What’s your Crypto Exit/Investment strategy?

TheBigShort said:
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).
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Which is it? It is of corse the former. Your confusion arises because by your definition of risk ratio risk reduces as the risk ratio increases.

We are not supposed to speculate on identities but are you sure you are not a bot? You appear to operate 24/7:rolleyes:
 
Duke of Marmalade said:
Which is it? It is of corse the former. Your confusion arises because by your definition of risk ratio risk reduces as the risk ratio increases.

We are not supposed to speculate on identities but are you sure you are not a bot? You appear to operate 24/7:rolleyes:
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Remortgaging, reduces the risk ratio of assets to liabilities. Another way of looking at it, if you need this level of help, is it increases the risk ration of liabilities to assets.

Duke of Marmalade said:
We are not supposed to speculate on identities but are you sure you are not a bot? You appear to operate 24/7:rolleyes:
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Yeh, late one last night. An organised 24 hr fast and outdoor sleep to raise money for needy charities. Have until 10am, then off for proper breakfast and proper sleep.
Thank God for late night trollers on AAM to help past the time.
It was fun. :D
 
TheBigShort said:
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.
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You must admit it is a bit confusing. But I suppose it does sort of hang together if you let the term "risk ratio" flip flop betwen Assets/Liabilities and Liabilities/Assets.
 
BS

It is bizarre to argue that leveraging a portfolio increases the "risk ratio" (to use your made up term) without also accepting that deleveraging the portfolio would decrease its "risk ratio". They are two sides of the one coin.

Joe and Mary have precisely the same "risk ratio". Mary leveraged her portfolio whereas Joe failed to deleverage his by the same amount. It gets you to exactly the same place.
 
Duke of Marmalade said:
You must admit it is a bit confusing. But I suppose it does sort of hang together if you let the term "risk ratio" flip flop betwen Assets/Liabilities and Liabilities/Assets.
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I do admit, writing these things off the cuff in the early am, can sometimes be conveyed in a confusing manner, my bad on this occasion. But considering re-mortgaging your home to take on new additional debt is being flip-flopped with using existing assets to pay down existing debt to apparently mean the same thing, it appears that is the level we are at. :(
 
Sarenco said:
the "risk ratio" (to use your made up term)
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I mean seriously, a "made up term"!!! Do we need to get the Ladybird version of Investing for Dummies?

https://www.investopedia.com/terms/t/totaldebttototalassets.asp

What is 'Total Debt to Total Assets'
Total debt to total assets is a leverage ratio that defines the total amount of debt relative to assets. This metric enables comparisons of leverage to be made across different companies. The higher the ratio, the higher the degree of leverage (DoL) and, consequently, financial risk.

Cant you understand that? :eek:

Cant you understand that if I have €1.2m worth of assets, €400k of liabilities that I have a net worth of €800k and a risk ratio (oh apologies, in case you are still taking it in I should refer to its full and complete title 'Total Debt to Total Assets') of 1:3.

If I pay down some of that debt, or deleverage, using existing assets, as per Brendans example with €200K bitcoin, my net worth worth remains exactly the same at €800K but my 'Total Debt to Total Assets has decreased to 1:4 (thus I consider myself to have less risk). This is not the same as 'effectively re-mortgaging'.

Or if I re-mortgage, as per Brendans question, without any hesitation my 'Total Debt to Total Assets' ratio increases (thus I consider myself to have more risk).

Time for my zzzzzzzz's :rolleyes:
 
TheBigShort said:
I do admit, writing these things off the cuff in the early am, can sometimes be conveyed in a confusing manner, my bad on this occasion. But considering re-mortgaging your home to take on new additional debt is being flip-flopped with using existing assets to pay down existing debt to apparently mean the same thing, it appears that is the level we are at. :(
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Yes BS, it really is very, very simple.

Investing while carrying debt is the same thing financially as taking on new debt to make the same investments. It's no more complicated than that.
TheBigShort said:
If I pay down some of that debt, or deleverage, using existing assets, as per Brendans example with €200K bitcoin, my net worth worth remains exactly the same at €800K but my 'Total Debt to Total Assets has decreased to 1:4 (thus I consider myself to have less risk). This is not the same as 'effectively re-mortgaging'.
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Of course not. How could deleveraging a position be the same thing as leveraging a position?

You're tying yourself up in linguistic knots but you're getting nowhere. It's just getting increasingly ridiculous.
TheBigShort said:
I mean seriously, a "made up term"!!!
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Sorry BS but the term "risk ratio" is not used in finance to describe a leverage ratio.

A "risk ratio" is a statistical term that is used to describe the ratio of probability of an event occurring (for example, developing a disease) in an exposed group to the probability of the event occurring in a comparison, non-exposed group.

So, yes, it was a made up term in the context in which you used it.
 
TheBigShort said:
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.
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Thanks Shortie

Now, Joe has a family home worth €500k and a €300k mortgage at 3.5%.
He also has a diversified portfolio of shares worth €300k.

Do you think he should sell those shares and pay off his mortgage?

Brendan
 
TheBigShort said:
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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Hi Shortie

You seem to be asking me whether someone who is left €300k should accept it or not?

Yes, they should.

