Beware of the Bubble

“A Nation Which Forgets Its Past Has No Future”

Those were the words on a 20-foot-long banner that “Mr. Slick”, my high school history teacher, kept carefully pinned across the width of his classroom for the entire four years I had classes with him.

“That makes no sense at all”, I thought to myself when I first read it at age fifteen. “The past is just a fuzzy black-and-white era, with big crude steam-powered factories and tragic wars with brutal low-tech weapons. The future is a land of ever-glossier technology and a peaceful society like the one I’m sitting in today.”

It was only gradually over the next thirty years that I have come to realize what Mr. Slick’s banner was really getting at. And now I can see that the wisdom really was worth 20 feet of classroom space, and its implications are big on both your own bank account and our entire world at large. Because what the banner really says is this:

Don’t be an Ass: Learn from the Past.”

Human nature never changes, so we are bound to repeat our past mistakes. Unless we are smart enough to see the seeds of these same mistakes in our present – and not repeat them.

Read the big books (and podcasts) that cover the longer arc of history. Or at least learn from our elders who are still around to teach us right now.”

The good news is that you can put this lesson to work immediately, because we are living through one of these moments right now. I can tell because of the number of people asking questions like this:

“Hey MMM, I know you’re an index fund investor, but what do you think about Gamestop? And Crypto? I see these things shooting sky high and I’m afraid of being left out! Should I invest?”

Meanwhile, the financial news, which should be a boring place of board appointments and dividend adjustments, has started sounding like a thriller written by a budding novelist who is still in high school. Among the recent stories:

A bunch of kids on Reddit have formed a gang called “Wall Street Bets” to manipulate stock prices in an ongoing series of pump-and-dump schemes. Just like the golden era of financial gangster activity of the 1920s that helped cause the Great Depression!

Last time this happened, we learned from our mistakes. And in 1934, the Securities and Exchange Commission was created to help regulate stock markets, making things like price manipulation and insider trading illegal.

But this obvious clash with previously accepted laws has been strangely absent from most of the financial reporting. The SEC is out of style now, and it’s popular among certain crowds to disparage it – perhaps in part because of an example from a certain role model.

Instead, we get positively framed interviews with the boyish CEO of the Robinhood stock trading app, telling us that this behavior is good, because it’s coming from the little guy.

“We stand in support of you, our customers,” Robinhood co-founder Vlad Tenev tweeted. “Democratizing finance for all means giving more people access, not less.”

Right – finally, we can fight back against the crusty Wall Street Elite and play the stock speculation (and manipulation) game on a level playing field!

Similarly, the chunks of computer data known as “cryptocurrencies” continue to receive widespread hype and religion-like devotion from their fans, coupled with mouth-foaming anger towards anyone who disagrees with the idea of placing speculative bets on their future prices (myself included). To Crypto fans, you are either with them, or you “don’t get it.”

They neglect the obvious and most important third option, an absolutely critical piece of perspective that any expert in any field, including investment, has in abundance: “I might be completely wrong on this.”

A true expert learns the big picture, researches all sides of an argument, and adopts a humble perspective. Experts put their energy into further learning and living by example, rather than participating in Twitter battles.

Real Investment Doesn’t Make Exciting News Headlines

To people who lack the perspective of history, this current fad seems exciting and perhaps like the “new normal”. You simply open a stock trading account and grab a crypto wallet and then just quickly get yourself rich by placing wild bets on recent fads and doubling your money every month.

The people playing this game are calling themselves investors, but in reality this whole situation is just the age-old game of stock speculation based on price momentum – which is in turn just another form of gambling.

Stock speculation is a shittier version of actual long-term investing, which we’ll cover in a minute: with speculation, you get massive highs and crushing lows. You can end up a millionaire or bankrupt, and the main separator between these two is your luck.

When you combine the results of all stock market participants and average them out, you get roughly the index performance. But speculators will tend to pay higher tax and transaction costs, allowing index fund investors to pull ahead.

Further compounding the hazards, the people who are the lucky side of this teeter totter (for example, people currently holding all their wealth in Tesla stock or the cryptocurrency or NFT of the day) will tend to attribute their success to skill, which leads them to become ever more confident and double down without realizing the preposterous risks involved.

Congratulations Jason! As someone who retired 16 years ago at age 30, I’d suggest some diversification. Why bet everything on such a volatile rocket ship, when you’re already set for life many times over?

They trumpet their success to the world, while those who have lost money tend to remain less vocal. When the tide inevitably goes out, the “winners” are stuck standing naked in the mud, and they lose a large portion of the gains because they failed to diversify and lock them in.

Because of all this, there are currently a series of giant, stupid bubbles forming in the financial world that nobody except the elders seems to be brave enough to question. And it leads to the following cycle of natural human behaviors, which everybody falls into – except, if we are lucky, those of us who have seen it all before.

The Bubble Hype Cycle

Even as a big fan of Tesla’s engineering accomplisments, I scratch my head at all the ongoing “analysis” of its stock price, which seems like just a random number generator.
  1. Somebody decides they think the price of something should go up. They share their story of why it should.
  2. This story catches on and gains influence, so people start buying the object and the price really does go up.
  3. Other people notice the “great performance” and pile in as well. They believe and reinforce the origin story from #1 above.
  4. The more this happens, the more it keeps happening. The stakes have become very high for people holding the trinket now, so they reinforce their beliefs with religious zeal (and personally attack anyone who disagrees with their thesis.)
  5. Newspapers document this circus with no skepticism at all, which lends it credibility. This leads even more people to pile in out of a fear of missing out.
  6. As earlier expectations are exceeded, the experts make up new, plausible reasons why this new price is justified instead of just admitting that it’s a bubble.
  7. Eventually, the cycle ends and everything comes crashing back to the ground. Anyone who was smart enough to sell does well, everyone else loses.
  8. Most importantly: the net effect of all of this bubble behavior was mostly just redistributing money from later buyers to earlier buyers.

So What’s the Alternative?

The alternative to speculation and riding on bubbles, is investing. And while I was discussing the difference on a walk with my son today, he came up with a really neat analogy:

A stock speculator is like somebody who notices the weather is warming up in March, and that the trend continues and even accelerates April and May. By August they have sold their winter coats and boots and are fiercely accumulating bikinis and flip-flops, shouting to everyone that you an’t seen nothing yet, this trend is just getting started!

An investor is somebody more seasoned. They have been through this all year after year, decade after decade, and thus they know what comes after summer. Therefore, the investor selects a portfolio of clothes that serve a purpose. Some of these garments deliver warmth in winter, others are great for the beach, and all of them with a timeless style and durability.

To put it another way: an investment is something that delivers value to you (and preferably does some good in the world as well), and produces products, services and eventual dividends that would make it worth holding for a lifetime even if you were never allowed to sell it.

And as a side note, a crypto speculator is somebody who says that the whole idea of “fiat clothes” is obsolete and we should be collecting shiny plastic frisbees instead. So they devote their entire salary to accumulating those, and neglect clothing altogether. When the fad catches on and the shiny plastic frisbees go up in price, they take this as vindication of their “investment” theory.

Then they go on Twitter and demand that Mr. Money Mustache apologize to his followers for telling them that speculating on future frisbee prices is not a good idea.

Just Keep Calm, and Keep Investing

Despite all of this hype and all the froth in stock prices, a true investor’s plan can remain stable through the seasons. I know a crash is coming eventually, but as mentioned in my pretend-forecast about an Impending Recession, I also have no idea when it will be.

And even when a crash comes, you never know how long it will last. One year ago, world stock markets collapsed in a great Covid-era panic. I conducted a Twitter survey to see how long people thought it would last. A full 75% of us thought it would be at least two years until stock prices came back. Being an incurable optimist, I guessed one year myself, and the correct answer was even faster: five months.

But again, I could also have been completely wrong.

You can never predict exactly which way the wind will blow, when bubbles will pop, or even which currently overpriced companies will eventually grow into their valuations. The only thing you can be sure of is that financial history runs in cycles just like the seasons, and you’ll do just fine if you keep your closet full of sensible clothes, and get out there and enjoy them on a daily basis.

Further Reading:

Last month, NPR shared nicely reasoned take on the betting mania, as they often do when the rest of the world goes crazy: Gamestop Mania likely won’t happen again. Here’s how to invest wisely.

  • Andrew March 26, 2021, 3:23 pm

    I’ve been caught up in the hype as well, albeit with 10% of my portfolio. Although I’m up, the stress of following these things all day doesn’t seem to be worth it. And I attribute my gains to luck, for sure. Thanks for this man, I’m going back to good ol’ indexing.

    • Chris April 4, 2021, 2:27 pm

      Yeah it seems to be all over the FIRE community. Single Stock picks / NFT’s/ Crypto / Pokemon cards etc. Everything is going through the roof. Going back and comparing notes on the history of the Dutch Tulip bubble, I think is a very good way to ground yourself and not getting sucked into the hype. I am not pulling anything out but I am also staying steady and consistent with Index fund investing.

      • Katie Camel May 29, 2021, 5:59 am

        I’m not an expert on the FIRE community as a whole because there are far too many bloggers/commenters within the community at this point to follow, but I know several bloggers (FreddySmidlap.com in particular) who invest in single stocks. I do as well. The first investment I made with my babysitting money at age 14 was purchasing McDonald’s stock, which, as you may know, is one of the legendary dividend stocks. It’s not sexy, but it’s been rewarding over the long haul.

        I continued adding my babysitting, waitressing, and gift money over the years. Then I grew hungry for more investment options and purchased Nokia and an actively-managed mutual fund. Nokia didn’t do so well, but the mutual fund did. I eventually sold that mutual fund and some of my McDonald’s stock for the down payment on my current home. But the bulk of my down payment came from the Apple stock I purchased in the early days of the iPhone. I took a chunk of my cash savings and invested it in Apple. Within 3 years it doubled. I sold it all as that 100% return started reversing and put it into my house. In the 7 years since I purchased my house, it’s appreciated nearly 6 figures. So all that money continues growing.

