Time & The World’s Most Amazing Investments

I read yesterday a copy of an answer given by a clever man to how he deals with investment volatility and it gave me something like an epiphany moment. There is something absurd about my approach to investing. It’s late, very late but I need to learn.

I asked myself a simple question and realised that the answer was not only staring me in the face but that I have known what it was for a long time.

This man asked himself a similar question in 2020, and it is hard to disagree with his answer or how he acted on it.

I also thought to myself, stop digging if you are in a hole.

What are the world’s most amazing investments. This is not a definitive list but in the conversation must be companies like Nvidia, Arm Holdings, Broadcom and Taiwan Semiconductor Manufacturing, cryptos like Bitcoin and Ether, ETFs like QQQ, SOXX and IYW, leveraged ETFs like QQQ3, SOXL and TECL and the uber-leveraged ETF, QQQ5.

The man who had his own epiphany moment in 2020 is Michael Saylor, CEO of Microstrategy. This was the conclusion to which he came.

Saylor is an advocate of Bitcoin, stating that he believes it will displace gold as a non-governmental store of value.^[25] Saylor has said that “capital preservation” is Bitcoin’s utility and compares buying it to buying a home in a city everyone wants to move to. According to Saylor, Bitcoin is “the apex property of the human race.”^[26]

On MicroStrategy’s quarterly earnings conference call in July 2020, Saylor announced his intention for MicroStrategy to explore purchasing Bitcoin, gold, or other alternative assets instead of holding cash. The following month, MicroStrategy used $250m from its cash stockpile to purchase 21,454 Bitcoin.^[27]

MicroStrategy later added $175m of Bitcoin to its holdings in September 2020 and another $50m in early December 2020. On December 11, 2020, MicroStrategy announced that it had sold $650m in convertible senior notes, taking on debt to increase its Bitcoin holdings to over $1bn worth. On December 21, 2020, MicroStrategy announced their total holdings include 70,470 bitcoins purchased for $1.125bn at an average price of $15,964 per bitcoin.^[28] As of February 24, 2021 holdings include 90,531 bitcoins acquired for $2.171bn at an average price of $23,985 per bitcoin.^[29] Saylor, who controls 70pc of MicroStrategy’s shares, dismissed concerns by observers that the move is turning MicroStrategy into a Bitcoin investment firm or exchange-traded fund (ETF).^[30]

Between October 1 and November 29, 2021, MicroStrategy bought 7,002 bitcoins for about $414.4m in cash at an average purchase price of $59,187, bringing its total holdings to 121,044 bitcoins.^[31][32]

In August 2022, Saylor resigned as CEO, remaining as executive chairman, to focus more on bitcoin.^[33]

Wikipedia

As of June 2024 Microstrategy owns 226,500 Bitcoin worth around $14bn.

Saylor does not worry about volatility but tries to turn it to his advantage. He focuses not on price action but the passage of time as explained in this quote.

On August 7, Michael Saylor, the executive chair and co-founder of MicroStrategy Inc. MSTR, appeared on Bloomberg Television to discuss the merits of Bitcoin as a superior option for long-term capital management. His insights were profound, emphasizing Bitcoin’s unique characteristics and its potential to revolutionize how we perceive and handle capital.

During the interview, Bloomberg Crypto co-host Sonali Basak noted that MicroStrategy had acquired an additional 169 Bitcoins for just over $11m in July. She then asked Saylor about his reaction when Bitcoin’s price recently dipped below $50,000 during the crypto market meltdown, inquiring whether he dives in during such dips and to what extent.

Saylor highlighted that MicroStrategy’s strategy involves consistent, quarterly acquisitions of Bitcoin, independent of short-term price movements. He stressed the importance of understanding that Bitcoin’s volatility is not a flaw but an essential characteristic. This volatility generates significant credit and liquidity globally, benefiting everyone in the short term. Over the long term, this same volatility drives superior asset performance and durability. Saylor views Bitcoin’s volatility as a sign of its functionality, contrasting it with other markets that are constrained by their inherent physics and politics.

A common concern about Bitcoin is its potential to lose significant value over short periods, making it seem like an unreliable store of value. Saylor addressed this by explaining that Bitcoin’s price movements are a result of its functionality as digital capital. He argued that Bitcoin is superior to physical or financial capital because it represents a capital investment that can be held for decades without being confiscated by corporations, competitors, counterparties, or countries.

He emphasized that Bitcoin can create generational wealth for families, corporations, or countries and can be liquidated in any amount, at any time, anywhere in the world, without the need for active management or business acumen.

Saylor further discussed the psychology behind Bitcoin’s price pullbacks and the importance of understanding these movements. He emphasized that while timing the market is nearly impossible for most investors, the key is to spend time in the market. Comparing Bitcoin to prime real estate in Manhattan, Saylor explained that there is never a bad time to buy Bitcoin, much like there is never a bad time to buy desirable real estate in a top city.

Saylor said that MicroStrategy will continue to acquire Bitcoin whenever it has cash or can raise money in the capital markets, viewing it as a perpetual opportunity. This consistent acquisition strategy underscores its belief in Bitcoin’s long-term value rather than attempting to time purchases with market dips.

Cryptoglobe, 8 August 2024

I have long believed that prime property in central London is a ‘never sell’ asset. I have owned the 4-bedroom flat overlooking communal gardens in the heart of Kensington, where I live, for 40 years. If I had done the same with many of the stocks I have liked over the years I would have done very well.

The top cryptos are great investments as are related investments like Microstrategy, Coinbase Global and Bitcoin ETFs like IBIT.

Semiconductors Are At The Heart Of The Modern World

Great semiconductor companies are the engine of the accelerating technology revolution. How can they not be among the world’s best investments? Somewhere around 2000 Intel, which had previously held the baton of driving change for some 20 years, handed over to Nvidia and a new group of amazing semiconductor companies began their rise to prominence. NVDA, AVGO, ARM and TSM are some of the names of which the most exciting is arguably Nvidia.

I looked at the presentation which accompanied their Q4 2024 results and picked out the first three slides.

How can anyone suggest selling shares in this company because of some temporary price action? These have to be one of the ultimate forever investments. Like Bitcoin, they will be volatile but focus on the passage of time, not the price action and the rewards should be amazing.

The same goes for all the other investments mentioned above. Time is on your side. Try, like Michael Saylor, to make volatility your friend. Forget my recent alert where I tried to make investment decisions based on the price action. It is not the route to investment success. Much more helpful is to use common sense.

I imagined having dinner with Michael Saylor and Jensen Huang and explaining why I thought that movements in a random moving average might provide insights into the future of their businesses. I think that conversation would be over in five seconds.

Strategy – Back Your Gut Feelings

If it looks like a duck, walks like a duck, flies like a duck and quacks like a duck it probably is a duck. Nvidia looks like a great investment and probably is one. Bitcoin does not have Nvidia’s credentials but is wonderfully lop-sided. Heads you could win millions, tails you take a hit. ETFs generally and leveraged ETFs especially are the perfect investments for a $-cost averaging approach.

Share Recommendations (9 August 2024)

Nvidia. NVDA

Arm Holdings. ARM

Broadcom. AVGO

Taiwan Semiconductor Manufacturing. TSM

Bitcoin BTCUSD

Ether ETCUSD

IBIT

Microstrategy MSTR

Coinbase Global COIN

QQQ

SOXX

IYW

QQQ3

SOXL

TECL

QQQ5

Until commonsense tells you different these are shares to buy, hold and accumulate. Any other strategy makes unrealistic assumptions about our ability to predict the future. There are no prices because the price doesn’t matter.