It sucks to have to sell investments during a downturn, but they're still liquid. It's not sound advice to keep more cash than is necessary for operational reasons. At least buy some bonds or something if you're bearish.
High-yield savings accounts are nice but don’t beat inflation.
rising rates mean savings accounts actually aren’t the worst place to stash your money atm.
They're better than like, a checking account or a mattress. Marcus is 3% rn, which seems great until you remember that inflation is way higher than that.
Part of the problem with a down market is that there aren't a lot of great places to stash cash. So, yes, you're going to have a high risk of some kind of loss everywhere.
Inflation sucks, but a cash loss of 4-5% a year is still better than losing 10% on some equity or index fund.
Unless you are a very good trader (I'm not) you're gonna miss the timing on when to put money back in, and probably come out worse overall. My mindset is conventional /r/personalfinance one: if you don't need it, don't touch it, leave it in VOO or whatever til nearing retirement.
Its not a matter of timing so much as value. Right now P/E on most stocks is still kinda high. Although, I guess under 20 isn't crazy.
I just wouldn't be in a rush to turn free cash into equities under these conditions. If you're already in, I agree its not a great time to pull out either. But telling someone with a bunch of free cash to buy up equities in this market seems like bad advice.
If you're doing more than maxing out Roth/401k, you're taking a gamble.
Yeah idk. Watching Tesla/GME/etc fluctuate based on vibes has kind of destroyed what little faith I had in value-based investing. If someone has a lump sum of cash I'd say DCA in to the highest yield thing that fits your risk tolerance. My own is pretty high*, I'm decades from retirement, but I think for most people that's probably something riskier than a savings account.
*hence doing stablecoin stuff. High platform risks in exchange for no price risk; I happen to be good at evaluating platform risk and hopeless at speculating.
Watching Tesla/GME/etc fluctuate based on vibes has kind of destroyed what little faith I had in value-based investing.
Tesla was a growth stock predicted on the theory that it could rapidly gobble up the domestic car market. Also, heavily predicated on revenue from government subsidies.
GME was pure memes. A total sucker's bet. It just demonstrated what an internet full of dorks could do to the price of an equity with low trade volume.
These were both exceptions that outperformed during a historic bull market. And they're both crashing back down to earth.
If someone has a lump sum of cash I’d say DCA in to the highest yield thing that fits your risk tolerance.
Right. And, ideally, in something big and safe like Berkshire or J&J or just the S&P index if you're feeling lazy.
I happen to be good at evaluating platform risk
I guess time will tell on that one. My friend lost a boatload on Terra/Luna with that attitude.
GME is still 5x from before the nonsense. I know if the market was "rational" we'd be able to predict it and the rationality would get arbed out, but it skeeves me out that prices can fluctuate so wildly based on vibes. I am an index fund guy, the government doesn't care that much about individual big companies but it's not gonna let the overall line go down long term.
I'm pretty confident about USDC, I think the only way I'll get popped is if Eth/BTC/etc actually goes to 0 and kills Coinbase (can't get rid of all price risk). I passed on UST a few months ago when I was looking at something called Stablegains. At that time the ecosystem was pretty obviously rotten: basically every project's yield ultimately flowed from Anchor, which was just shoveling out investor cash at an insane unsustainable rate. The market knew it too, every pool with UST in it offered much higher yield than the reputable stables because of the risk.
I'd prefer USD as collateral, because what I'm actually interested in is decentralized stuff where reading the code is enough to tell you 80% of whether it's good. Algo stablecoins are risky in a market like this, even if they're backed by Eth instead of Luna (lol), and I think the other centralized coins are made by sketchier companies than Coinbase. Unfortunately there is little financial incentive to accept deposits, issue stablecoins, and just sit on the deposits instead of investing them. Coinbase says they do this now, pretty sure they subsidize this arm of their business in order to be the default reputable exchange for US users.
Its trading $10 (40%) off its 2014 high of $14/share. The $1-2 valuation during its brush with bankruptcy was (not unjustifiably) seen as artificially low. A company with $1B in revenue enjoying an $8B market cap isn't unheard of, even if it is hemorrhaging $100M/year. And - baring another internet hysteria sponsored surge - it'll likely bleed out over the next five years like a normal failing company would.
But again, its an exception, not a rule.
I’m pretty confident about USDC, I think the only way I’ll get popped is if Eth/BTC/etc actually goes to 0 and kills Coinbase (can’t get rid of all price risk).
They don't need to go to zero. They just need to slip below the point at which you can reliably liquidate. That will set off a panic that kills the stablecoin. These vehicles don't function when everyone tries to exit them at once precisely because the brokerages are futzing with their cash reserves on risky investments so often. Maybe Coinbase really is a This One Is Different case. But... :doubt:
what I’m actually interested in is decentralized stuff where reading the code is enough to tell you 80% of whether it’s good
They just need to slip below the point at which you can reliably liquidate.
