Cryptocurrencies , bitcoin

Disclaimer.. I'm a crypto sceptic and don't own any bitcoin. 

This is not to say that I won't buy any in the future, but at this moment I'll sit on the fence.

I'm writing this post to expand my understanding.

What is Crypto?

It is a digital currency.

Bitcoin is a value based token. It is the first but just one of many cryptocurrencies.

The promise is that bitcoin is the currency for the people. It is anti establishment.

It is seen as decentralized, free from government & a salvation from the "greedy banks".

It's been 16 years since bitcoin launched. But does it have any widespread utility?

What is the block chain?

It's a public digital ledger ... a way to record a transaction that is independent of a 3rd party.

It means that I can transfer value to you without needing permission from a intermediatory.

For example:

If you go back 5 thousand years, when we transact with each other we typically use a third party.

If I was to buy your house I'd instruct my bank to send funds to your bank. The bank/s would charge a commission.

Or if I was to buy food at a restaurant with my credit card or phone, Visa or MasterCard or Apple transfer the digital money on my phone from my bank to the bank of the restaurant.

Blockchain is a way I can avoid paying the 3% charge from Visa, Mastercard etc.

In the past, this technology has been stalled by the regulatory processes from Governments, banks, credit card companies , taxi companies etc, etc. 

(ie anyone afraid of the new, potentially disruptive, technology).

In the past various US and European Governments had stalled its acceptance.

But now the Trump administration has come to power and he is heavily influenced by the crypto lobby.

The real person behind this is Paul Atkins. He is the acting SEC (securities and exchange commission) chairman. He believes that the increased use of crypto will reduce the cost of transactions.

It will disrupt the role of banks and move beyond the types of governance we are used to.

This technology is quite volatile. Eg after Trump was elected the price of bitcoin rose 40% in a month.

It eventually rose to 126K but has since dropped to 80K.

Trump issued 2 meme coins on the eve of his election (for him and his wife).

These meme coins went up in value, he takes a few hundred million out for him self and these coins over the last 7-8 months have crashed in value. This is a problem when the President is issuing self interested meme coins. Is he is susceptible to grift? Will people who buy the token  try to influence him?  There are also trump connections to World liberty Financial .

The Trump family receives 75% of net proceeds when WLFI sells tokens, as well as getting cuts of stablecoin profits.

Now it seems that there are no restraints to Bitcoins adoption as far as the US govt is concerned. 2025 is the year crypto went mainstream. But has this also soured the industry? Has it had the opposite effect of what the crypto industry wanted.

Instead of promoting the future promise of  making transactions cheaper 

and easier for the consumer has it made crypto look like its full of scammers.

Today, I wonder if bitcoin will ever life up to its promise of being a digital currency we can trust.

It has high volatility, high transaction fees & high fraud.

There is so far no widespread adoption as a payment system.

You cant use it to buy groceries... and even if you could it would probably be converted to hard currency ASAP.

I suspect that the real use of bitcoin is as a speculative asset.... like gold.

It's 4x more volatile than stocks.

The difference between government debt and the trade deficit

Government debt is the total money a government owes from past borrowing (budget deficits), while a trade deficit is an annual imbalance where a country imports more goods/services than it exports. One is about government borrowing (fiscal policy), the other about international trade (balance of payments); but a trade deficit can increase government borrowing (and thus debt) if foreigners buy government bonds to fund the import gap. 

Government Debt

+ What it is: The cumulative total of all money the government has borrowed 

  over time to cover spending not met by taxes.

+ How it grows: Each year's budget deficit (spending > revenue) adds to the national debt.

+ Analogy: Like the total balance on a credit card. 

Trade Deficit (Current Account Deficit)

+ What it is: An annual situation where the value of goods and 

  services a country buys from other nations (imports) is greater than the value 

  it sells to them (exports).

+ How it grows: Results from consuming more foreign goods than selling domestic ones.

+ Analogy: Like a household spending more on groceries and foreign vacations 

  than it earns from selling its products. 

Key Differences & Connection

+ Scope: Debt is a stock (total owed); trade deficit is a flow (annual imbalance).

+ Cause: Debt comes from government overspending; trade deficit 

  comes from international spending patterns.

+ Link: A persistent trade deficit means money flows out; to finance this, 

  foreigners may buy government debt, or the government might borrow to 

  support the economy, thus linking trade deficits to rising national debt. 

Economics Index

 All things business....

+ Bonds

+ Investor Psychology

+ Cryptocurrencies , bitcoin

+ A brief history of Australian house prices

+ My Property Rant

+ The Impact of inflation over time

+ Property vs Shares - which is better over 30 years.

+ Franking credits Vs CGT - calculating

+ Hedging against market crashes

+ The difference between government debt and the trade deficit...

