Warning: I am short bitcoin.
Think of these oscillations as a shepherd slowly herding the remaining sheep in a meadow into the corral to be slaughtered. Each oscillation upwards builds confidence to the next unsuspecting lamb and each correction represents the death of another corral full at the hands of the shepherd to the benefit of the farm owner pulling all the strings.
Investments are all the same. Whether you are talking about pork bellies, real estate, bonds or equities, be they public or private. The value in the long run all comes down to the Net Present Value of all future cash flows generated by the investment discounted at its cost of capital. It's not that complicated and it the same for everything. When fundamental economic analysis shows the NPV of such investment to be above the current market price one should buy and when NPV is below the market price one should sell. In the short run (sometimes years in thin markets lacking good information), emotion can cause investors to make decisions fully void of such fundamentals. Typically these occasions occur when the economic fundamentals are ambiguous and sensationalism provides a window for certain actors to arbitrage the condition of ignorance. In my experience I have never observed a combination of fundamental ambiguity, emotion, sensationalism, and arbitrage to this degree. The outcome is a wealth transfer from the misinformed to such actors like our society has rarely seen. The oscillations will continue until the last sheep is finally led to the gallow by the last surge upwards and then...........
Think of these oscillations as a shepherd slowly herding the remaining sheep in a meadow into the corral to be slaughtered. Each oscillation upwards builds confidence to the next unsuspecting lamb and each correction represents the death of another corral full at the hands of the shepherd to the benefit of the farm owner pulling all the strings.
Investments are all the same. Whether you are talking about pork bellies, real estate, bonds or equities, be they public or private. The value in the long run all comes down to the Net Present Value of all future cash flows generated by the investment discounted at its cost of capital. It's not that complicated and it the same for everything. When fundamental economic analysis shows the NPV of such investment to be above the current market price one should buy and when NPV is below the market price one should sell. In the short run (sometimes years in thin markets lacking good information), emotion can cause investors to make decisions fully void of such fundamentals. Typically these occasions occur when the economic fundamentals are ambiguous and sensationalism provides a window for certain actors to arbitrage the condition of ignorance. In my experience I have never observed a combination of fundamental ambiguity, emotion, sensationalism, and arbitrage to this degree. The outcome is a wealth transfer from the misinformed to such actors like our society has rarely seen. The oscillations will continue until the last sheep is finally led to the gallow by the last surge upwards and then...........
