I'm in the same boat, have the same view... and the more I try and read about, understand it, the less it seems to hold water.Originally Posted by Montello
Like I say, KR1 is not for everyone. So please avoid if you:
a) don't believe in crypto
b) don't like volatility
c) want a sane life
In hindsight, the recommendation is not for this thread, nor forum, so I hope that no one follows me into investing into KR1. I didn't invest a lot so not risking that much, so just watch from the sidelines and wish me luck! (thanks Raffe!)
I started as a non believer, then did a hell of a lot of reading which didn’t change my view much (apart from understanding the general bits and bolts of how it works) but my method to analyse then took a different direction - hard to explain, but I think a lot of my “belief”* comes from two things - a complete distrust in “the system” be it banks/government or whatever you believe “the system” to be
And secondly, the realisation that things can and do change rapidly and often without warning. The “norm” can be completely blown out of the water in a very short space of time.
Several examples of this in recent times, many of them in this very “sector”
(I don’t like the term sector, as it’s another thing I think will see massive disruption soon - the days of businesses and other things fitting neatly into certain descriptions and definitions will be resigned to history)
If any of the above seems like the ramblings of a mad man, you’re probably not investing in bitcoin
*belief is a strong word, I’ve invested what I can afford to lose
Last edited by demonloop; 14th February 2021 at 15:03.
Appreciate you explaining your own rationale.
I see this thread has become crypto centric.
Perhaps I should mention something I mentioned in a quiet corner of the forum a few weeks back.
Internationally regulators are looking at crypto's hard, really hard. Some will no doubt be found wanting.
At base there is nothing wrong with crypto but currently it's like the wild west and the law is coming to town.
Some really early adopters, particularly miners, might strike it rish, who knows?
I agree people not paying loans or mortgages.
I agree the majority of these projects will end up worthless. There is a reason altcoins are called sh*tcoins by some.
1) crypto is a cyclic play. I believe we are in a bull market, so have traded accordingly.
2) some of the technology these companies are working on may be adopted by mainstream companies.
This is a high risk area, so DYOR and only put in what you are willing to lose.
If you don’t mind me asking, what is it about ‘the system’ that you don’t trust? I’m genuinely interested, not trying to make my own point. I understand there are a lot of sharks working in finance, and in politics of course, but even a cynic like me currently believes that money in a bank or regulated financial instruments generally works as described (even the risky stuff) whereas so much around crypto seems dodgy.
FWIW I understand blockchain but you are right I don’t have any bitcoin (having nearly bought 10 when they were a few $).
Re: the banking system - every time there is a catastrophe, those responsible don’t end up paying or going to jail. The working man pays. Every time. Those least able to afford it. A tale as old as time itself.
Re: money in the bank, it may work as described in the sense that it’s there if you need to withdraw and you might get 0.001% interest on it, which the bank charge 1/2/3/4/10% interest lending it out. And if they make enough risky loans, see the point above. If you think that’s “working as it should” I would suggest it isn’t. For so long banks have been a necessary evil, but that could all be about to change.
It’s entirely set up so that the bank can’t lose. No matter what. That’s why the FSCS £85k insurance is such a joke - do you think HMG would let a bank fail?
Re: crypto being dodgy - that’s just wrong, and I wonder who pushes that opinion? Those with the most to lose by being excluded from the new technology maybe?
I accept it does require a different type of thinking and i could well be mildly insane.
Or right.
Depends on your own view I suppose.
It is safe to say I don't share your opinion. IMO it is dodgy as hell, you couldn't find me a bargepole long enough to touch it.
If an asset requires some sort of belief system it’s verging on religion.
If I invest in a company I take the view that it’s able to provide goods and / or services that customers need and so are willing to pay for and that process creates a profit. That’s how capitalism works.
