The Book I'm Reading Now


I took out this book from my bookshelf recently and re-read it again, with much curiosity, I wanted to find out if I could learn something from past financial crisis and if there is any similarity of past crisis vs recent crazy price movement of Bit-coin. 

 I read with great interest especially on Chapter 4 ( Fueling the Flames: Monetary Expansion ).
Quote “ Speculative manias gather speed through expansion of money and credit or perhaps, in some cases , get started because of an initial expansion of money or credit. One can look back at particular manias followed by crash or panic and see what went wrong .“ Unquote


Some analyst and economist been highlighting that current high asset price including stocks , real asset and Bit-coin ?? to some extend were  caused by “ultra loose “ monetary policy & QE implemented by world central bank for long period of time after GFC.






Price has gone up by another 248% since my last blog-post about Q&A of Bit-coin ( here) and it has surged by more than 1800% since Jan 2017.  As mentioned , price may continue to go up to fetch USD50,000 or even USD100,000 if the party continue to draw much attention and new capital continue to flow in , especially when you can buy “ future contract “ of Bit-coin base on margin

 Although the margin requirement for Bit-coin is much higher than normal future contract like S&P 500 ,  “The margin requirement at CME is 35 percent, while at Cboe, it is 40 percent, reflecting bitcoin’s volatility. The margin for an S&P 500 futures contract, by contrast, is just 5 percent” , but the extra capital could be generated would be huge base on global scale.





Bitcoin debuts on the world's largest futures exchange (here)

 

Bitcoin hits bigger stage as exchange giant CME launches futures (here )



With the launching of future market for Bit-coin , I am sure the volatility will increase as people ( investors ??) could use the margin to enlarge their position and using short-selling “  to capitalize the sudden fall in price. One should ensure that they have enough “ Risk appetite “  if he/she decided to join the “ PARTY “.





Good Luck and All The Best to those millionaires created and future millionaire to be created by investing in Bit-coin .



Cheers !!




"Sometime in the next five years you may kick yourself for not reading and re-reading Kindleberger's Manias,Panics, and Crashes." by Prof. Paul A. Samuelson

Comments

  1. Thanks for this post.
    I haven't read this book, looks like I should get it, otherwise I may be kicking myself sometime in the next 5 years.

    ReplyDelete
    Replies
    1. Hi TTI,
      "kicking myself"....no,no, definitely not for you, you will be popping the champagne to celebrate your extraordinary return of your investment in next five years base on your acute and in dept knowledge of the companies and market...
      Cheers. !! :)

      Delete

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