crash. Can you believe it?
Appropriately or ominously (depending on your view), the market continues its eight-year march up the charts.
Nowadays, it’s setting records with each new high it hits.
Are investors nervous? Should they be?
This bull market is old by historical standards. At 102 months, only the 115-month bull market of the 1990s lasted longer post-WWII.
If that doesn’t make one a tad nervous, the stock market has been undergoing a shocking under-the-radar reduction: from 7,500 publicly listed companies in the 1990s all the way down to fewer than 4,100 today.
I could go on. It’s almost too easy to poke holes in the current bull… not enough job growth, a large (and growing) amount of public debt, flat wages, etc.
But the ultimate arbiter of how the economy is doing is the market itself. And the only trend that counts is the current trend.
In the short term, the trend is your friend.
So I’m not going to worry about tomorrow or next week. The market has made utter fools of those who do.
But that won’t stop me from asking an increasingly critical question for investors…
What is the long-term upside of the public stock market? Or put another way…
When the bull degrades into a bear (and at some point it will), what are the pros and cons of staying in the stock market?
Japanese stock investors recently welcomed a long-awaited milestone.
It took 21 years. But last week, the Nikkei stock market hit a new high. It blew past its previous peak reached on December 5, 1996.
The Japanese have learned the hard way what “slow and steady” means.
The opportunity costs of riding the Japanese market down and then up were significant.
What stock markets could they have invested in during those years? Let’s take a look at some numbers I dug up…
We know that the U.S. markets did well, even taking into account the 2000 to 2002 crash. But that pales in comparison to Indonesia’s and India’s market performance. They rose tenfold in the last 20 years. Even China’s up and down market went up by more than 3.5 times.
Investors Always Have Choices
Right now, there’s an incredibly dynamic market in its early days. I’m talking about cryptocurrencies.
Bitcoin and Ethereum are the best-known digital coins you may have heard of, but there are thousands more.
Any infant market (or infant company) draws skepticism. Is it real? Long-lasting? Overhyped?
It’s easy to write these opportunities off, because you’ll never have all the answers. You do a lot of digging and a lot of thinking to fill in the blanks. But you can never fill them in completely.
So most people don’t invest. This early is too early. It’s just too uncomfortable for them. Early investing isn’t for everybody.
But I’ve found that it’s by far the most profitable way to invest.
Early to late almost always means very small to very big (in terms of size) and very low to very high (in terms of price).
It’s as simple as that.
And it’s how you should view bitcoin.
It’s not easy because bitcoin’s price has risen a lot already. The market capitalization of bitcoin plus other cryptocurrencies has ballooned to about $150 billion.
That’s an eightfold increase just this year, according to CoinTelegraph.com.
It doesn’t feel early. Nor does it feel small.
But believe me, it is.
Cryptocurrencies today are about where cellphones were in 1992, growing fast and furiously… but with mass adoption still a decade away.
Bitcoin’s growing incredibly fast. Two billion dollars’ worth of bitcoin changes hands every day. And it’s increasingly used for remittances, payments and stored value (digital gold). Cryptocurrencies are making significant inroads in fintech, medtech and the Internet of Things.
Yet bitcoin and other cryptocurrencies haven’t truly scaled yet.
A few million people now use them. In the greater scheme of things, that’s paltry.
What happens when a few hundred million people use them?
What happens when institutional investors start putting money in them?
It’s too early to say. But we’re going to find out over the next two decades.
I look at the big picture. So where other people see high cryptocurrency prices, I see low prices.
The combined capitalization of all cryptocurrencies is still smaller than any of the world’s 100 largest stocks.
Bitcoin may be the largest cryptocurrency, but it’s only the 65th largest currency in the world overall. Some of the larger fiat currencies are highly problematic, which should provide a fertile area for future cryptocurrency adoption.
Early Means Low Prices, and Bitcoin Is No Exception
I remember when oil was climbing from double-digit prices to triple-digit ones. It was a crazy time.
I had the privilege of explaining what was happening every Wednesday morning on Fox Business News.
Every week there were geopolitical events that justified yet another price increase. There were also other events that could have driven prices down.
But since they didn’t fit the narrative, they were largely ignored. I mentioned some of these events at first. But because they were having no impact on prices, I stopped. I was talking into a black hole. Nobody gave a fig about them.
Today’s narrative on bitcoin?
It’s in a bubble. Prices are extremely elevated. And buying at this juncture is buying high and buying foolish.
That’s NOT looking at the big picture. To be frank, it’s small thinking from small minds.
I remember when oil was going for $15 to $20 a barrel. Now it’s going for $50 to $60.
Compared to $15, it’s expensive. Compared to $147, it’s cheap.
Seeing the big picture – and knowing how high oil can go – I’d never consider current oil prices expensive.
My favorite three words are “IT’S VERY EARLY.” There’s a long way to go.
I see bitcoin and cryptocurrencies as a huge irresistible investing opportunity. Think about it this way: People who invest early in so-called bubbles usually come out WAY AHEAD.
The long-term upside of the stock market? It pales in comparison.
I strongly suggest you diversify at least a small part of your investible savings out of public stocks and into cryptocurrencies.
The opportunity costs of NOT doing so are just too significant to ignore.
Co-Founder, Early Investing
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Source: Early Investing