+ US govt debt - Ways to pay it off

+ Stablecoins & US debt

+ Sir John Templeton

+ Connection between the USD, Gold & Oil

+ How did the BOJ keep interest rates low for decades?

+ MACD

+ OMO vs QE (Open market operations vs Quantitative Easing)

+ Yield Curves

+ Commsec Financials Page explanation

   - Balance Sheet

   - DCF

   - EBITDA

   - PEG

   - NST Balance sheet - example

   - Comparison NST vs EVN

   - Value Investing - fundamentals

   - ROIC vs WACC - Return on capital vs Cost of capital

   - Debt: Equity - how to interpret it

   - Banking CET1 ratio

++  Shares - index

My Property Rant

Bloody Property!

Australians are addicted to bricks and mortar. Most of my friends only know how to invest in two things:

Bitcoin or the housing market.

This post has nothing to do with synths (except if you avoid property you'll definitely

be able to afford more synths in the future).

I'm writing this to get things off my chest and try to change the mind of some of my friends. 

The Australian residential property market is crazy

For the property market to have as much appeal are things like shares it must drop in value.

There is really no other option. Its too expensive at the moment.

As an asset, it's brilliant. You can live in it.

It's utility is great. You can't do this with shares.

Yes, I understand the arguments....

The population in Australia is growing. There is lots of immigration.

There is a massive undersupply and huge demand.

It's something that will always be in demand.

Everyone needs somewhere to live.

My problem with housing is the price.

If you need somewhere to live, not flip or speculate on... that's cool. 

But get that roof over you head paid off as quickly as you can. 

Maybe buy a apartment and invest the money you've saved elsewhere.

but as an investment, I'm really skeptical about property.

Affordability is a real problem.

I live in Sydney.

The average house price is 1.3M

The average weekly rent for a house is $560/week

That's $560 x 52 = $29,000

(29000/1,300,000) x 100 = 2.2307

So if I bought a $1.3 million investment property, I would earn 2.2% interest on my investment.

This is the raw income. I haven't taken into account things like interest payments,

depreciation, repairs, land tax, rates, etc etc.

Wouldn't I be better of just putting the money in a Bank term deposit (current interest rate is 4.2%).?

The only way property as an investment makes any sense is if the value halves or the rent doubles.

Historically, house prices have gone up, so this is still I guess, possible. 

However, we had a low interest rate environment for the last decade. 

And I don't think this will continue.

I could be wrong.... of course. And I wouldn't bet against it.

Australian's are nuts about housing..... that quarter acre block is the "Australian Dream".

Logic often doesn't come into the equation.

Is FOMO (fear of missing out) too great a force?

Will prices double every 9 years?

Maybe. But what drives this?

Where does the money come from?

For every seller, there must be a buyer.

Will the average Australian wage double in 9 years to keep up?

The market is a voting machine in the short term, and a weighing machine in the long term.

(Ben Graham)

It must be supported by fundamentals. 

This is the same in shares... in any asset class... not just property.

If prices just keep rising, and wages don't keep up, then future investors will have to accept lower, and lower returns.

Past generations invested in property because prices to wages were lower.

They were getting at least 7 to 10% yields.

It made sense back then.

Maybe there will be a correction.

This might even be healthy in the long run.

But a "small" 10% correction could be dangerous for anyone with high gearing.

eg: If you borrowed 100K to buy a $1M property.

A 10% correction would wipe out your entire deposit.

If this were invested in shares, you'd get a margin call.

Food for thought.

PEG

 PEG

In finance, a PEG ratio (Price/Earnings-to-Growth ratio) is a tool used to find out if a stock's price is fair. It takes a company's normal P/E ratio and divides it by its expected profit growth rate. This helps investors see if a fast-growing company is a good deal or too expensive. [1, 2]

How the PEG Ratio Works

Formula: \(\text{PEG Ratio} = \frac{\text{P/E Ratio}}{\text{Earnings Growth Rate}}\)
P/E Ratio: The stock price divided by its earnings per share.
Growth Rate: How fast the company's profits are expected to grow. [1]

What the Numbers Mean

Under 1.0: The stock may be cheap (undervalued) for how fast it is growing.
Around 1.0: The stock price matches its growth rate.
Over 1.0: The stock may be expensive (overvalued) for its growth level

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DCF

 DCF

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In finance, DCF stands for Discounted Cash Flow. It is a valuation method used to estimate the value of an investment, project, or company based on its expected future cash flows, adjusted for the time value of money. [1, 2]

How DCF Works

Future Projections: Estimates cash a business or asset will make in future years.
Discount Rate: Uses a rate (often the Weighted Average Cost of Capital, or WACC) to reduce future money into today's dollars.
Present Value: Sums up these discounted values to find the total intrinsic worth. [1, 2, 3]

Key Uses

Investing: Finding if a stock is cheap or expensive compared to its market price.
Corporate Finance: Deciding if a new business project is worth the cost. [1, 2, 3]

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