        Like most of the FIRE community, I invest in index funds (I own the requisite VTSAX and some others), but I’m not going to lie and say the growth of index funds in anyway reflects that of my individual stocks. That said, investing in individual stocks isn’t for everyone. All investing takes discipline, but investing in individual stocks takes far more time and discipline. These days, I’m limited on time but not discipline, so I generally invest in index funds while keeping a few individual stocks.

        I’m not bashing anyone for investing in index funds. I believe consistently investing in at least one low-cost index fund is the surest, though not fastest, way to individual wealth. That said, I don’t understand why some within this community feel the need to judge those who choose to step outside the “recommended guidelines” by investing in individual stocks or even crypto. I’ve never been a conformist and there are many more non-conformists in this community, so judging our slightly different investing approach seems a little strange. Ultimately, we all have the same goal of achieving financial independence through reduced spending and wise investment choices. We’ll all get there, though we’ll reach it through different paths. That’s kind of reflective of life as a whole, isn’t it?

        • Katie Camel May 29, 2021, 6:08 am

          Hmm…my above post drifted away from my original intent. I agree we’re in a bubble, but I also think people are investing in anything and everything they can at this point because there’s other place to receive any kind of return. Banks and bonds pay nothing in interest, so everyone’s investing in the stock market. Far fewer are purchasing crypto, but enough are that it’s inflating the value. (How much influence does Elon Musk have though?) I see crypto as more of a Dutch tulip than our market, which has actual value as it’s invested in legitimate companies. That said, I believe many of our stock prices are overvalued at this point, which is why I’m holding onto more cash outside my retirement investments. I’m still maxing out my retirement investments because they’ll have time to recover from the inevitable crash, but I stopped investing the leftover cash each month in taxable accounts. Once the market drops, I’ll buy again. I remember the days before the previous crash all too well. The same method served me well during the pandemic drop too. Yes, I know all about dollar-cost averaging, but like I said above, there’s more than one way to invest. Happy and safe investing to all!

    • Tgots April 15, 2021, 5:47 am

      I recently purchased and read the book manias, panics, and crashes and it really grounded me. A history of this kind of stuff.

      • Mr. Money Mustache April 15, 2021, 9:06 am

        Thanks for the recommendation, T! I really loved the book “Towards Rational Exuberance” for its coverage of the same subjects, but it hasn’t been updated since 2002. It would be great to read some books that cover the 2008 crash, and it will be even better to see a post-game analysis of the current exuberance, however it ends up shaking out.

        • Stefan May 20, 2021, 5:41 am

          I can recommend “The housing boom and bust” by Thomas Sowell, I think it explained the 2008 financial crisis quite well.

    • I, Vigilante August 15, 2021, 6:38 pm

      Plenty of reasons to be involved in the hype. Not much reason to follow the back-and-forth of social media about it.

      I’m in Gamestop, myself. I’m still mostly an index fund investor, but I set aside a small (also about 10%) gambling fund about three years ago to start investing in weed stocks. Basically throwing money at any company I thought would actually be around in five years. I’ve done well, and multiplied that initial investment by almost 10x.

      Much of that gambling fund was reinvested in Gamestop, but I invested in a way that doesn’t require much attention. I’m selling covered calls on it when it wildly swings up, and buying puts to hedge. I had it set up so that I won no matter what, so long as the stock didn’t immediately rise to a certain price too high to buy out of my short and too low to make profit on the shares, stay at that price for about 3-4 months, and then drop like a rock to sub-$20. Obviously, it hasn’t done that, so I’ve now made enough from Gamestop to realize gains larger than the initial investment. Without selling my shares. Now I don’t care what happens; I just rinse and repeat and see how much I get, MOASS or not.

  • Landshark March 26, 2021, 3:27 pm

    Agreed that things feel like a bubble right now. I’m curious if any of history’s previous bubbles were fed by artificially cheap money? Given how low interest rates are, it seems like this bubble could be especially brutal once it bursts. But then again, what do I know, I’m just a fish.

    • Opin-onion March 27, 2021, 3:27 am

      You might find this video entertaining and enlightening: https://www.youtube.com/watch?v=d0nERTFo-Sk

      Summarized, FA Hayek (among many others) states that one of the biggest causes of bubbles is low interest rates… basically, cheap or free money encourages people to spend freely and speculate, building a tower of cards that eventually will and must collapse. (Keynes says that it’s the emotional animal spirits that all humans have. I agree with both, I’d say that in normal times, higher interest rates force people to think instead of acting animalistically.)

      But yeah you’re absolutely right, low interest rates do (at a minimum) contribute to bubbles. Consider the housing bubble, back then, cheap money fueled skyrocketing housing values. Hard to believe that was about 12 years ago now and again, house values are skyrocketing and people are acting bizarrely. Sometimes, I feel like I’m the last sane man on the planet.

    • Gene March 27, 2021, 6:08 am

      The 2000 bubble was not “fed” by “cheap money”. Taxes and interest rates were relatively high. Fed funds effective rate was 6.24% and the top income tax bracket was 39.6 %. The resulting crash was pretty devastating and caused my dreams of early retirement to be seriously postponed.

      • ElbowWilham March 30, 2021, 1:12 pm

        The fed did lower interest rates in the first half of the 90s and kept it flat. Its all relative.

      • JG April 19, 2021, 6:44 pm

        It was “fed by cheap money,” but it didn’t come from THE “Fed.” All bubbles, to some degree, are caused by mis-allocation of capital. In this case, the cheap money was overseas money–in search of higher yields relative to their own domestic economies–which was invested in the comparatively safe housing sector (not such as sure bet in hindsight obviously). The crash was certainly devastating for many, and it’s unfortunate that you had to delay early retirement, but if your portfolio can’t withstand market corrections–a byproduct of almost any economy–then it wasn’t ready for retirement anyway.

  • Cano101 March 26, 2021, 3:30 pm

    Do you have the same concern for people with too much of their net worth in housing? In HCOL areas, it can be difficult to get that to a reasonable number! You should check out the housing bubble brewing in your old stomping grounds up north!

    • George Choy March 27, 2021, 11:07 pm

      Hi. As long as your properties are not in a declining area, you are holding for over 10 years and you bought based on profitable cashflow, then there isn’t much concern.
      I’ve owned a portfolio of properties for over 17 years and seen two market crashes. They always bounce back in the long term and the average house price (and my portfolio) keeps doubling approximately every 7-9 years.

      • John March 30, 2021, 4:52 am

        There are a lot of ifs in that statement. Also how do you tell if an area is declining? Is the bay area currently declining? Is the current drop a long term phenomenon?

        • Man Tan April 7, 2021, 5:43 pm

          Most good investment strategies have a lot of ifs. Why does that bother you? In fact this is not even limited to investment. Even good nutrition requires multiple checks are needed, fat (and type of fat, saturated, unsaturated, mono vs poly unsaturated), carbs (and type of carbs – starch, fiber, soluble vs insoluble fiber), protein (again type of protein – level of amino acids) etc. See a pattern? An intelligent person is not afraid of ifs.

    • PlantBased March 29, 2021, 10:34 am

      Back in 2005-2008 certain banks lent money to those who could not afford one home let along multiple homes – and they did this in great number. It’s a completely different ball-game now; lending standards are very strict now, the average credit rating for a home loan is around 770 in the USA, which is very high historically.

      As long as the population goes up, the amount of resources to be shared will go down, hence home prices rise. There will always be exceptions to the rule, for example if buying in an area that starts to flood, or a city with a declining population.

      Here is the thing: cheap money, and soaring national debts devalue currencies, and hard goods like homes and land values rise.

    • Mark April 2, 2021, 4:34 pm

      I do. Not so much that that real estate is in a “bubble”, but that rising prices induce many people to get emotional, stretch and devote far too much of their monthly income to a house payment rather than investing in productive assets like a large S&P 500 index fund portfolio.

      The house doesn’t pay you to own it like an index fund kicking off quarterly dividends does, you continue to pay monthly to hold the investment. The larger and more expensive the home is, the more you spend on mortgage interest, property taxes, utilities, insurance, an HOA, and the furnishings expected of a larger, nicer home. All these things detract from true wealth building and delude the homeowner into thinking they’re actually building wealth owning a home they cannot afford. And you only get to realize the home price appreciation by selling and moving to a much LCOL area.

      • Loop April 26, 2021, 7:47 pm

        Actually, a house is in fact a productive asset and *does* pay you to own it in the form if implicit rental income (basically, you get to live there “rent free”, and that’s a flow of cash to your benefit which does allow for building “true wealth”). That said, it’s only a net benefit if you don’t buy too big a house and if you own it for long enough.

        • Gina June 1, 2021, 1:42 pm

          Loop, I came here to say exactly this! Big ERN (from Early Retirement Now) has an entire blog post on this exact topic.

        • Renee July 6, 2021, 10:57 am

          This is true! If you can find a way to rent out the rooms (not without its own risks and benefits) or the house.

      • Renee July 6, 2021, 10:56 am

        Couldn’t agree more. Moreover, a house you live in has the added risk that you live in it. You care a helluvalot if anything were to happen to it, i.e., fork over tons of $$ to keep a roof over your head.

  • Chris March 26, 2021, 3:35 pm

    Your son has a good bit of wisdom bouncing around in there! The clothing analogy is a good and simple one. Winter is coming, you might say.

    Of course, the hard part in that context, is knowing when the real winter will arrive. The one that saying invoked fear of. Until then, lots of folks will make money on those summer clothes.

    Even the frisbee riders will have some fun with the sun still out.

    To your last note: the most important part might be getting out there and actually taking advantage of the freedom frisbees, summer clothing fads, or sensible seasonal gear might offer. Life keeps floating on by.

