This is not a Boat accident …The Stock Market of 2017
This is not a boat accident!
A bullish as this tape is, the price action and the market action is not normal.
Yesterday Goldman Sachs warned that we are seeing the highest valuations since 1900. Their stock jumped THREE percent.
In the year 2017 — the same bank, Goldman Sachs — is saying that Bitcoin is TOO volatile for them to trade. Ya right.
Is Bitcoin just a bubble?
Matt Levine had this to say on the Bitcoin frenzy:
Bitcoin 10,000! 11,000! 10,000! 9,000! 10,000! Whatever!
How do you value a bitcoin? I think you can reasonably put a range around the value:
On the downside, if people decide to stop using bitcoin as a means of exchange or a store of value or a speculative instrument, then its value will be zero. There is no scrap value for a bitcoin.
On the upside, if bitcoin becomes the sole currency for all transactions in the world, you could take Dan Davies’s back-of-the-envelope valuation methodology from 2014, plug in a gross world product of about $100 trillion, and get a value per bitcoin of about $500,000. (Here is a talk from Mike Novogratz along related lines.) But that methodology treats bitcoin as just base currency; if you assume that it also replaces all financial assets then you should probably scale that number up by an order of magnitude or so.
So let’s say that in the most pessimistic scenario a bitcoin will be worth $0, and in the most optimistic scenario it will be worth $5 million. So! Great! Now all we have to do is to figure out the likelihood that everyone decides bitcoin is a fraud and stops using it, and the likelihood that bitcoin becomes the sole means of exchange and sole store of value, and the distribution of possibilities in between, where it fills some smaller or larger niche with some smaller or larger value.
Meanwhile over in Trump’s mind — his fingers and tweets — the stock market continues to go up because of him. He now also believes the stock market would be down 50 percent if he had not been elected.
The S&P is now up a historic 13 months in a row.
It’s been fun watching the market do what it wants to do this year.
My theory has been the big tech stocks here and in China are too big to be governed.
The same goes for Bitcoin.
Originally published at Howard Lindzon.