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The Washington City Times’s This week, a quarterly investment package has been released that is full of stories about technology.
That’s probably not surprising given that technology stocks have been rising for a while. The technical sector of the S&P 500 gained 44% last year, versus 18% for the general index. Collectively, the big six – Apple, Microsoft, Amazon, Google, Tesla and Facebook – are now worth more than $ 8 trillion. For some it is an obvious bubble, for others a logical response to COVID’s winners of the year.
With the great influence of technology on the stock market, I profit indirectly and you probably too. All of my investments are in mutual funds, mostly cheap index funds, and they are supplemented by the big six and other tech high flyers.
Well, not all of my investments. About two months ago, I used the PayPal app to pay for something, probably a bag of coffee beans I saw on Instagram, when I noticed the company’s promised digital currency exchange had gone live. Right from the app, with just a few taps, I could buy and sell Bitcoin, Ethereum, Bitcoin Cash and Litecoin. This new level of exposure to the general public and ease of buying seemed likely to make prices higher, I reasoned. So I bought a small mixed basket of crypto … and watched it go up.
A week later, I was bragging to the family about my success and commented that the strength of my 10% profit – if calculated on an annual basis over an entire year – would make us rich. I was asked to put in a little more money, enough to buy dinner for a family of five at one of Boston’s best restaurants with drinks, dessert, and a healthy tip.
PayPal must be excited about the response to the crypto addition as I started checking the app at least once a day. And on the way to the races we went. At the recent high of Bitcoin’s price of nearly $ 42,000 in early January, I had nearly tripled.
Money aside, this was more about entertainment and bragging rights than a serious foray into digital currency, an offshoot of how fellow newsletter writer Matt Levine calls the stock market a “ fun casino. ” So I had no interest in selling. Bitcoin’s recent decline also happily hit my PayPal casino. I have now only doubled my money. Maybe I should have listened to astrologer / bitcoin strategist Maren Altman?
Among the more serious investors, the more serious question remains: Should you add Bitcoin to your portfolio in 2021? As one of the top journalists writing crypto, Robert was looking for a different story in our investment package.
There has long been a strategy of investing in assets that will thrive in bad times. When all your stocks fall, treasury bills, foreign exchange, and gold can provide you with a safety buffer. Could bitcoin do the same? Is the ultimately capped total number of bitcoins that could ever be mined a hedge against the Federal Reserve’s seemingly infinite ability to hit more dollars? Robert offers both sides of the debate, although a recent analysis by JPMorgan Chase strategists John Normand and Federico Manicardi decisively put the skeptics down. Bitcoin is “the least reliable hedge during periods of acute market stress,” they wrote.
Still, I have a good seat in the nice casino. Have fun this weekend and we’ll see you here Monday.
Next Wednesday, January 27 at 11 a.m.ET, The Washington City Times organizes a CIO roundtable on the topic of COVID and the cloud, accelerating conversion and finding value, with Accenture CIO Penelope Prett and Zoom Global CIO Harry Moseley. The event is invitation only and we are almost full, but you can sign up for consideration.