Brewer's Droop #261

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INVESTMENTS

There are two major topics trending in Cape Town at the moment: Rainwater tanks and Bitcoin.

Although I’ve “invested” in one, I’m not really sure (yet) if it was a wise decision. The other I’m still following very carefully.

Let’s take the rainwater tank first. I installed a 2,500 litre tank and, last week, during the merciful storm we had, it’s now full to the brim.

Well that’s good I suppose but my problem is what do I do with it now – before the next drizzles arrive?

It’s hardly worth tapping off small watering cans (or even big ones for that matter) because it’ll take an absolute age to give my new lawn even a smattering of hope in the form of moisture. There isn’t enough gravity pressure to use a rose spray so if I wanted to properly hose the bone dry grass I’ll have to invest more money in a pump. Hmmm.

And then, how do I know how much I can afford to use in one watering before serious depletion on the levels occurs – will there be more rain before the “scorching summer” we’ve been promised?

So, at the moment, it seems to be a good enough investment (the water does look clean enough to drink I must say) but like any other type of saving, when’s the right time to pull out? If it rains within the next few days then I won’t catch a drop of that. On the other hand, if it doesn’t rain then I’m similarly buggered.

I’m sure I’ll figure something out.

Meanwhile, all dinner table conversations inevitably end at this Bitcoin phenomenon. It really is quite astonishing the way the price has gone wild – in an almost obscene inexorable rise.

Of course, people are starting to panic. “Am I too late?” or “when is this bubble going to burst?” The major underlying concern seems to be total uncertainty. A bit like my water tank dilemma really I suppose.

The fever pitch surrounding Bitcoin (should I, shouldn’t I?) has reached almost evangelical proportions. And that’s what worries me. This frenzy about Cryptocurrencies (and there are many, many of them) tends to lend credibility to the popular notion that it’s a scam. Maybe a pyramid type scheme even.

When people get excited about stuff like that and encourage me to part with my cash then all my defences go up.

However, friends of mine are making profits hand over fist. It’s crazy!

As far as I can see there are basically three ways to get into Bitcoin (or any of the other cryptos) and they are:

One: Simply buy a Bitcoin (or any fraction of one you can afford) through a reputable company and sell your investment whenever you think you’ve made enough.

Two: you can try “arbitrage” with a broker. Essentially he will buy and sell on your behalf. You have nothing to do. The advantage of this appears to me to be that the more volatile the price, the higher your broker will make your investment worth. So you don’t want a steady rise, you want a roller coaster!

Three: Mining. Now there’s a misused term if ever there was one. This is what it really means: transactions have to be recorded properly and all the systems synchronized all over the world. In the case of Bitcoin, this process is not done by people or companies, but by thousands of computers everywhere that are all connected to the internet. These computers are known as ‘miners’, but they should really simply be called ‘computers that process transactions’.

Mining costs more to get into but they tell me the rewards are staggering. It doesn’t much appeal to me but people I know appear to be doing exceptionally well.

The over-riding good news (especially for “miners” and those just “holding on”) is that I was told, back in August that the price of Bitcoin would reach $7,500 by the end of 2017 and $10,000 by the end of 2018. So far that foresight seems to be holding true.

However, I recently did a little comparison between the rising price of the coin and the alternative of investing with a trader (i.e Arbitrage).

It’s not a truly compelling comparison because of timing as traders operate on a monthly cycle but, nevertheless, had I invested in “Arbitrage” on 25 August (the coin price was then $4,672) and cashed-in on 25 October (at a price of $5,519) I would have made a profit of 44.2% (cumulative by trading).

On the other hand, if I’d just held on to the coin for the same period, it would have delivered a profit of 18.1% (both of which are hefty returns in any bankers parlance).

But since then the price of Bitcoin has shot past $7,000 so, as I’ve said, it’s difficult to compare.

However, it does seem that there is some glitter to this kind of investment.

For my part, as I sit looking at my brown (and all-but dead) lawn due to lack of water I’m wondering if that has been such a good investment. As far as Bitcoin is concerned I’m uncomfortable a little sceptical. I can’t help myself – I get a sense of deja vu about it. I seem to recollect similar promises and prognoses before.

Of course, I’m as jealous as hell of my mates who appear to be literally “coining it”.

Maybe I’ll buy a lottery ticket on Saturday?

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Comments

  1. Very interesting Chris!

    With your rainwater…you should use only half of your tank now (new lawn?) and wait for more rain, then use half again.

    With Bitcoin…I’ve been involved with arbitrage for a while and it’s paid me more than double my investment – let expert traders buy and sell on your behalf – you’ll score (as you say) whether the price goes up or down.

    BTW I see the price has dropped about $1,000 in the last couple of weeks – good news for traders!!!

    Reply
  2. Personally I think that Bitcoin is a bad “investment”. It’s a bit like Amway but without the products.

    Your rainwater tank is a great investment on the other hand!

    Reply
    • Hi Caroline, you can’t really say it’s a “bad” investment. You might think it’s a scam and that’s your opinion to which, of course, you’re entitled.

      But as an “investment” it’s producing results (like all of them, some poor, some very good) so I think a little bit of open-mindedness is called for here.

      Certainly, I’m tracking it very closely – so I guess I’m taking it seriously.