  • conthecoloradoclimber March 26, 2021, 3:39 pm

    I make $900 on doge coin and lost in it all on GME, then I learned about MMM and invested every single dollar I had saved and in my Robinhood account into index funds on vanguard. Now I’m much happier and have not lost any money, only earned. I also bike everywhere.

  • CaptainFI March 26, 2021, 3:40 pm

    Really interesting MMM – I find myself reminded about the importance and basics of boring investing. I recently switched my main investing style to being completely ‘hands off’ with automatic investing into my split of three ETFs (for global diversification into Australian, US and global markets) and stopped trying to buy up listed investment companies that trade at a discount to NTA. It’s been wonderful for my mental health.

    I have found though that this crypto mania is so popular and people keep keep keep asking me to talk about it – so I bought a small chunk of crypto (BTC and ETH) mainly just as an experiment and I’m honestly gobsmacked at the return. My main motivation was literally just to write about it – not to hold it as an investment though!

    Interesting here in aus, we seem to have the ‘perfect storm’ for a property bubble too – a beach side property here in Sydney just sold for $900,000 above reserve – something about falling unemployment rates, massive stimulus and record low interest rates….

    All of this talk of bubbles and hype and crypto and inflation makes me anxious, and the best solution I have found is to turn off the noise (news) and just rely on the automated investment feature. I’m actually looking into a similar Australian version of the robo investing platform you use too.


    PS. Would LOVE to interview you on my podcast, as the guy that helped start my FI journey !

  • Phil March 26, 2021, 3:43 pm

    Thanks MMM. I’m a die hard value investor (graham/Dodd style) and although I agree with everything you’re saying I actually own some blockchain currencies despite the hype. The reason is super complicated but it’s really worth investigating if you can look past the hype and speculation (both of which are really bad). Anyway…worth a look!

  • Matthew March 26, 2021, 3:51 pm

    The most logical argument I’ve heard in favor of crypto (specifically, Bitcoin) is diversification. Meaning, there’s no other asset quite like Bitcoin. It’s a hedge against government, and everything else. Cathie Wood shared the same idea in her ARK Big Ideas annual report.

    Sure, people who put 100% of their salary in Bitcoin (and then go and leverage margin to buy more) are crazy. But it doesn’t seem unwise to hedge 5%-15% of your NW into something with such an asymptotic reward potential, especially if you’re rebalancing your portfolio regularly.

    “A crypto speculator is somebody who says that the whole idea of “fiat clothes” is obsolete and we should be collecting shiny plastic frisbees instead. So they devote their entire salary to accumulating those, and neglect clothing altogether” <– this is a strawman argument. An investor can be a fan of index funds AND also recognize the extra diversification potential with Bitcoin.

    Bitcoiners are often criticized for viewing Bitcoin as a "religion", but Yuval Noah Harari shows in Sapiens that "money" is *literally* a religion. "Always has been", as the memers say.

    • Liam March 26, 2021, 4:44 pm

      For the last 500 years reserve currencies have changed every 100 years like clockwork. At this point not having a little bit of Bitcoin as insurance for this is more risky than not.

    • Troy March 26, 2021, 6:28 pm

      Ya great point calling out the straw man there Matthew. I would bet the great, great majority of bitcoin/ethereum buyers maybe put 5-15% of their networth into these coins (I put in 5% myself back in 2017, haven’t traded or done leverage with them, just buy and hold, and its now 20% of my networth which has grown significantly, I also invest mainly in index funds and real estate).

      Most who enter into crypto don’t use leverage, they aren’t investing their entire paycheck, maybe a very small percentage of bitcoin “fundamentalists” or “maximalists” or “maxis” as they are known really do that.

      • EfficiencyNerd March 26, 2021, 8:24 pm

        So now that it’s at 20% of your NW, are you going to do the proper thing and rebalance so that crypto is back at 5%?

        Personally I really don’t get the “iT’s A hEdGe AgAiNsT cUrReNcY” argument. None of these crypto coins have any inherent value. At all. Simply “being a currency not backed by a government” does not give it inherent value. Let me know when I can buy something in a certain crypto coin without first comparing it’s price to a fiat currency. If Tesla comes out and says “1 bitcoin will always buy you 1 Tesla”, then boom, a bitcoin has a tangible value now. Until that day, I’ll keep all of my investments in a diversified portfolio of thousands of companies which produce tangible products and service of actual value.

        I’m not trying to convince anyone here… just really trying to understand – how and where does owning crypto give you any real value, other than speculation?

        • Troy March 26, 2021, 10:38 pm

          Hey ENerd, I actually have started doing just that. I sold a decent chunk of BTC and put it straight in low cost index funds, US market and INT market. I have plans to sell more at certain price targets for BTC and ETH.

          To answer your question about what gives it value, the people who use it give it value. The miners who constantly increase the security of the network give it value. Every bank and hedge fund and mom and pop and teenager who buys it gives it value. Every citizen of a country with hyper inflated currency (Venezuela, Belarus, etc) give it value by using it. Being the first real crypto currency gives it value. Being decentralized (not controlled by a single entity), having no double spend possible, running damn near perfect for over 10 years, all these things give it value. Is it perfect? Hell no, many other cryptos offer more, but I would bet it’s here to stay.

          Look I get it, back in 2016 I thought it was ridiculous that I could earn money simply by having my computer run a program (mining) and get money in return. Seemed too good to be true. But if you do your research on it and have an open mind you might be surprised.

          • EfficiencyNerd March 27, 2021, 9:27 am

            Troy – thanks for helping me understand. I struggle to wrap my brain around the concept of “people use it therefore it has value”… that seems to me like nothing more than speculation. I also find it a very tough argument to say anyone “should” put money into it as a way of investing/insurance/whatever.

            I’ll likely remain skeptical… today 1 bitcoin buys me a car, tomorrow maybe it buys me a house, and the next day maybe it buys a loaf of bread. To me it’s hard to justify investing in anything like that. But, I do see some validity that if enough people are holding bitcoin in particular and agreeing that it has value, then perhaps the agreed-upon value is “stable” enough to use. For now I really just think it’s still too volatile for that though, as it’s several orders of magnitude more volatile than most 1st-world currencies.

            Also, those transaction fees… I’ll admit I don’t know the particulars, but whenever I look at the crypto fees for sending/converting/transferring crypto the fees seem to eat up way too much. And the electricity requirements to maintain the network seem unsustainable.

            One thing you mentioned that piqued my interest though, is countries with hyper-inflation. I can see where in that case in particular, bitcoin/crypto might be a more stable way to preserve asset value. But, I would think an even better way to preserve asset value for someone in that situation would be to hold something like Euros or US dollars – or even better, investing in thousands of global companies. Perhaps that’s not as practical, however.

            In any case, thanks for your thoughts – and I can see how crypto could, in theory, become the de-facto world currency if enough people use it and agree to it’s value – but personally I only think that will happen if and when multiple world governments agree that a certain crypto has a defined value.

            • charlie March 29, 2021, 4:58 am

              You are both correct. Think of it as a collectible like digital Beanie Babies/cards. There is value when there are collectors that want Bitcoin. The benefit to someone in Venezuela is that it might be easier to obtain Bitcoin, than it is to obtain USD due to exchange controls in place in Venezuela. Hence it could still be attractive to them, despite it never having a use case.

              That’s the objective argument. The amount of speculation though makes holding Bitcoin as a store of value too volatile for me though.

        • king mapo March 27, 2021, 6:54 am

          No currency has inherent value. We’ve just all entered into a social agreement that we can trade them for things or services, and the nation states have also agreed to do so between each other.

          When you hear the “hedge against fiat” argument, it means it’s a store of value, not currency. Think gold alternative, not fiat alternative. I can’t speak for inflation-ridden nations. BTC is probably more reliable not Bolivars.

          In order for goods to be pegged on a cryptocurrency, its entire supply chain would also need to be. So Tesla can safely price a Model S in BTC only after they can say the same for its components and so on.

          So are there things pegged to crypto today? Arguably, yes. NFTs for example don’t fluctuate in crypto value and there may be no need to think of them in USD. It’s a mindset shift and the majority of people don’t think that way, but the crypto billionaires do. Also, DAOs that seed fund projects in their crypto is an example of buying labor and services. Still very few examples, so it is still a speculative landscape.

        • ken smith March 30, 2021, 3:39 pm

          Value is what we give it. Study history – there has been many things that have been used as currency to buy and trade goods and what made it valuable was that we decided. Bitcoin can buy things, it can be traded and the people have given it value. Remember Dollars are just paper that has been given value, coins are just cheap metals. Bitcoin has gotten too big – sorry it is not going away. Some folks want to keeping denying it but how long will they keep repeating themselves. I use to be in that boat – I learned. Let’s revisit this article in 5 and 10 years and see. Or you can just go back 5 and 10 years to see what the future my bring.

          • Mr. Money Mustache March 31, 2021, 10:35 am

            I think there is a bigger picture missing from this argument: is that human sentiment is not a given, immutable force. It is very fickle and it changes with the wind and the seasons.

            Bitcoin is currently popular because enough people have gotten excited about it and now there’s a FOMO effect where everyone is piling on. Just because “institutions” are now jumping on the wagon, doesn’t mean it is any fundamentally smarter at its core.

            To counteract this effect, we need people to speak out against it and do their part to change the sentiment. Warren Buffett was bold enough to do so, and when I write articles like this I am doing my own part, however small it might be, to try to contribute to a more sane financial system as well.

            It may sound presumptuous, but remember that Mr. Money Mustache is ALSO trying to eliminate car culture worldwide, and to quote the blog’s original mission statement, “To save the human race from destroying itself due to overconsumption of its own habitat.”

            Compared to that goal, ending the bitcoin craze is like stepping on a tiny fly! ;-)

            • Adam August 17, 2021, 3:28 pm

              I have to say that I agreed with your sentiment for the longest time; that bitcoin was lacking fundamental value. But recently started to change my mind. Maybe it will evaporate to nothing; but I’m inclined to think it won’t.