Brendan
 
Brendan Burgess said:
Thanks Shortie

Now, Joe has a family home worth €500k and a €300k mortgage at 3.5%.
He also has a diversified portfolio of shares worth €300k.

Do you think he should sell those shares and pay off his mortgage?

Brendan
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Thanks Brendan.

Yes I think he should.
 
OK

Thanks for clearing that up.

Mary with a home worth €500k should not remortgage it to buy shares.
Joe with a home worth €500k with a mortgage of €300k and a portfolio worth €300k, should sell those shares and so would end up with a home worth €500k and no mortgage.

So now back to landlord's original question.

What should the exit strategy be for someone who has Bitcoin and a mortgage?

They should sell the Bitcoin and pay off the mortgage.

I think that this even applies if the mortgage is a cheap tracker. Despite the extraordinary potential of Bitcoin, we are nearly all agreed that it is very risky. I presume that you would agree that it's much riskier than a balanced portfolio of equities? So the correct exit strategy is to sell off the Bitcoin.

In other words, it's not a good idea to borrow money to buy Bitcoin. And it's not a good idea to buy Bitcoin while you have borrowings which you could have paid off with that money.

Brendan
 
Brendan Burgess said:
In other words, it's not a good idea to borrow money to buy Bitcoin.
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I agree, its not a good idea to borrow for bitcoin.
I have bitcoin, I also have a mortgage repayments due to expire on 31.12.2027 as agreed under the terms of the loan.
Since I have being buying bitcoin, there has been no material alteration to my mortgage, nor have I any other ourstanding loans.

if bitcoin crashes to zero, there will be no material difference to my mortgage. It will still be due to expire on 31.12.2027, requiring the exact same amount of payments.


I am no more re-mortgaging my home, or 'effectively' re-mortgaging my home as the term is commonly understood to mean (outside AAM) anymore than if I were to start a stamp collection.

remortgage
riːˈmɔːɡɪdʒ/
verb
  1. 1.
    take out another or a different kind of mortgage on (a property).
    "he remortgaged their home to help meet the growing bills"
noun
  1. 1.
    a different or additional mortgage.
    "a remortgage is one of the cheapest ways of borrowing money"

I am doing none of these things. Landlord is doing none of these things. Joe didnt do any of these things.

Mary did.

But to call this to a halt, you wont convince me otherwise, and I wont convince you otherwise.
 
Sigh.:(

Once again, nobody ever suggested that you re-mortgaged your home when you bought Bitcoin.

What we repeatedly said was that there was no financial difference between re-mortgaging your home to make the investment and maintaining an existing mortgage, in the same amount, while holding the investment. The net position is the same.

Why do you feel the need to constantly and repeatedly attack points that nobody ever raised?

Also, you do realise that you would advise Joe to do the direct opposite of what you are doing yourself? Don't you?
 
TheBigShort said:
I agree, its not a good idea to borrow for bitcoin.
I have bitcoin, I also have a mortgage repayments due to expire on 31.12.2027 as agreed under the terms of the loan.
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Hi BS

I thought we had made some progress.

There is no difference between Joe and Mary.
Mary should not remortgage to buy shares, Joe should sell his shares to pay off his mortgage.

If you or the OP has a material amount of Bitcoin, you should sell it and pay down your mortgage.

Mary could easily argue in her defence of taking out a mortgage to buy shares:

"if shares crashes to zero, there will be no material difference to my mortgage. It will still be due to expire on 31.12.2027, requiring the exact same amount of payments."

Brendan
 
Attempting a 24 hour fast is no mean feat.
Attempting to comprehend and contribute to this thread appears to be equally challenging.
Attempting to do both simultaneously is quite ambitious! Well done B/S :)
 
fpalb said:
Attempting a 24 hour fast is no mean feat.
Attempting to comprehend and contribute to this thread appears to be equally challenging.
Attempting to do both simultaneously is quite ambitious! Well done B/S :)
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It would be disengenuous of me to take such credit. The 'fast' event was for 24hrs. But due to logistics (family commiitments etc) the event was broken into shifts. I put in ten hours, some of the younger ones were more dedicated.:)
 
landlord said:
I put my faith in the more technologically savvy Bill Gates and Richard Branson, who I believe would have a much better understanding of the crypto blockchain technology than a 90+ year old equity picking veteran.
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This thread is about BTC as an investment not as a technology. This is a question for economists and others well versed in the workings of our monetary system. Nobody is questioning that the BTC technology does what its fans say it does.

Bill and Dick will have interesting thoughts on Quantitative Easing, The Gold Standard, Ricardo's theory, Keynes' theory etc. But they are not omniscient, there is no reason to put faith in them in areas outside their area of expertise just because they are successful billionaires. Same goes for Donald Trump.

Economists and investment professionals are overwhelmingly dismissive of BTC having any long term economic value. A few hedge fund guys see it as a punt for a small part of their portfolio, not based on any faith in its value, but simply based on the fact that currently it can be bought and sold and it is non correlated (for sure) with any other asset.

Any way as I have explained elsewhere Bill and Dick aren't overly convinced in BTC.
 
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There does appear to be an association though.
Investors that are comfortable within the technology sector like James Altucher are bullish on bitcoin.
While investors that appear to be total technophobes stay clear.

It is rumored that Warren Buffett does not even have a cell phone.
 
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