What’s your Crypto Exit/Investment strategy?

I think it was simply a case of mental accounting but I suppose you could describe it as the framing effect.

Of course, it's possible that BS simply didn't understand the point being made but I very much doubt that was the case.
 
Sarenco said:
I think it was simply a case of mental accounting but I suppose you could describe it as the framing effect.

Of course, it's possible that BS simply didn't understand the point being made but I very much doubt that was the case.
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Well, can we put the Joe and Mary situation, or at least, what we know about them to the otest?

Brendan Burgess said:
Yesterday Joe had a house worth €500k and a mortgage of €300k and no shares.
Yesterday Mary had a house worth €500k with no mortgage and no shares.

Today, Joe inherited €300k worth of shares from his father.
Today Mary remortgaged her home for €300k to buy shares.
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Sarenco, if you were advising Joe, who has a house worth €500k and a mortgage of €300k to accept his inheritance of €300k, increasing his net worth from €200k to €500k?

Would you advise Mary to re-mortgage her €500k home to the tune of €300k to buy shares, leaving her with zero benefit/loss to her net worth of €500k?

Both Joe and Mary will be in the exact same financial position after your advice. Except if they follow your advice Joe could be €300k net better off.
Mary on the otherhand will have no financial gain or loss.

For the record, even though they would end up in the same financial position, I would advise Joe to avail of the opportunity to increase his net worth by €300k, but advise against Mary re-mortgaging her home to invest in €300k of shares.

So on the one hand, Joe, with mortgage debit of €300k, I would advise to become an investor in shares. On the other hand, Mary, I would advise against becoming an investor in shares if it means re-mortgaging her home.

But thats just me, seeing as I have difficulty understanding these things it would be interesting to see what advice the pros would give.
 
TheBigShort said:
Both Joe and Mary will be in the exact same financial position after your advice. Except if they follow your advice Joe could be €300k net better off.
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Does...not...compute...

I tried to give you the benefit of the doubt but it seems you genuinely can't see the contradiction in what you're saying.

I give up.:(
 
How could they be in the same position financially while at the same time one of them is better off? That makes zero sense.

Joe had already inherited the share portfolio in Brendan's example.

This is starting to get irritating.:mad:
 
What I find interesting but not at all surprising is that Brendan has not replied to:
Dan Murray said:
If you believe you can't time the market, why are you spending so much time debating on the mechanics of how to time the market? This seems like a contradiction to me.
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and
Dan Murray said:
It is, not at all, clear to me that those who purport to be certain about Bitcoin's fate have any expertise or knowledge that Sarenco does not possess.
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See full original posts for context.
 
Sarenco said:
How could they be in the same position financially while at the same time one of them is better off? That makes zero sense.

Joe had already inherited the share portfolio in Brendan's example.

This is starting to get irritating.:mad:
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To answer your question directly, if someone has a net worth of €200k and another has net worth of €500k, and the person with €200k inherits €300k, then that person is better off while both persons are in the same position financially i.e net worth €500k.

But if it's starting to irritate you then best leave it so. If you want, perhaps you could explain what advice you would offer to Joe and Mary (if you have any advice at all), based not on what anything I've said but on what Brendan has outlined.
As for me, that's my last word on the topic.
 
TheBigShort said:
To answer your question directly, if someone has a net worth of €200k and another has net worth of €500k, and the person with €200k inherits €300k, then that person is better off while both persons are in the same position financially i.e net worth €500k.
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Of course.

But, as you well know, that's not what we were talking about.

Please stop blatantly changing the conversation to save your blushes. At this stage, you are just embarrassing yourself.

Once again - there is no financial difference between investing while in debt and taking on new debt to make the same investments.

Once again - I'm pretty sure that you now realise that's the case but you just can't bring yourself to admit that you made a mistake.
 
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Sarenco said:
Once again - there is no financial difference between investing while in debt and taking on new debt to make the same investments.
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I wholeheartedly agree. I have been saying it all along. If you have mortgage debt and borrow further to invest, that is effectively re-mortgaging. But if you earn additional income ( or in Joes case, acquire additional income) and subsequently invest it, that is NOT that same as effectively re-mortgaging.

I wasn't going to say anything else but your comment above sums it up...:rolleyes:

So, genius, which part of Joe's €300k inheritance represents new debt?

I appreciate this requires you to actually answer directly, so perhaps you could actually answer the question directly?
 
Once again, for at least the third time, Joe already had a mortgage when he received his inheritance.