Buying a digital token that only has value because someone else will pay more for it one day is nothing more than a ponsi scheme. These schemes can make many very rich if they get in early and cash in before the collapse. There is a market right now but because of the absolute reliance on belief it is at risk to collapse at any point.
I agree the mainstream banking system does over rewarded the establishment and rich but it is what it is and the world is more or a meritocracy than it’s ever been.
If you want to create a ponsi scheme the first step is to discredit the establishment and promise riches to all the believers.
Thanks, I appreciate the thoughtful answer. I agree about bankers seeming to get away with it.
The point is though that the establishment will indeed do anything to protect the banks, whether you think that is ethical or not it does mean there is a pretty reliable safety net for conventional currency. There is no such net for crypto, as already noted there are regulatory headwinds on the horizon and there is always the slight chance a given instrument goes pop overnight if someone finds a way to crack or hack it. There are fortunes to be made alright, but it is in effect a Ponzi (note the z) or pyramid scheme of sorts.
There’s a safety net for conventional currency,
yes. No argument there.
Who’s paying for it?
(Apologies for trimming your post, I don’t think I’ve taken you out of context, it’s just the quoted posts are getting very long)
I don't see how they can regulate/oversight crypto in a meaningful way without undermining it's 2 biggest usp's as far as I can make out, the degree of pseudo annonymity it's usage confers AND that it allows 2 individuals/entities who don't trust each other to complete a transaction without recourse to a centralised authorities currency/oversight/ regulation...aka I suppose the System.
It's a riddle/ contradiction wrapped in an enigma to me I'm afraid.
Does it matter who pays? Crypto is hardly the working mans panacea, or a force for the democratisation of finance, it is a speculative plaything of the rich with roots in organised crime. Those with the least should steer clear for self preservation.
You need to read up a bit more.
In Autumn 2008, in the midst of the financial crisis, five financial institutions collapsed affecting over 4.08 million retail bank accounts in the UK. The most prominent were Bradford & Bingley, which failed on 27 September 2008, and Icesave, which failed on 8 October 2008.
The Financial Services Compensation Scheme (FSCS) played a pivotal role in protecting the customers of those banks. From the seamless transfer of the accounts of 2.5m savers with Bradford & Bingley to Santander – with no changes to their account details or terms – to the online claims process developed specifically for more than 200,000 retail savers with Icesave.
https://www.fscs.org.uk/media/press/...fter-failures/
It matters to me, yes.
The answer is of course: everyone pays. Everyone except the bank of course.
Those banks were bailed out, no?
Anyway, regardless of that: where does FSCS get their money from?
Last edited by demonloop; 14th February 2021 at 17:43.
No they failed, they don’t exist any more. The deposits of the account holders were protected by the FSCS scheme and the accounts were transferred to other banks.
https://www.bbg.co.uk/
'Every time', that sounds like a large sample size? How many banking system catastrophes can you name that affected the United Kingdom, or let's say Europe, or the developed world, except for the 2006/2007 GFC?
How did working people end up paying for the GFC? And if they did, when was the last time before that they paid for a financial crisis (you say 'every time')?
How exactly will crypto change anything about this? Isn't it in fact much more likely that crypto will be the catalyst for the next financial crisis rather than the answer?
I don't understand what you are criticising? That banks take too much margins between the deposit rates and the lending rate or that they don't take enough margin? Are they lending too much or too little? Who shall decide how banks price lending and which type of risk they are taking through their lending? Shall the same regulation apply to lending in crypto? Given one can earn 10% of return with staking, how much will a mortgage in crypto set me back? Who will be mortgage lender if not banks?
Already today, there are many fintech solutions cutting out the banks as middle-parties in transactions, such as consumer-to-consumer lending, direct payments or robo-advisors. All of these work perfectly fine with existing currencies, what contribution will crypto currencies make to change the banking system? Where can I take a crypto mortgage?