              Bitcoin represents a combination of decentralization, digital scarcity, and the network effects of adoption. If you think of it as a valid monetary system that anyone can choose to participate in, then it’s energy consumption is a small fraction of what is used to secure monetary systems around the world today. Why would someone choose to adopt it? Precisely b/c of the scarcity. If you are saving money then you are hoping that those savings will retain their value into the future. With zero and negative interest rates around the world and monetary/asset inflation in excess of wage inflation; people are incentivized to find alternative; harder forms of money that are safer to save in. Given bitcoins predetermined diminishing issuance schedule, it looks like the best savings account at the moment.

              You should take a look at “The Bitcoin Standard.” The author injects his political opinions in a lot of areas unnecessarily; but he has many valid points about the value of hard money and savings independent of investment. There’s definitely an argument to be made that people would save more and consume less if their money held it’s value. Very Mustachian if you ask me.

    • Profit Greenly March 27, 2021, 6:16 am

      The biggest problem with Bitcoin (and all other Proof of Work Cryptos) is the insane amount of energy they waste. There are a bunch of disingenuous arguments against this that compare energy used for bitcoin to weird activities like flying gold bars around on planes, or turning a blind eye to the vast majority of fossil fuel electricity that Bitcoin is mined with to focus on the small portion of renewable energy it consumes (which could well be used for actual productive purposes if Bitcoin didn’t exist). When you compare the amount of money transferred per kWh with Bitcoin to a truly efficient system like Fedwire you see find that Bitcoin is using over 1000x as much to transfer farrrr less money. Because of how PoW is designed the energy waste of Bitcoin will only increase with it’s value. Right now Bitcoin alone uses 46-147 TWh per year, somewhere between the total annual use of Portugal and Malaysia. As the value goes up this energy waste escalates with it. I agree with MMM’s assessment that all cryptos are Ponzi schemes, but if you really want to “invest” in them please buy one that uses Proof of Stake or some other low energy verification rather than the hugely energy wasting Proof of Work. This blog post goes into the numbers on Bitcoin energy waste better than any other I’ve read.


      • Aaron Brown March 29, 2021, 12:37 pm

        I’ve been getting involved in a Proof of Space and Time that seems to address this by being as decentralized or more than Bitcoin but has an even better smart contract language than Etherium, called Chia designed by Bram Cohen with a red-hat like business model. Early days, but there may be engineering solutions to these energy issues of proof-of-work, and that avoid the other problems of proof-of-stake.

  • Raisin Mountaineer March 26, 2021, 3:51 pm

    Thanks for this. You helped me (a couple of years ago) decide to divest myself of the single stock that saw my parents and grandparents through their retirements— as it happens, it is an oil stock (which Gramps earned as his annual Christmas bonus by driving a truck for 40 years for Standard Oil — the story goes that he stashed it in a box under the bed and never checked its value until he retired). My Vanguard guy switched most of it out for a broad market balanced portfolio, mere months before Covid hit.

    I still have a remnant— enough to think fondly of Grandpa— but watching this “blue chip” stock deflate over the last year reminds me that my family ran a multiple-generation streak of mostly good luck.

    I will continue to ignore my “crypto hobby” friend’s solicitations to join him in grabbing the big bucks…

  • Scott Rieckens March 26, 2021, 4:11 pm

    Optimistic Take: Because I understand the power and sensibility of methodical index fund investing as a means to an end (FI), I tell myself to ignore the mania of Nyan Cat NFT’s, GME and Crypto. Also, I’d so much rather enjoy a hike or picnic with my family than spend one more second learning about reddit forum shenanigans. Hail to the simplicity of the Index!

    Pessimistic Take: I contemplate the early adaptor potential to accelerate toward our “end” using these new shiny frisbees. I worry about the powerful technological advancement curve creating opportunities or disruptions at a rate that won’t/can’t be regulated by our seemingly archaic governing bodies. Could this create havok never seen before, and will that chaos be even worse than a market crash?

    Realist Take: While I find these MMM reminders to be soothing, I still feel overwhelm and worry about disruptive technology (or byproducts of such tech) disrupting otherwise sound investment strategies. Especially when many within the FI community are participating with at least a portion of their portfolios, or so they claim. Anyone else feeling this way?

  • Larry L March 26, 2021, 4:22 pm

    “[A]n investment is something that delivers value to you (and preferably does some good in the world as well), and produces products, services and eventual dividends that would make it worth holding for a lifetime even if you were never allowed to sell it.”

    I really liked this quote. But what kinds of things are you referring to here?

  • david March 26, 2021, 4:31 pm

    I agree for the most part but it would be wrong to come away from this post with the impression that broad index funds are the answer. Current valuations are far outstripping earnings and your trusty VTI/SPY ETFs are chock full of these bloated companies.

    I’m just going to keep buying BRK.B. It’s a bargain at these prices and management continues to repurchase shares at an impressive level. It might not give me a 20% CAGR but I sleep better at night.

    • ElbowWilham March 30, 2021, 1:16 pm

      I have to agree with you. Buying the S&P index is essentially just buying 6 companies.

      • Mr. Money Mustache March 31, 2021, 10:29 am

        I agree that Berkshire Hathaway follows a sound investing strategy, and as a lifelong Buffett fan I do have a lot of shares myself.

        But Elbow’s statement about only six companies dominating the index is fairly inaccurate. I always recommend the VTI index tracker, which allows you to invest in about 3500 companies. The top 90 companies combined make up for about 50% of the index, and of course the largest do get a bigger share (currently Apple about 4.x%)

        I find it quite helpful to dig into the details of my investments – I did a bit of that here: https://www.mrmoneymustache.com/2020/08/22/socially-responsible-investing/

  • Liam March 26, 2021, 4:40 pm

    Any thoughts on super cycles which Ray Dalio and The Fourth Turning suggest we are at the end of?
    My understanding is that a supercycle is an 80-100 year cycle consisting of four or more lesser cycles. The challenging factor is that supercycles tend to end with a lot of volatility and a reset of norms. So what has worked for 80 years might no longer apply. Extremely hard to predict what might happen and plan for, except to remember that things like pandemics, hyperinflation, war, collapse, economic power shifts happen over and over through history

  • Profit Greenly March 26, 2021, 4:41 pm

    Great advice as usual MMM. My fav quote is “an investment is something that delivers value to you (and preferably does some good in the world as well), and produces products, services and eventual dividends that would make it worth holding for a lifetime even if you were never allowed to sell it.” When I read that I don’t just think of dividend producing stocks though. I think of stuff like rooftop solar panels, and heat pumps. These are both fairly big ticket items that almost match the “never allowed to sell it” requirement, but are also doing good in the world and are both totally worth holding for a lifetime. They also both produce a higher ROI than “safe” bonds, with even less risk. I bought mine a few years ago though and prices of both have dropped while their performance has increased so ROI is likely even higher now. The federal solar tax credit in the US even got extended! Given how overvalued many stocks are now due to speculation it’s a great time to shift some stock money over into hard assets like this that’ll give nice stable returns for the next few decades. Maybe consider an eBike or a Chevy Bolt while you’re at it (currently selling for under $20k at many dealers, and for an insane $19.95/month lease with $2k down at 1 dealer in SF). Anyone who’s unsure about the ROI of stuff like this can double check the math on my blog https://profitgreenly.com/net-zero-and-profit/

  • Tashina Taylor March 26, 2021, 5:01 pm

    I agree with you about the GME stuff….however, Crypto seems to be a whole other beast. It offers a bit more convenience (among other things) when it comes to money access, and pushes towards having a much needed worldwide currency. I’ve thought about starting my own crypto-based index style of investing.
    If you look at the beginning of the stock market, I can’t imagine people didn’t have the same sentiments towards it – it’s just a fad ect.
    People also thought the internet was dumb and just a fad when it started…

    • Mr. Money Mustache March 27, 2021, 10:50 am

      Right, but speculating on crypto coin price increases, and the adoption of one particular token as the world currency are two completely different things!

      Currencies are a boring medium used for transactions, and you don’t hold onto them in hopes of price increases. Speculative instruments are things you buy and hold, hoping to make returns even greater than the stock market can offer over time. So far, every argument I’ve heard for “investing” in crypto is based on this speculative proposition.

      • Joel July 28, 2021, 1:03 am

        Right, but when was the last time we saw a free-market process of monetary adoption? This makes sense from an Austrian economic perspective, but is utter nonsense to the Keynesian mainstream.

        Bitcoin is the most recent evolution of money. As such, though its not an investment, taking the time to understand the tech and adopt it as money results in benefiting from being early on the S-curve of adoption.

  • Brandon March 26, 2021, 5:35 pm

    Hi MMM, I feel like you are talking right to me. I followed your sage advice, and made myself a well diversified ETF portfolio. I thought I’d make one smallish bet on Tesla in early 2016, just because I really liked what they were doing. Well, over the last few years I added mainly to my ETF positions, but also a little to my Tesla. Then 3Q19 tesla earnings came out, and a surge began. Now Tesla is over 60% of my portfolio, and I’m sort of paralyzed by indecision. The plan is to sell off Tesla slowly over the next 10 years to make sure its under 5% of my portfolio when i’m ready to retire just before 50. Am I being a total idiot, or is it a reasonable idea? I’ve found over the last few months especially that I have a stomach for the volatility, and would hate to just exit Tesla entirely as I really enjoy following the company closely. Any thoughts would be greatly appreciated. Thanks for all you do, reading your articles that past 10 years has changed my life.

    • Mr. Money Mustache March 27, 2021, 10:45 am

      Hi Brandon – congratulations on your good luck! I too confess to using a small portion of my “play money” and getting lucky on Tesla stock, even though it was pure luck and not actual investment.

      I actually hesitated to pick on Tesla too much in this article, because it IS a fundamentally great company. I was skeptical in 2012, but their massive breakthrough technical successes (most notably rolling out the supercharger network so early and most recently the construction of four giant new super-efficient factories) has convinced me that they are here to stay.