TL;DR I give Coinbase the "this one is different". Think that the NY attorney general and SEC will continue keeping them in line. The only thing that differentiates them from other CEXes is that they're not sketchy; to keep that they've done stuff like shutting down margin trading when the CFTC said rather than just moving jurisdictions. Based on this I think that (1) they're not commingling with Circle (2) their statements are accurate, e.g..
sigh Well, good luck with that.
I write Solidity for a living, would not be so confident if I hadn't been able to compare my work to that of auditors.
It sucks to have to sell investments during a downturn, but they're still liquid. It's not sound advice to keep more cash than is necessary for operational reasons. At least buy some bonds or something if you're bearish.
They're better than like, a checking account or a mattress. Marcus is 3% rn, which seems great until you remember that inflation is way higher than that.
Part of the problem with a down market is that there aren't a lot of great places to stash cash. So, yes, you're going to have a high risk of some kind of loss everywhere.
Inflation sucks, but a cash loss of 4-5% a year is still better than losing 10% on some equity or index fund.
Unless you are a very good trader (I'm not) you're gonna miss the timing on when to put money back in, and probably come out worse overall. My mindset is conventional /r/personalfinance one: if you don't need it, don't touch it, leave it in VOO or whatever til nearing retirement.
Its not a matter of timing so much as value. Right now P/E on most stocks is still kinda high. Although, I guess under 20 isn't crazy.
I just wouldn't be in a rush to turn free cash into equities under these conditions. If you're already in, I agree its not a great time to pull out either. But telling someone with a bunch of free cash to buy up equities in this market seems like bad advice.
If you're doing more than maxing out Roth/401k, you're taking a gamble.
Yeah idk. Watching Tesla/GME/etc fluctuate based on vibes has kind of destroyed what little faith I had in value-based investing. If someone has a lump sum of cash I'd say DCA in to the highest yield thing that fits your risk tolerance. My own is pretty high*, I'm decades from retirement, but I think for most people that's probably something riskier than a savings account.
*hence doing stablecoin stuff. High platform risks in exchange for no price risk; I happen to be good at evaluating platform risk and hopeless at speculating.
Tesla was a growth stock predicted on the theory that it could rapidly gobble up the domestic car market. Also, heavily predicated on revenue from government subsidies.
GME was pure memes. A total sucker's bet. It just demonstrated what an internet full of dorks could do to the price of an equity with low trade volume.
These were both exceptions that outperformed during a historic bull market. And they're both crashing back down to earth.
Right. And, ideally, in something big and safe like Berkshire or J&J or just the S&P index if you're feeling lazy.
I guess time will tell on that one. My friend lost a boatload on Terra/Luna with that attitude.
GME is still 5x from before the nonsense. I know if the market was "rational" we'd be able to predict it and the rationality would get arbed out, but it skeeves me out that prices can fluctuate so wildly based on vibes. I am an index fund guy, the government doesn't care that much about individual big companies but it's not gonna let the overall line go down long term.
I'm pretty confident about USDC, I think the only way I'll get popped is if Eth/BTC/etc actually goes to 0 and kills Coinbase (can't get rid of all price risk). I passed on UST a few months ago when I was looking at something called Stablegains. At that time the ecosystem was pretty obviously rotten: basically every project's yield ultimately flowed from Anchor, which was just shoveling out investor cash at an insane unsustainable rate. The market knew it too, every pool with UST in it offered much higher yield than the reputable stables because of the risk.
I'd prefer USD as collateral, because what I'm actually interested in is decentralized stuff where reading the code is enough to tell you 80% of whether it's good. Algo stablecoins are risky in a market like this, even if they're backed by Eth instead of Luna (lol), and I think the other centralized coins are made by sketchier companies than Coinbase. Unfortunately there is little financial incentive to accept deposits, issue stablecoins, and just sit on the deposits instead of investing them. Coinbase says they do this now, pretty sure they subsidize this arm of their business in order to be the default reputable exchange for US users.
Its trading $10 (40%) off its 2014 high of $14/share. The $1-2 valuation during its brush with bankruptcy was (not unjustifiably) seen as artificially low. A company with $1B in revenue enjoying an $8B market cap isn't unheard of, even if it is hemorrhaging $100M/year. And - baring another internet hysteria sponsored surge - it'll likely bleed out over the next five years like a normal failing company would.
But again, its an exception, not a rule.
They don't need to go to zero. They just need to slip below the point at which you can reliably liquidate. That will set off a panic that kills the stablecoin. These vehicles don't function when everyone tries to exit them at once precisely because the brokerages are futzing with their cash reserves on risky investments so often. Maybe Coinbase really is a This One Is Different case. But... :doubt:
sigh Well, good luck with that.
TL;DR I give Coinbase the "this one is different". Think that the NY attorney general and SEC will continue keeping them in line. The only thing that differentiates them from other CEXes is that they're not sketchy; to keep that they've done stuff like shutting down margin trading when the CFTC said rather than just moving jurisdictions. Based on this I think that (1) they're not commingling with Circle (2) their statements are accurate, e.g..
I write Solidity for a living, would not be so confident if I hadn't been able to compare my work to that of auditors.