I have no sage like powers. In retrospect, I would have been better off to have left my money in the share market last year rather than to pull it all out in March 2020 and then trickle it back in over the intervening 16 months.
But this week, I was reminded of an anecdote about the tycoon Joseph P. Kennedy (father of JFK) in 1929. On the way to his office, he stopped to get his shoes shined. The shoeshine boy proceeded to give him some stock tips.
This disturbed him sufficiently that he went to his office and immediately not only sold his share portfolio, but took a short position on the market. He not only saved his fortune but he increased it.
I am not sure how true this story is, just that it does give one pause for thought. When a rank amateur such as a shoeshine boy thinks that he know how to play the market, it is probably time that the smart money gets out. All the suited sharks who know how to play the game professionally know a lot better than the mug punters when to get in, and when to get out.
I think it is probably a fairly safe bet to suppose that when all the most uninformed mug punters are pouring their money into a particular asset class, they are propping up the price whilst everyone else is getting out.
I was thinking of that shoeshine boy earlier this week. There was an ad on the inside of the tram I was riding advertising a particular app which enables you to trade cryptocurrency. Once you sign up, you get $10 worth of bitcoin. That evening, on the same tram route, there was a poster ad at the tram terminus on the tram shelter advertising another website which enables you to trade cryptocurrency.
I think the opportunity to make money out of cryptocurrency has probably passed, and that any money that is left to make is on the greater fool theory, that you might be able to find some greater fools willing to get in late and trade to them on price fluctuations. There could be very many people willing to sign up to such sites and start investing small parcels of money into cryptocurrency, especially people who have never invested in anything before. The main effect of this will be to hold the price of cryptocurrency up whilst those who have already bought in at much lower prices are able to liquidate their holdings and get out with large fortunes.
I may be wrong about this, but personally, I don’t really care. I have always thought of cryptocurrency at best as the financial equivalent of magic beans. I am not going to trade the cow for them. And if you recall the fairytale, even when the magic beans worked, getting a return on investment involved a lot more risk than just watching a beanstalk grow. Fee Fie Fo Fum….