You must have missed the bank/building society failures of Northern Rock, Alliance & Leicester, Bradford & Bingley, RBS and HBOS in the UK or AIG, Bear Stearns, Merrill Lynch, Lehman, Fannie Mae and Freddie Mac in the U.S.?
Plenty of dodgy transactions being settled in crypto. We obviously don't know the ratio, but I don't think anyone would be surprised if the ratio was a hundred illicit transaction for every legal. Quite simply transaction fees for bitcoin payments are so high that it just doesn't make sense to use it for payments other than those of criminal nature.
I would also call the misinformation being pushed by crypto-shills dodgy. But maybe that's just me.
Yes.
https://www.bbg.co.uk/other-products
They now exist just to service their mortgage products which were already in place when they collapsed.
The clients were bailed out. The owners of B&B lost everything.
The amount of b/s posted in this thread is approaching peak misinformation. Just saying.
If a bank is nationalised, has it failed? It’s certainly at the point it should fail, so why does it not follow the normal rules for such an event. If any other large business fails does HMG come along to save the day?
And if you don’t think the general population have/will pay for the GFC then who do you say will?
Last edited by demonloop; 14th February 2021 at 18:19.
That's exactly the point of nationalisation: clients are bailed out and the bank fails. Are you saying the government should also let the clients lose everything? What would be the point of that?
The people paying for the GFC have first and foremost been the shareholders of the failed banks. They lost their investments. All bank clients (= the general population) have been made whole.
As a consequence, the government (= the general population) holds shares in the nationalised banks, which at one point in time will be sold back into the financial market - either at a profit or a loss. For the Lloyds bailout, the British government has made a profit of about £1 billion, while the RBS/NatWest investment will take a few more years until all the shares have been sold. Currently, the government still holds NWG shares which are deep under water. It will take quite a recovery to turn this into a profit, but then who knows what the future will bring?
Impressive indeed how Lloyds were able to get back on track so quickly. Business must be good.
PS: I find it telling that what you describe as an investment is what I describe as a bail-out. Both technically correct but the different terminology raises an eyebrow
Wut?
I said it was a bailout, nothing more and nothing less.
Obviously, the government money wasn't for free, HMG received shares for their cash (a lot of shares, diluting the existing investors into oblivion). Those shares continue to trade and end up either up or down. The government has invested cash into the bank, that is what anyone is doing when they buy shares. They did it to save the bank's clients, and tried to do it in a way minimising damage to the public. The final verdict on that will come when the shares have been sold, currently planned for 2023 or 2024.
You referred to the bail outs as “investments” in the previous post. I know you didn’t mean it as “not a bail out”, just it was a word I’d never use to describe the bail out: showed a different train of though between us
Whatever.
Have a nive evening.
PS: You haven't answered any of my questions above. Don't bother, I actually lost interest.
The simple answer is MMT, QE, and helicopter money has flowed to a number asset classes.
This has driven increases in the price of shares, property, and bitcoin.
Keynsian economics in action. The problem is there are fundamental flaws with it, or rather trusting governments to not abuse it. More people are aware of those flaws as the effects get more visible.
Also check out the Cantillon effect. https://www.aier.org/article/cantill...ey-neutrality/ - those closest to the spigot gain most benefit.
It sure feels like it to me and I avoid it like the plague.
The FSCS is funded by a levy charged on Financial Services companies (banks, asset managers etc.) - the levy is calculated based on each company's size and profitability, and is effectively a further tax (a large expense, and quite rightly so)
You’re paying for it
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Is the correct answer.
It’s a government backed scheme, where does the government get any of its capital?
You are acting like you exposed some grand conspiracy...
Lloyds, although a safe bank their share price has never recovered, I wouldn’t say they are back on track when you compare to their past.
Regarding crypto, does anyone think this is just a morph of how we trade, the human race has used food, shells, moved onto gold and silver, then local coinage to countrywide currency.
We’re now in the contactless era but currency is still king, surely it’s only a matter of time before we move on from currency?