No part of his inheritance "represents new debt" (how can somebody inherit debt?).

You have asked the same nonsensical question three times now and I have given you the same direct answer on each occasion. No part of his investment/inheritance represents new debt/a re-mortgage.

He didn't take on any new debt when he received his inheritance - he just didn't pay off his existing debt.

The net result is precisely the same as Mary's financial position who had no debt but remortgaged her property to make the same investment.

it's really very, very simple. Even a complete idiot would follow the point.
 
Sarenco said:
No part of his inheritance "represents new debt" (how can somebody inherit debt?).
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Yes, I agree, he hasn't taken on any new debt, great...I think we are almost done.

Sarenco said:
The net result is precisely the same as Mary's financial position who had no debt but remortgaged her property to make the same investment.
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Does Mary's re-mortgage represent new debt?

It does of course. And to save you the bother, that is the difference which you well know. Despite exactly the same net financial positions, the difference is Mary has taken on new debt (through re-mortgaging) and Joe has not.
And if you can't understand that, then I would suggest you seek financial advice.
 
Huh?

Mary has taken on new debt. Joe hasn't. But they are in the same financial position.

That's the point that I've been making - and you have been disputing - all day.

Of course I understand the point - I've been trying to get that through to you all day!

Sheesh.

You really are frustrating.:mad:
 
Ok, you want to do the full 12 rounds? Fair enough.

Its simple,
[broken link removed]

There are plenty examples there to show that leverage is the strategy of using borrowed money in order to invest.
The more you borrow against your assets, the higher the leverage.
If you acquire additional income and subsequently invest that income in a bank deposit, in shares, in bitcoin, in antiques etc you are decreasing your leverage ratio, that is the amount outstanding on your debt (mortgage) to the value of assets you hold.
This is a basic investing concept which you cannot seem to grasp.
Taking brendans example where he holds €1.2m assets €400k in debt. That represents a leverage ratio of 3:1 assets to liabilities.
He then asks the question "would you re-mortgage...?"
Re-mortgaging, or re-financing in the ordinary parlance of finance, means to acquire more debt, in turn reducing the asset to liability ratio (taking on more risk).
Instead brendan then continues, using €200k in bitcoin to pay down debt, which is deleveraging the debt (reducing risk ratios, not increasing them as re-mortgaging would do).
Similarly with Joe and Mary. Joe had assets of €500k / mortgage €300k 5:3. On acquiring inheritance his assets to liabilities increased to 8:3, he effectively reduced his risk, not increased it as re-mortgaging would do.
Mary on the other hand had no risk. She did then re-mortgage, and as could be expected, her risk ratio increased.
Regardless of the net € positions being the same (which I have never disputed), if you remortgage (borrow more) your risk ratio of assets to liabilites reduces, not increases as both you and brendan have tried to pawn off.

I think that is where you go wrong, in not being able to apply the correct terminology in the appropriate manner. If the net position is the overriding factor for you, what was the point of asking the question "would you remortgage your home...."in the first place?
The clear implication is that you would increase your borrowings, not pay them down.
 
Sarenco said:
I regularly advise people to max out their tax advantaged pension contributions before paying down mortgage debt ahead of schedule. I think that's appropriate financial planning but I don't fool myself into thinking that I'm not therefore advising people to make leveraged investments.
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Here is another example of how you do not grasp the concept. If you are advising people to max out their tax advantaged contributions (im assuming you are not advising them to borrow to this? That they are using their additional earned income?) , instead of paying down mortgage, you are not advising them to make leveraged investments. The pension contributions are a growing asset, the more they contribute the greater the asset. This is deleveraging!
 
Hi Shortie

May I interrupt this discussion to ask you a question:

Mary has a home worth €500k and no mortgage. Would you think she would be wise to remortgage her home at 3.5% variable to buy a €300k portfolio of shares?

Brendan
 
Brendan
To answer the question directly, no I would not think she would be wise to borrow against her home (at any interest rate) for the purposes of investing €300k in a diversified portfolio of shares.
If I was giving advice, and Mary wanted to invested in shares, I would advise any additional earned (or acquired) income to invest.
The reasons for this is simple, borrowing against your home puts a risk on your home that may emerge should Marys ability to repay her new loan come into question.
You may consider a house, an asset or a commodity. A home is neither, it is a social necessity, for everyone.

Same question to you, and considering Joe and Mary end up in the exact same net financial position, would you advise Joe, to avail of his €300k inheritance of a diversified share portfolio?
 
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