      On the other hand, the followers of the stock – including Cathy Wood and ARK investments, behave very evangelically. If you are a logical investor, a stock has a certain value based on your fundamental understanding of the company and its market. If the stock rises to WAY ABOVE this value, it would make sense to cash out and invest elsewhere. But the bubble mentality is to keep holding on and pumping for higher – regardless of how high the stock goes.

      For example, if you dig into ARK investment’s tesla valuation models, they have some preposterous assumptions like tens of thousands per year per tesla of robotaxi revenue – and no competition even ten years from now. This COULD of course happen, but to me it sounds like reaching and stretching to justify the current valuation.

      Back to your specific situation: I definitely think Tesla will continue to prosper for decades to come. But it might be a matter of “growing into their stock price”. After lots of volatility, it may well be the same level in ten years, as it is now.

      Case in point: Around March 2000, I was working as a software engineer at Cisco Systems, and the company was in its heyday. Our company was worth close to a trillion dollars inflation-adjusted, and the CEO was predicting another doubling in value if we executed well.

      21 years later, the company has executed well and been consistently profitable. But the total market value is still far below its level of 21 years ago, even on a nominal level let alone accounting for inflation.

      • charlie March 29, 2021, 5:04 am

        ha! but is an old-world company now and clearly that’s why it wasn’t going to work! [Tesla] and [BTC] are much differenter and better!
        Can I replace and [] with whatever flavour of the month now so I can say that “this time is different”.

        What amazes me most though, is the speed at which we were predicting the end of the world from Covid with “this time is different” to predicting the future prosperity forever with “this time is different”.

      • billy March 29, 2021, 6:51 am

        I was a cafeteria grill at Cisco Systems, around that time, small world…

    • Andreas April 4, 2021, 1:57 pm

      I would sell the amount of Tesla that would get my net gain to above getting equal or double my invested money. With this done, my thinking would be that whatever I do or decide, I´ve already done very well and can´t loose money.

      That would give me complete peace of mind. I´ve done this a few times and I just can say this allows for rational decisions. I walked away from a lot of money this way but I also kept a lot of money, e.g. when Wirecard collapsed. Doubling your money is great. Deciding to hang in there afterwards is great, too. And even if the stock collapses, you already made a fair share…

  • Tory His March 26, 2021, 5:46 pm

    Surely there should be more history we take into consideration than only the last 100 years to prevent assishness

    • Mr. Money Mustache March 27, 2021, 10:32 am

      You are right that the US has increased the money supply – but that doesn’t necessarily mean permanent trouble.

      The reason behind it was attempting patch the crater left by the financial crisis, to support fuller employment and to fight DE-flation. I recommend the book “Stress Test” by former treasury secretary Timothy Geithner. Whether you agree with the policies or not, it would be difficult to argue that he’s not a brilliant and thoughtful guy.

      Also, while our federal reserve balance sheet is large by US historical standards, it’s also helpful to compare it to our peers for some perspective: https://www.mrmoneymustache.com/wp-content/uploads/2021/03/money-supply.png

      • Mighty Eyebrows March 27, 2021, 2:37 pm

        I completely agree with MMM’s point of view. Also, looking at M1 money supply is misleading. Read some Morgan Housel:


        …and then look at M2 instead.

        • Nick March 30, 2021, 1:18 pm

          An increase in money supply, M1 or M2, will not by itself cause inflation. That requires monetary velocity to increase as well, which is “the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period.” Monetary velocity plummeted in 1Q2020 and has remained low through the pandemic, (https://fred.stlouisfed.org/series/M2V) but if the virus fades and people start spending their VASTLY accumulated savings (https://fred.stlouisfed.org/series/PSAVERT), then inflation or hyperinflation are possible. Alternatively, if people don’t spend their vastly improved savings, then economic inequality will only get worse, and all the free money the govt pumped into the economy will be to blame.

  • Catprog March 26, 2021, 6:01 pm

    I have a bit of speculation in the crypto and gamestop situation.

    As in less then $1,000 in both.

    My thinking is, if the gamestop situation is correct then the market will crash as a result.If they are not then my main investment will still be good.

  • Troy March 26, 2021, 6:19 pm

    Genuine honest question, and I hope you answer it.

    What would it take for you to admit you were wrong about bitcoin? It is now accepted for payment with Tesla. Large financial institutions are adopting it for their clients. I forsee it being an option in most employers 401k very soon. Having a money that is not tied to one country has value, in my opinion. Having a money which can’t be infinitely printed by a central bank has value, in my opinion.

    You are fully on the “crypto is a bad investment ” boat, we git it. But surely if it keeps gaining adoption and keeps getting better, at some point you have to admit it has merit. Or else just fully live in denial forever about it.

    Are you willing to change your initial judgement on it and if so what would make that happen?

    • Ron Cameron March 26, 2021, 7:33 pm

      I too would like to hear the answer from MMM, if only because it’s a tricky (but reasonable) question.

      For me it’s like watching someone hold their breath for an incredibly long time. To the point that people are placing bets that he can hold it -forever-. What would it take before you, the naysayer, were also convinced he could hold it forever? Because if you say “When he holds it for 60 minutes straight, I’ll place my bets with the rest of them that he can hold it forever” I bet I’d know what would happen in the 61st minute!

    • Flip March 27, 2021, 7:03 am

      If you read MMM’s definition of an investment carefully, it answers your question. Crypto (by itself) produces no goods or services and will never pay dividends. Since this holds true now and in the future, don’t expect MMM to change his mind; it makes no sense hold as an investment. It’s rise in price is pure speculation.

      I get that blockchain has its uses and can add value when companies use it as part of the goods and services they provide, but crypto does not fit the definition of an investment. Sure, many have gotten rich with it as long as you can sell it higher to the next sucka, but that’s not enough to make it investable.

      • Troy March 27, 2021, 12:28 pm

        Just to correct you Flip, there is many, many ways to currently receive dividends from holding crypto. As in right now, at this moment. Staking is one big way. Just Google “cryptocurrency earn dividends” if you don’t believe me.

        I agree with MMM that speculation plays a large part in what drives interest to cryptos, but to assume it is the only thing at play, while ignoring all the other beneficial and technological improvements it can offer is pretty ignorant in my opinion.

    • Erik March 27, 2021, 7:21 am

      I have my own opinion on crypto. There is no denial and no believe. I can not know how it turns out. But if bitcoin will truly be accepted as a currency and fiat currencies will go down the stream, what happens to all the companies in those index funds we hold ? Will they cease to exist ? What will I buy then for bitcoins ? Or will those companies also switch to bitcoin ? I think if bitcoin will really gain on credibility and will be accepted more and more as currency, eventually our dividends could also arrive to our accounts (wallets) in form of bitcoins and we can sell our shares for bitcoins. So if there is a bright future for bitcoin, I think that the shares of sound and healthy companies will still have the same value. Eventually It does not matter if they can be traded in dollars or bitcoins. Which currency will prevail is not important on the end. Again as so many readers before mentioned this quotation: “an investment is something that delivers value to you (and preferably does some good in the world as well), and produces products, services and eventual dividends that would make it worth holding for a lifetime even if you were never allowed to sell it.”

      • Mr. Money Mustache March 27, 2021, 10:17 am

        But why would we switch to “Bitcoin” in particular, instead of any of the other cryptocurrencies that are better engineered with greater scalability and lower power consumption?

        If we switch to a a real more digital source of money, and plan to use it as a currency rather than a speculative instrument as Bitcoin is used, I believe it will have to be with the coordination of actual governments. A “Fedcoin” or “G20Coin”, as I suggested in my 2018 article on this trend:

        • ERSG March 31, 2021, 2:45 pm

          There is little difference in the concept of “money” between bitcoin vs a Gold ETF.

          I get the technological differences. Blockchain and yada yada…

          But when we look at Bitcoin as a worldwide currency, then we only need to look at a Gold ETF.
          If everyone had a Gold ETF transfer account like a “Gold venmo account”, one could transfer Gold units to each other same as Bitcoin. Didn’t happen. Not to mention, Govs needs fiat currency to influence the economy.

          At best, Bitcoin would just emulate the purpose of Gold.

          • Chris B April 5, 2021, 10:57 am

            One can already “spend” from a gold ETF easily. Just get a debit card from your brokerage, click sell on one share of the ETF, and buy your groceries using the debit card. This involves no commission or fees except to the vendor.

            This might not be possible in all countries of the world, but which is more likely? Impoverished countries buy bitcoin from rich Western speculators or brokerage services expand and improve in those countries?

            • Joel July 28, 2021, 12:53 am

              Impoverished or developing countries don’t need to buy bitcoin directly, as a speculation: they’ll demand it for the goods they’ll sell to a global market. Bitcoin as a global money (not an investment) gives every entrepreneur in the world an ability to sell worldwide, to anyone who has bitcoin.

              Impoverished nations will earn bitcoin, not buy it.

        • MAtias April 1, 2021, 3:22 pm

          Although the USD doesn’t have the gold standard anymore, it has a way better standard. The “Led Standard”. Either you pay your taxes in USD or our police officers will kill you by led intoxication.
          In the end, the only thing that has real value is firepower. And nowadays USA is still the country with the biggest firepower to back USD up.

    • EfficiencyNerd March 27, 2021, 9:55 am

      I can’t speak for MMM, but as someone else who fully agrees with his position on bitcoin – for me personally, once a company starts accepting bitcoin/whatever *without first comparing it to a fiat currency*, I will accept that bitcoin has value as a currency in it’s own right. I still wouldn’t call it an “investment”, the same way I wouldn’t call US Dollars/Euros/other currency an investment, but I would accept that it’s a valid currency.