What are you guys thinking re the overall market for the next few months? I was thinking of getting out and having cash available for the next dip however VIX is at sub 20 meaning market isn't expecting huge volatility.
Glad I'm not sat in cash today!
And the only major news seems to be more vaccine optimism.
I'm starting to wonder if the markets in general aren't really as overvalued as we've been led to believe. Certain stocks like Tesla, yes, but overall......
The economy has hugely unhinged itself from the markets in 2020. Maybe that's the new norm for a while, and maybe it's a result of all the unprecedented money printing.
Cash is depreciating every day, and every time central banks turn on the printers. That's why asset prices have been rising since the pandemic started.
Check the Fed's money supply:
https://fred.stlouisfed.org/series/M1
Increased by US$2.8tr (or 70%) since April 2020. That's even more than the prior 10 years combined. If you look at the history of the money, you will quickly understand what the future holds.
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A decent Covid recovery play, currently 42% up and I’m sure there’s more to give.
Its fully funded by the financial industry, and do you think they just take that from their bottom line, shrug their shoulders and forget about it?
Of course I haven't uncovered anything, but lets not lose sight of who is paying for this scheme.
The FSCS scheme is insurance and works like all other insurance in principal ... everyone pays a little to cover the few who fall on difficult times ... it's hardly a secret and it's worth paying IMHO to provide cover for then things go wrong.
Yes, I know, but what are we insuring?
If it was Act of God, or something like Covid I could accept that, but to my mind it's there in no small part in case the banks go rogue again ala 2008.
And I don't think we should pay for that.
I accept that our views may differ.
When you are used to a P/E ratio of 20 being strong its hard to adjust to todays new valuations.
The S&P500 sits at 40 against a historical average of 15.
But that historical average sits along side a historical interest rate of 7% ... so you could get a decent return on a bond.
When rates are zero ... what is a decent stock worth that pays a dividend and has potential for capital growth?
There is a limited number if good quality companies to invest in ... combine that with the number of people looking for a yield and you have a lot of money competing to buy decent stocks.
Add into that a new slug of new printed money looking for a home and the ability for people to borrow cheaply to invest and you have your new normal.
It is a tough time for pension funds to create income ... the required size of a retirement pot continues to grow.
Last edited by Montello; 15th February 2021 at 11:12.
Banks fail because they misjudge risk; now you could argue that if they do so that is their problem and they should not be expected to bailed out by the scheme ...
I guess you could make owning bank shares unlimited liability so share holders have to cover any losses ... that may make them behave a bit more responsibly.
I do share your view that some of the banks in the past have been reckless / incompetent and there seems to be little in the way of punishment for such acts...
But despite the issues with banks and bankers I think the account holders deserve protection and so support the scheme.
I think we have more or less found agreement!
Now, about this Bitcoin... ;-)
Last edited by demonloop; 15th February 2021 at 11:06.
https://www.thetimes.co.uk/article/c...heme-hkrv75clr
Last edited by Montello; 15th February 2021 at 11:22.
That guys claims are widely regarded as false, though I'd be quite excited if it was true, just out of curiosity.
There is a way he could easily prove himself, but he has opted to not do it so far.
Just make a transaction from one of the early mined coins.
But that is exactly what happened. The bailout was for the bank's customers and to some extend also the employees - but the managers have lost their jobs and the shareholders their investment. The protection scheme only starts kicking in if and when the bank is bankrupt (they have not had to pay for RBS or Lloyds).
The part of unlimited liability is one of the most stupid things I have ever heard. Were bank shareholders irresponsible? How so? So what happens if the bank fails? It doesn't go bankrupt, but shareholders have to stump up more capital. What if they cannot, do banks have to check the creditworthiness of investors to make sure they can add additional money if the bank fails? If I buy shares of a bank at 100p, how much additional capital do I have to set aside to support the company if it gets in trouble? Will we then start trading shares at negative prices?
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