      Reply
  3. Early days my heart said “Do it.” My brain said “think of tulips from Amsterdam and the South Sea Bubble.”
    Bad mistake brain box.
    But now, I wouldn’t touch ’em with a barge pole.

    Reply
  4. Hi Chris,love your article.Just a thought.If you had a borehole or well point you could “mine” your water and decide when and how much you want to use or store.Your lawn would always look good and it doesn’t matter if it rains or not you are always winning. Bitcoin mining is just the same.When the price drops miners mine more and when it goes up you are still way ahead of the pack. So. Just as you are contemplating future garden parties, I personally suggest you think long term and buy a borehole.Or a Bitcoin mine.Can’t go wrong with either.

    Reply
    • Good point John. I’ll think about the borehole.

      As for the Bitcoin mining, I know people who are doing very well out of it. So I’m not against it – just wary. (In the meantime I’m probably losing out on a big opportunity – especially if the pundits about the rising price next year – arrgh).

      Reply
  5. Hi Chris,
    You should have had artificial grass installed as a lawn then you could save all your water in your tank for a rainy day!
    .
    Bob

    Reply
  6. Chris my favourite column thus far. The only thing missing was A flight of Teal to some water in front of your house Maybe next time. Anyway it’s amazing how The Water tanks work when there is water.We in Tucson use the to water our gravel.

    The Bitcoin, Blockchain , investment thing is like you say good for those who got in early. It is definitely the furture! However my take is great , it could go higher by 70 percent or lower by 70 percent in a day. There are many players . I am waiting till People realize You still cannot Buy Biltong or flowers from a street vendor.

    Reply
  7. Interesting article, I might add, very well written.
    I think you could describe the hype around Bitcoin as “FOMO”
    One always hears wonderful stories of huge profits made from “risky” , or should I say new untested ventures. Surely someone has also lost a fortune.
    I must admit I am wary of bitcoin , especially considering it depreciated $1000 almost over night last week. I think if I had invested in bitcoin and had seen the $1000 drop , I certainly would sell quickly for fear of losing my profits. How many other people think like me, which could cause a selling frenzy and thus further devaluation.
    In my opinion your water storage investment is far safer at the moment

    Reply
  8. Chris,
    Put it this way. Invest in 10 rainwater tanks, which all fill at the same speed at no cost, happy Brewer. $10,000 Bitcoin taken from savings, instant transfer. Frightened Brewer. Its all a question of balls.

    Reply
  9. To the Bitcoin commenters, I would not compare Bitcoin to Amway or any other company as it is not a company. It is a decentralized monetary system. You need to have a good understanding of cryptography before you will understand how secure it really is. Don’t forget the very same encryption algorithm is used to protect the very credit card transactions you do online, and that does not stop people from transacting online.
    When credit cards were first introduced, many people had the same view of them, look at Visa and American Express now…compared to the Rand it is not that volatile, and is a far better investment.

    Reply
    • What you say is true (about comparisons with companies and products). However, as a “decentralised monetary system” you can’t simply dismiss any criticism of Bitcoin by saying “you need to have s good understanding of cryptography…..”

      For example, you don’t need to have a degree in Economics before understanding currencies.

      I do agree that the monetary system is on its last legs (successive bankers and financiers are nailing in the coffin nails right now).

      So, I understand the attraction of Bitcoin.

      What I don’t like is the way some crypto currencies are being marketed – they sound like snake oil salesmen (and probably do more harm than good).

      Reply
      • Completely agree Chris.

        If you want to invest in Bitcoin, invest in Bitcoin in your own private wallet and sit on it. Stay way from this “Arbitrage” system you speak of, you are only making other people rich.

        Ignore the other crypto currencies, they have a small market share by comparison.

        The main thing for people to understand is the beauty of the currency being decentralised, with no human intervention or “federal reserve” it is a free and fair, self governing monetary system.

        I stand by my statement of understanding cryptography, if you want to call it a bubble you will have to understand the workings, especially as they are not selling a product, why are we comparing it to the Tulips? It is like me saying your car is going to break down because it is a Mercedes.

        Reply
  10. Use your rainwater Chris ….. use it for washing dishes, flushing loos, cleaning the house, steaming the veg.
    then you’ll thrill at the slightest drizzle that fills the tank up again.
    1mm rain per m2 of roof = 1 litre water

    Reply
    • Yes, I never knew how much a miserable drizzle produces. Mine’s now overflowing and I’m filling buckets like crazy!

      I have water!!!

      Reply
    • After last night I now have buckets & buckets of water – with the overflows going straight into the garden!

      So I need sunshine for a few days (so I can use my water for plants etc) and then more drizzle.

      Long may this continue!

      Reply
  11. Google: erina botha indigenous plants and reconsider your lawn, bit by bit if necessary. Your garden will still need water, but far less. Your tank will be a boon, given time. My sister has had two, for years and loves them.
    On the other, I don’t have the money to waste on it…

    Reply
  12. I invested in a 2,500 lt tank and went the whole hog and got a pump ,,, what a boon over watering as apposed to the trickle before ! But like you I worry when to empty the tank onto a happy garden and when to hang tight ! Decisions decisions !!

    Reply

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