      For example, if Tesla says “1 bitcoin will always buy 1 Tesla car” (with whatever options, etc) – then bitcoin is the currency standard they use. Put another way, right now any company that accepts bitcoin is doing the math to determine how much bitcoin is valued in US dollars (or whatever fiat currency), and say this is the price of this item in US dollars, therefore that equals this much bitcoin. If instead companies were to say the price of our product is always X bitcoin, and thus the amount in US dollars is fluctuating based on the bitcoin standard – that is when bitcoin has become valid. But I don’t ever see that happening until companies can then spend those bitcoin to pay their bills (again, without first comparing its value to some fiat currency). Realistically, I’d bet a lot of money that’s going to take government intervention.

  • Rural Rothbard March 26, 2021, 6:21 pm

    The boom/just cycle is predicted in the Austrian school of economic theory. The problem, of course, is fiat money and fractional reserve banking.

    • Mr. Money Mustache March 27, 2021, 10:36 am

      It’s not a “problem”, it is “our current approach to managing the money system”, and based on the results of human prosperity the past 500 years since fractional reserve banking was introduced, I would say it works pretty damned well.

      I first learned about the label Austrian Economic theory when reading Peter Schiff’s books Crash Proof / Crash Proof 2.0. Those books were simultaneously so confident, and so wrong about everything, that it has kept me pretty skeptical about the whole field. However, I could be wrong and I’ll keep reading more to try to understand why some people are so drawn to that doctrine.

  • Brady March 26, 2021, 6:33 pm

    Hey Pete. I’m unsure of your preference regarding posting additional links, but for those with 30min to spare (less if you speed it up by 25 – 50%!), here’s a nice YouTube video by Ray Dalio offering a perspective on how the economy works – including taking the long view! https://www.youtube.com/watch?v=PHe0bXAIuk0

  • Joe (arebelspy) March 26, 2021, 8:28 pm

    “An investor is somebody more seasoned.” A+ quality pun.

  • ZeroGBuff March 26, 2021, 11:39 pm

    I’m curious to hear where you think SPACs fit into all this, MMM. My gut is telling me that while some legit companies are certainly entering the market this way, the lack of SEC oversight will draw a bunch of sketchy companies pulling shenanigans. I’m sticking with my index funds, of course, but I could see this rocking the boat in a little different way than the other trends covered in this post.

  • Prateek March 27, 2021, 2:45 am

    I read this article and i loved it. This era of bubble has been unresting for me since i just don’t get it. I was also wondering if i’m turned into a dinosaur. But your article (and the detailing) just reassured it’s my experience resisting the fad.

    A big-shout out to my former boss from Seattle who introduced me to MMM in 2018. If you’re reading this, Thank you !

  • some guy on the internet March 27, 2021, 4:07 am

    In my opinion people are confused what crypto really is. An investment that promises an increase in value over the time or a mean of payment that will be adopted by more and more companies and used by more and more individuals.

    My point is that it can’t be both. If it’s an investment, it would be widely expected that its value should increase giving the investor a certain return. The problem is that the only way how the value can increase is by growing demand of the specific coin which potentially could be caused by hype or increasingly wide corporate adaptation. BUT, the core motivation of the corporate world to adopt it, would be to use it as a mean of payment for selling goods and services. So if the wider adaptation fuels increase in price/value then it puts crypto in the same bucket as volatile fiat currencies that corporate world is so eager to avoid in global transactions.

    For me this is a paradox because on one hand we want its value to increase which is possible only by wide adaptation but if its widely adapted it can’t really be used due to its volatility (or ever growing value).

    Even if crypto will become as a widely used mean of payment, it shouldn’t matter when you get it or when you start using it because the core motivation for a global use should be its price stability combined with secure use and other beneficial elements compared to fiat money.

    I guess my stand is that you can’t invest in crypto currencies, you can trade them (aka speculate) as with forex, it just happens that crypto seem to have much bigger amplitude of volatility frequencies than forex. Also, we need to remember that if the whole hope behind wider use is based on if the corporate world will start accepting it as a mean of payment, it takes one decision by government to outlaw it and that will can be the end of the story real quick.

  • Simon W. March 27, 2021, 4:19 am

    Amen to that, MMM.
    Something that I always keep in mind:
    “A currency is only as much worth as people believe in it.”
    This is valid for all currencies, not only the digital ones.

  • Dibbels81 March 27, 2021, 5:47 am

    Jack Bogle wrote about “fun money”, no more than 5% of your total portfolio invested in individual stocks or speculative investments. I’ve got a bit of fun money invested (not particularly fun at the moment.) To youngsters out there, I’d recommend getting at least 100k in your core index funds before trying your luck at stock picking.

  • king mapo March 27, 2021, 6:02 am

    Hey MMM readers. Now that you’ve read this cautionary article, please go and dig deeper into all the points made. He even makes the argument that you should since we should strive to be experts investors.

    This is good advice, but can really put off some people from understanding these issues deeper. For example, the Wall Street bets narrative being a bunch of kids manipulating the stock is surface level stuff that I’ve only heard parroted on the news. It is much more likely that hedge funds and whales are causing the prices to pump and dump. Most of these “Reddit kids” can’t even short sell or have high frequency trading machines. The point is we don’t know for sure and that shouldn’t be the final take from that fiasco. It is a signal of market exuberance but also maybe of pent up energy from the frickin pandemic.

    With crypto, I would compare it to the early days of the internet, not dismiss it completely. It’s going to be disruptive, but a lot will fail with only a few taking the lion’s share of the market. There are tremendous utilities being built that are better alternatives to the current system. For example, look into the DeFi phenomenon. Sorry MMM. Your crypto take is ignoring that the new (and future) generations are digital natives. Computer code funny money is more natural to them than rusty nickels and dimes.

    • anthonyjh21 March 27, 2021, 8:40 pm

      I’m glad someone actually called this out about WSB. There’s a lot in this blog post that can only be called media spew and it’s clear MMM didn’t do much if any digging. Feels like a surface level dive into researching before forming an opinion and posting for the MMM crowd. Then people who comment have virtual gift bumps and confirmation bias activated. It’s honestly disappointing.

      Respectfully, I’m unsubscribing from these emails.

      • Andreas March 30, 2021, 7:18 am

        Please hold. Someone does not agree with bitcoin hype, calls it evangelical and due to this you unsub to MMM? Over a currency? That indeed seems like a misstake on your end.

        Confirmation bias goes both ways, but please don´t be one of those that unsub to everything just cause you encounter a different opinion.

        This is why bitcointhings are called evangelical and fanatical/religious.

      • Jay April 26, 2021, 3:38 pm

        The idea would be to view opinions different than your own to either confirm your investment thesis or call it into question. Either way, it is beneficial to support or question your position.

    • Panda March 28, 2021, 7:28 pm

      I am one of these ‘Reddit kids’. I’m also 43 years old.
      WallStBets says it all in the name, a lot of is a bet – just like gambling. People are very clear about this, and actively encourage others not to ‘bet’ more than you can afford to lose. But this doesn’t mean that people aren’t capable of performing some mind-blowing research and that every investment made by these ‘kids’ is an ill-thought-out gamble (any more than an investment made by a ‘seasoned investor’)

      Take the GameStop situation for an example; the pivot from a brick and mortar company to an e-commerce one is a significant change. New board members CFO, COO already announced, the majority of the old board resigning in June and new leadership with a proven track record of transforming companies, is in. This company is a solid investment with a big upside potential WITHOUT the short squeeze that is still taking place. Think Amazon but for gamers. The short squeeze is a bonus. As the hedge funds are forced to buy back more shares than actually exist, the share price will increase dramatically. (Your stages of the bubble hype cycle are misleading at worst and lazily researched at best – at least in the GME situation)

      I plan to ride the short squeeze wave to a number that I have in mind, sell and make a lot of money, and wait for the dust to settle and the hedge funds have finally covered their shorts. When this has happened the volatility will disappear and I will re-buy back into GameStop for the solid investment that it is.

      Do I have all of my money in it? No
      Do I think that it is a $10 000 per share company? No
      Do I think that it will temporarily hit $10 000 per share during the squeeze? Yes
      Do I think that without this squeeze GameStop is still currently undervalued? Yes.

      As for crypto – like most people, I don’t understand it enough to talk intelligently about it, but unlike most people – I will refrain from attempting to.

      • Kitty April 7, 2021, 12:12 pm

        I am also one of the ‘Reddit Kids’. 28 and an index-only investor from 2017. I did an immense amount of research and increased from $100 to nearly 3% of my assets in GME from Jan-Mar. I was up 3x at the peak and exited with a 12% profit. I was an avid reader of all types of resources and could never find any legitimate facts.

        How can you make the statement GME hits $10K when you say you don’t understand it, wsb and the other gme forums read like echo-chamber cults led by 16 year olds. It’s preposterous. The chart already looks parabolic and to the moon.

        Pigs get slaughtered.

        • Chris May 30, 2022, 12:15 am

          It touched $325 at the peak of the squeeze, and no higher. It was $40 three weeks later. It’s now yo-yoing around the $150 mark, which is still a massive win if you bought in 2020 or earlier.

  • slacker41 March 27, 2021, 8:15 am

    MMM, when you combine the facts presented in the book Good to Great with the book Common Stocks and Uncommon Profits, you get TSLA among some other stocks. It’s not the Random Walk Down Walls Street, but it does appear to be an alternative path to investing!

  • Strummin March 27, 2021, 8:58 am

    Thanks for the reminder that speculating and gambling are two sides to the same coin. Nothing wrong with 2-5% in high risk speculative assets but you have to be ready to endure the pain if you go all in! I pushed Wprt to the limits riding it to 12$ and a 1200% profit and then doubled down at exactly the wrong time! Now I have a nice little loss going…..holding my Bitcoin cause it’s a form of diversification at only 1% of my assets amd reccomend everyone own a small piece……can’t wait to get back into my index fund and sleep week at night! I should have listened to me Collins!!

  • user101010 March 27, 2021, 9:03 am

    Historically, the world turns on it’s head every so often. Governments investing in junk bonds, Governments propping up zombie businesses at the expense citizens, the SEC standing behind billionaire market manipulators and insider trading for their own future job prospects at the expense of the very people they’re created to protect. These “fads” that you say are just “speculating” are really the people’s working answer to protecting themselves against a rigged system.

