Gold is a real asset, and there is a fixed quantity of it, and people have liked it for millennia, and so it has held its value .
. bitcoin is a real asset, and there is a fixed quantity of it, and people have liked it for a few years, and so it might hold its value, for all we know.
What on earth did I mean calling bitcoin a real asset? Most definitions of real assets are based on the distinction between intrinsic or tangible value, on the one side, and contractual or financial value, on the other.
It is a counter in a digital ledger that doesn’t belong to anyone; a piece of a collectively regulated payment infrastructure.
Bitcoin’s non-contractual character is part of the reason many of its fans think it will prove to have some of the crucial virtues of real assets, namely inflation protection and low correlation with financial assets.
Edward Finley, finance professor at University of Virginia, wrote to argue that the only defining characteristic of real assets is high correlation with inflation.
Bitcoin, he points out, is certainly not an economic input, and cannot be considered infrastructure “unless you buy the fantasy that it will replace central bank currencies”.
Inflation will cause the Fed to hike, which will end the liquidity cycle and hurt Bitcoin more than other assets.
As of Friday, third-quarter earnings growth among S&P 500 companies is 33 per cent, compared with the year-ago period, according to FactSet.
Good chart! As I often say: buy US stocks — their earnings go up! But sharp-eyed readers will notice that even if earnings do hit $50 this quarter, that’s lower than the first quarter.
Yes, energy and materials companies are killing it, but earnings in the consumer staples and consumer discretionary sectors that did so well during the pandemic are slowing down fast.
Another point on this.
If that’s right, we should probably not get too excited about companies easily clearing a bar that is getting lower as the years pass.