    These are crazy times, you as a conservative investor should be quaking in you’re boots about the present value of securities and their indexes, about the rapid expansion of the money supply and all the yes men economists and academics taking about how money supply no longer has anything to do with inflation. We will probably see a continued run up of all stocks for a little while longer, but the bill will come due. Not hedging against the current institutional corruption and insanity, with crypto is insane, and advocating not to hedge is corrupt. Even Morgan Stanley sees it. That’s why they’re into crypto.

    • Mr. Money Mustache March 27, 2021, 10:13 am

      The thing is, comments like this one are a very seasonal phenomenon as well (although the Internet is a big enough place that they are in permanent bloom in some spots). People worry about the money supply, the rigged system, everything being on the verge of explosion.

      The reason I strongly disagree with this perspective in one word: productivity.

      Here’s a quote I still stand by, and then a link to the article that it came from:

      “Humankind’s ability to live well and prosper depends at its core only on productive land, sunshine and our collective knowledge. While the first item on the list is currently under some attack, the second comes with a billion-year guarantee and the third is increasing so rapidly that it should easily be able to correct our current failures in the land department.”


      • user101010 March 28, 2021, 7:30 am

        I watched my city burn last summer. I’m watching the global economy grind to a halt because of a single boat. I’ve been lucky enough to watch from the sidelines as other countries across the globe destabilize, hyperinflate their currencies and revert to being dangerous places. Only a few months ago I got to see that the USA has a lot more in common with countries like Venezuela than we’d like to believe. It’s not doom and gloom, it’s respecting reality, appreciating the great good fortune that we are currently experiencing and planning for a time when this good fortune might end. Certainly, if the point of the blog post is about learning from history, you must recognize how many times the pages have turned on a civilization. Putting all your eggs in the basket of the mainstream system is, in the long term, just as bad as never selling Xerox, Polaroid or Wang computers. Everything comes to an end, businesses, industries, countries, etc hedging against those ends is prudent investing, taking an investment all the way to the grave, is not.

        • charlie March 29, 2021, 5:13 am

          So by your reasoning wouldn’t a basket of all the biggest companies in the world as an index be more realistic/prudent than betting on a single outcome?

        • cryptoHedge March 29, 2021, 7:25 am

          I hope one day that MMM realizes that his fans urging him to diversify into crypto is not coming from a place of evangelizing, but from legitimately wanting him and this community to be better protected. “If MMM had put 100k into BTC in 2018″…. those arguments aren’t going to convince him. I appreciate your comment, because we forget how crazy things can get, and while it is not “the” solution, crypto is a great hedge.

        • Andreas March 30, 2021, 7:27 am

          Lets say you are right, why would any type of cryptocurrency help you with any of this doom and gloom end of world scenario? Why trade with crypto if there are no markets left to buy or invest with? How to buy a loaf of bread when the bakery is burning? Crypto cant hedge that.

          Short run and long run? Please explain AS SHORT AS HUMANLY POSSIBLE, no more “dig into it and read 5million pages of crypto-arguments”. Can you do that for me user101010 ?

          I feel that to many people that todays troubles and wishes for anything to help them, most of us know there is no god so maybe tech instead? Hence crypto and promise of paradise (again).

        • Phil June 6, 2021, 4:09 pm

          Your post is an argument for paying off all your debts, including your home. Keeping your expenses as low as possible and holding assets that you can hold in your hand: Gold, silver, diamonds, etc.

          If it all goes to hell the internet and the servers that mine the remaining solutions and process transactions are at risk. That is why I would never invest in GLD over holding gold coins.

          Bitcoin and GLD are investments. Land and gold coins are tradeable assets that can be used if civilization fails.

      • Jon March 29, 2021, 9:43 am

        GDP is closely correlated with the growth of energy use. All of our productivity improvements (productivity measured in human hours per task) are really just substituting more energy for human effort. It has certainly been nice, but it’s all been riding on the back of massive expansion of energy consumption over the decades, almost entirely powered by fossil fuels. (There are certainly some counterexample instances of us decreasing energy use in a specific application, though often those are cancelled out by Jevon’s paradox.)

        The continued growth of the world economy depends on our ability to continue to consume more and more energy.

        That has alarming implications – to me at least.

        • Mr. Money Mustache March 31, 2021, 10:17 am

          Right – but if this hypothesis of productivity’s relationship to energy use is true, imagine the explosive century we are about to have now that we are replacing expensive, dirty, finite fossil fuel energy with free, infinite solar and wind energy? (With better forms of nuclear on the way too)

          It’s already so much cheaper, and it has nowhere to go but down from here.


          • thedude123 June 9, 2021, 1:07 pm

            I love the sentiment, but that only applies to electricity. You can’t very easily move a container ship through the ocean, or a plane through the sky, on electricity. You also can’t make about 10,000 different products and chemicals we currently make from oil (plastic, asphalt, etc). I’m hopeful for the long term future, but we need a bunch of other paradigm shifts before we are anywhere near being done with fossil fuels.

            • Mr. Money Mustache June 11, 2021, 6:43 pm

              I agree with you on the plastics and chemistry, but definitely not on the container ship and airplanes: electric versions of both are already in existence, and they are already better and cheaper to operate – and we are only at the start of an exponential increase in battery capacity (mainly because of the billions of dollars being invested to do so).

              Because container ships sometimes have to operate for several weeks at full power without refueling, they need a higher energy density than even planes (I calculated that you’d need to use up about 25% of the ship’s cargo capacity with Tesla Megapacks in order to duplicate a full load of fuel oil). But a small next-generation nuclear reactor could do the job with minimal mass, just as it already does with aircraft carriers and such. Or we could wait for a 3-4x increase in battery density (10 years) and and coat the ship in solar panels, and electric would be competitive with oil at that point. In mass, but MUCH cheaper from a fuel perspective.

      • JeffD April 2, 2021, 12:50 am

        One of my top five Onion articles focuses on ever increasing technological “breakthroughs”:


        • JeffD April 2, 2021, 1:12 am

          PS Bitcoin and worldwide negative interest rates come to mind. I think your history teacher was onto something.

  • goodcoffee March 27, 2021, 9:08 am

    Thanks MMM – that’s the cold shower I really needed

  • Sendug March 27, 2021, 10:09 am

    Totally with you on knowing your history. Two of my best reads this past year have been Ray Dalio’s Principles for Big Debt Crises (available free on his site) and Nassim Taleb’s Black Swan/Antifragile, both of which give perspective on what’s the worst that can happen, the worst case scenarios for what actually has happened, and what we simply can’t know because it’s never happened before.

    A couple interesting takeaways were:
    1) They’re called Black Swans because they’re unpredictable, and the scariest thing are the unknown unknowns. Everyone’s heard “past performance is no prediction of future behavior”; look up the turkey story if that hasn’t sunk in yet.
    2) You can also benefit from fat tails: put the bulk of your money in safe bets, then bet on the wild and crazy with a small amount, like maybe 1-5% of your net worth.
    3) Dalio’s Holy Grail of investing: Find and invest in 15 uncorrelated return streams and you can reduce your risk to a small fraction without sacrificing returns.
    4) The advantages of diversification dwindle past 5 of any one asset class, be it stocks/indexes, rental properties (although single/multi/commercial could be classed separately), crypto, commodities, clients in a particular industry, whatever.

    That said, I will also push back on your hardcore distain for crypto. Understandable that investing in something you don’t know is essentially gambling, but based on the above nuggets from people much smarter than me, I myself have judged crypto worthy of a small (currently 1%) segment of my portfolio. It definitely qualifies as an uncorrelated asset class, and it still has fat tail potential if played correctly (not just BTC, which is probably too big to see the potential of smaller/newer alts). I’ll keep it under 5% and rebalance out above that point. I’m getting advice from a crypto-heavy friend on what to do with that, but it sounds very involved for those who want to go in deep (more effort than I’m willing to give it). I might do another 1-2% in EV technology (I see there are indexes for that now) as it’s another something I think it here to stay and wave of the future.

    As for NFTs, my friend’s advice was to chase the proverbial picks and pans in the gold rush: find the coins that people use to buy NFTs and let them gamble. I can see potential in the concept, but I’m not into collectibles. It probably makes more sense for someone who’s too vested in crypto and wants to diversify.

  • Mark March 27, 2021, 12:27 pm

    Well, I, for one, find index funds plenty exciting. In one fell swoop, for almost zero in fees, one can buy a slice of thousands of the best companies throughout the global economy. Then, 24/7, with no further fingers lifted on my part, millions of workers around the globe show up to work every day in order to raise the price of my little slice of the pie. Wait a minute, I might have gotten this whole bit from MMM circa 7-9 years ago. If so, thanks MMM!

  • Dominic March 27, 2021, 2:25 pm

    Once the media starts reporting on things like Gamestop and crypto, you know the bubble is already in place. Its like showing up to a party when you see the cops. The party is already over, you wont have any fun, and you will regret it the next morning.

    Not necessarily a recommendation, but in January I decided to sell half of my VTI (Vanguard Total Market) and buy VTV (Vanguard Value) to diversify. I’ve been getting nervous seeing how top heavy VTI has become with Apple, Microsoft, Facebook, Netflix, Alphabet, etc…

  • Daniel March 27, 2021, 3:21 pm

    Agree 100%. However sometimes bubbles last a LOT longer than anybody would expect. Look at the housing market in Canada – huge bubble IMO. 10 years ago people bet it would come down and lost their shirt. 5 years ago, same. Still going up strongly today, I am scratching my head… Any thoughts?

  • Jay McConnell March 27, 2021, 3:26 pm

    Thanks for the sanity. I try not to even look at stock prices. Just good, sensible clothes like your son says. I just buy my “clothes” at a halfway decent price and keep them for a long, long time. :)

  • George Choy March 27, 2021, 11:27 pm

    Great article MMM. I loved the analogy of Bitcoin speculators buying bikinis and flip-flops. I often get asked whether I’d invest in Bitcoin and it’s a definite ‘no’ for me.

    The book Stealth Millionaire contains interviews with millionaires about their money and investing habits – none of them invested in anything they considered to be gambling, like Bitcoin, or even the lottery.

    Remember Warren Buffett’s rules:
    “Rule Number One: Never Lose Money.
    Rule Number Two: Never Forget Rule Number One”

    My wife and I became financially free through our property portfolio (we now have £2 million). We mostly buy and hold forever.

    Because we buy for Cashflow, it doesn’t matter to us when house prices have a ‘correction.’ We just keep banking the rental income every month, which also increases most years. Just like the index funds, the long-term trend for house prices is a steep incline.

    That’s why we invest mostly in property, and also in low-cost index funds.

  • isip March 28, 2021, 12:21 am

    This is a good post for new investors or those new to FI.

    Me, Mustachian since 2011. Holding mostly SP500 index = nice but boring returns.

    Went long Tesla in 2013 = not boring returns. Not selling my Tesla shares anytime soon.

    Am 1% Bitcoin. Potential downside not a game changer. Potential upside = $$$. Blockchain = next gen.

    Me a gambler?  This post = binary thinking, which can be good for new investors.

    Indexes are good but other good/better investment opportunities exist.

    GameStop is NO Tesla, Bitcoin, or ARK. Kathy is solid.

    Don’t trade/gamble but avoid other good investments (Tesla, BTC, ARK) at your own loss.

    • Nick March 30, 2021, 12:46 pm

      What metrics do you rely on to come to the conclusion that Tesla, BTC, and ARK are good investments? I actually think GME was a far better investment in January than the three you mentioned. It was trading below tangible book value and had 130% short interest – meaning there were 30% more shorts than actual shares in circulation. It was an obvious opportunity and I only wish I gave it attention to understand the thesis instead of writing it off as “crazy speculation”. Now that the vast majority of short sellers have gotten out of their position (only 18% short interest now) the opportunity has passed, so I don’t recommend anyone hop in now.

      • isip April 1, 2021, 8:25 pm

        Hey Nick, as a long time investor, TSLA, BTC and ARK are much better than GME.

        GME may have been a better trade in the short term but not a better long term investment.

        I only invest in opportunities that I have a strong 10 year conviction about. Where do I think GME will be in 10 years? If it is still operating I don’t see how it is a better company/opportunity to own vs TSLA, BTC and ARK.

        I hope that helps.

  • SimoneSays March 28, 2021, 1:12 pm

    Excellent article! Thank you for being one of the voices in the wilderness.
    Seems to me that the past few years has brought us a lack of common sense, coupled with a lack of civility and manners.
    Hopefully those old-fashioned and time tested attributes will come back into style soon.

  • Chris March 28, 2021, 2:09 pm

    Great post, thanks.

  • Tyler March 28, 2021, 2:18 pm

    I don’t think people can be blamed for wanting a little more excitement in their life after having to deal with the past year…as long as you’re being realistic and not betting the farm then I see nothing wrong with a bit of speculation.

  • Julio Nobrega Netto March 28, 2021, 3:28 pm

    I bought GME just for fun. Spent 0.15% of my portfolio, my first non-index fund real stock purchase. I then proceeded to spend the next 2 weeks opening the Yahoo Finance app multiple times per day, anxiously waiting for it to go up – and it did, so I sold.

    But I kept opening the Finance app because at the bottom of the search results there’s an area for the highest movers. I saw stocks going up 100% and even 300% in a day. I kept thinking I was missing these opportunities, if only I browse /r/wallstreetbets or read more news, I could have fun and make some money too.

    Then I realized what I was thinking, that I can actually invest in stocks and surely with some effort I can make 300% in a day. Uninstalled the app right then.

    The pull is strong.

  • Jon D March 28, 2021, 7:09 pm

    People have been warning of impending financial collapse since 2010. If you listened, you’ve missed out on one of the biggest and smoothest booms ever seen in financial history.

  • LS March 28, 2021, 8:47 pm

    I gotta say I’m a bit disappointed in your take on GME as well. I have no idea if the “kids on Reddit” are going to hit big or lose their shirts at this point. Quite frankly neither do you and neither do they, but the people (of all ages) that were there before they were on the news are perfectly happy to acknowledge they are gambling as opposed to investing. (Also worth noting for everyone who posts on Reddit, there are an estimated 5-10 people who just “lurk.” And to be fair, lots of the people who do post act like juvenile idiots, so I can understand the confusion.)

    Additionally, there was a genuine thesis driving the first run up – and I’m happy for the ones who bought in at a few bucks year(s) ago and were smart enough to entirely or partially cash out with enough gains to… you know, retire early. The ones I’m thinking of invested a few hundred, maybe a few thousand bucks and are now legitimate millionaires. Good for them for seeing an opportunity and taking it. In fact, I’ve seen several posts that amount to them telling each other to, “Cash out NOW, pay off your loans, and put your lucky lotto winnings into an index fund and move on.”

    I think you should do some more research – really dig around – and try a second, more nuanced post on what’s going on. I don’t think you’ll come away with a different take on the stock itself, but you might give them (meaning the people on WSB before WSB was on the news) a little more credit, unlike the “journalists” in the media either outright lying for nefarious reasons or those doing the bare minimum of research out of laziness or (more likely) unreasonable demands from their employers. I think you have even complained about that happening to you and the FIRE movement in the past. It’s a shame you’ve basically done the same here.

    Plus it really is a fascinating story on many levels (Robinhood’s major screw up, hedge funds’ tactics, the idiot bro culture that drives the forum, the hundreds of thousands of dollars they poured into a wildlife fund a few weekends ago, mostly because it was funny and they were bored). I think you, MMM, could do it justice. But this ain’t it.

  • Schmitt March 29, 2021, 2:10 am

    I bought Tesla back in 2013 at 15 and sold it in 2014 at 30 with a 100 % profit.
    I was satisfied at that time.
    When you look back now, you might say that I was a fool.
    But back then, Tesla might also have become a penny stock.
    The same is true with bitcoin, bought in 2020 at 10,000 and sold in 2021 at 32,500.
    I am satisfied and that’s the main thing.

    • Steve B. April 13, 2021, 12:05 pm

      Schmitt, thanks for sharing your story. I was pitched BTC by a friend back in 2013 and told to put some money into it. I did not ‘invest’, but my gamble would have paid off if I had held.

      I think that perhaps if I had bought BTC back then, I would have been like you with Tesla. If it had doubled in price, I likely would have thought, “Great, I’ve doubled my money!” and sold and been happy with my profit.

      The question for any investment (and especially speculative investments) is “When do I sell?”

  • LizC March 29, 2021, 4:18 am

    MMM I’m curious your thoughts on the huge surge in housing prices. Is this a bubble too? We’re thinking of selling ours and becoming long term renters, but also worried we will regret it with two little kids! We would dump our profit in index funds and continue to invest in them instead of home repairs.

    • Mr. Money Mustache March 31, 2021, 10:09 am

      This is a great question Liz, and I’m sure many people are wondering the same thing.

      In the long run, housing SHOULD grow only in line with incomes, which track economic growth. And in a country like the US which is geographically still mostly empty land, the price of houses should also have a counterbalance of new supply being built.

      Right now we have a temporary shortage of homes, partly because many house building companies (including my own!) shut down in the 2008 housing crash, and perhaps because of regulations in some areas as well, and definitely because of things like lumber and copper prices being 300-400% of normal levels (production hangovers left over from the Covid shutdowns)

      But it’s all a solvable problem, and the political and economic pressure to open up the supply tap will surely lead to some improvement. Meanwhile, someday we’ll get another financial panic which may reduce home prices in some areas.

      With all that mumbo jumbo aside, housing is really such a local thing. You can still get a beautiful big Victorian house within walking distance of downtown in lots of historic towns for under $200k. And you can still pay $1 million for a bombed out meth shack in some metro areas as well.

      I would use the NYT’s “rent vs buy” calculator in your own area to help make the decision, and also keep your eyes open on other fun, affordable places to live in the long run if you have a taste for change and adventure.

  • Amir March 29, 2021, 5:01 am

    MMM, but if much of the index is on the bubble stock, aren’t you participating in it too?

  • billy March 29, 2021, 6:31 am

    I switched from bonds to stablecoins that’s backed by the dollar and ear interest on, I am taking added risk but it’s other factors and I’m comfortable with. I’m close to fire, and felt my VBTLX took on added volatility due to the rona and near 0% interest, the next 2 years don’t look so good.

    When talking to my coworkers and bringing up crypto, I’m surprised how many buy btc/eth, but most of them don’t manage there own portfolio and understand the basics of investing, and in turn pay high fee on the stock side and on the crypto side, sucks for them for sure, I try to tech them how to suck less, but then there eye start to glaze over. There’s currently 8,996 cryptocurrencies and growing, which is a bit scary.

    • Miles April 18, 2021, 10:18 am

      Billy it sounds like you’re talking about an entirely different thing. A cryptocurrency fund is largely like a commodity fund and isn’t at all like going out and buying a thousand bucks of dogecoin because Elon added their logo to one of his tweets 30 seconds ago.

  • Andy March 29, 2021, 7:26 am

    MMM took an article that could have been smart and thoughtful and instead used his influence to help promote the idea that “a bunch of kids on Reddit have formed a gang called “Wall Street Bets” are what’s wrong with the investment world.

    You’re just another millionaire trying to keep the rich richer and being a gatekeeper for what investing should be instead of looking at another point of view.

    • Johan April 3, 2021, 7:56 pm

      I feel like this blog over the years contradicts itself more. It’s very pro-capitalist even though capitalism is what will end our species and habitable planet. That goes against the so-called mission of saving the human race from itself.

      There are still great individual ideas scattered throughout this blog though.


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