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Bitcoin Adoption Is The Start Of A Digital Revolution

Bitcoin Adoption Is The Start Of A Digital Revolution

Authored by Emeka Ugbah via BitcoinMagazine.com,

The global adoption of bitcoin is…

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This article was originally published by Zero Hedge

Bitcoin Adoption Is The Start Of A Digital Revolution

Authored by Emeka Ugbah via BitcoinMagazine.com,

The global adoption of bitcoin is only beginning as the world evolves toward a society based upon cryptographically secured money…

It’s remarkable how far we’ve come in only a little more than a decade. Since its launch in 2009 by the pseudonymous creator Satoshi Nakamoto, bitcoin, the world’s first and largest cryptocurrency by market capitalization and dominance, has seen astonishing rises in value. Taking a look back at when the digital asset saw its first significant price increase, going from trading at a few fractions of a cent to 0.08 cents and then to $1, no one could have predicted with absolute certainty that we would one day live in a world where the asset would have gained over 6 million percent. Well, it happened in only 12 years.

This astronomical growth gave birth to a whole new industry that has altered our perception of the financial world. It has also, just as expected, piqued the interest of millions of users worldwide. From nation-states to individuals, both private and publicly-owned companies and global financial institutions, these entities are either already invested and therefore now beneficiaries of this new monetary revolution, they are still on the sidelines thinking about how best to get involved, or just outrightly against the idea of this disruptive innovation, playing a blind eye to what it stands for, or just sadly oblivious of it.

THE PANDEMIC VERSUS THE GLOBAL ECONOMY

Image by Gerad Altmann from Pixabay

2020 was an inflection point for the entire global financial market. The pandemic, as well as efforts by different countries to contain it, resulted in an unprecedented collapse of the global economy. In an attempt to salvage the situation, central banks lept into action, printing so much money that it further skewed the already unbalanced supply and demand relationship. That action laid bare what was already known, the fact that the monetary policies of most developed nations, and by extension the less developed ones, are tethered to a flawed system. After the markets crashed, it became clear that adverse measures had to be adopted if the world isn’t to end up in yet another recession. These measures had to be adopted at all levels, from the individual to the national, as well as at the corporate and institutional levels.

The cryptocurrency market wasn’t spared during the crash, of course. Devastating declines were experienced across the board. Bitcoin itself lost over 50% of its value in March 2021. But as a result of its intrinsically scarce nature, its recovery was unlike anything seen in modern times within the financial world. Over the space of eight months, Bitcoin was able to crawl and claw its way back up, breaking its previous all-time high of $20,000 reached at the peak of its 2017 bull run. And since then the price of the digital asset has been on an absolute tear, bulldozing its way through psychological levels of resistance, printing new all-time highs and defying all the fear, uncertainty and doubt thrown its way.

As expected, this parabolic rise in the value of the asset didn’t happen under the radar. Right before its steady climb, rumors and whispers of institutional interest in bitcoin began flooding the space, a lot of which was later confirmed by the institutions themselves. One such institution was MicroStrategy.

THE CORPORATIONS JUMP IN

New York City skyline view. Image by Manuel Romero from Pixabay

In August 2020, MicroStrategy — the largest independent, Nasdaq-listed, publicly-traded cloud-based business intelligence provider — announced the purchase of 21,454 bitcoin for a total purchase price of $250 million, including fees and expenses. The company deliberated for months before deciding on a capital allocation approach. CEO Michael J. Saylor, went ahead to state that some macro factors — along with the public health crisis caused by the pandemic — forced governments around the world to adopt financial stimulus measures like quantitative easing to mitigate the crisis. Despite their best intentions, these measures may well depreciate the long-term real value of fiat currencies and many other various asset classes, along with many of those traditionally held by corporate treasury operations.

The company’s bitcoin acquisitions didn’t stop at 21,454 bitcoin. Overall, MicroStrategy is said to hold a total of 114,042 bitcoin worth $6,966,574,887 based on the current price of the asset at the time of writing. Their total acquisition was purchased for $3.16 billion at an average price of $27,713 per bitcoin.

Following the announcement of MicroStrategy’s acquisitions, news broke that Ruffer, a UK-based wealth management firm, had followed suit. The financial firm invested 2.5 percent of its $27 billion portfolio into bitcoin in November 2020. But unlike MicroStrategy who still holds bitcoin to date, purchasing a few thousands more now and again, Ruffer’s game plan was different. They opted to take out their initial investment of $650 million in profit, and subsequently, when the price of bitcoin began showing signs of weakness just before the May 2020 crash, they sold their entire position, turning a $650 million investment into $1.1 billion in the process.

If that isn’t evidence of the market’s potential, it’d be difficult then to think of anything else that could be. The wealth management firm wasn’t the only non-crypto or blockchain-native company to demonstrate this. The Tesla case, despite having a different twist, still pushed that narrative. The American electric vehicle and renewable energy company revealed in February that it had purchased 42,902 bitcoin worth $1.5 billion. They also announced that “according to relevant regulations and initially on a limited basis,” they have begun making arrangements to accept bitcoin payments in return for their products. This news, as predicted, had a tremendous impact on the price of the digital asset, driving investors into a buying frenzy that drove the price up by more than 20% in just a few days that followed.

As the months ticked by and the price of bitcoin verged into the unsteady waters that marred the second quarter of 2021, the air was saturated with fear, uncertainty and doubt. Different countries had begun yet again putting up measures to stifle the growth of the bitcoin and the entire cryptocurrency market, pushing out exaggerated data and false narratives about the Bitcoin network’s energy consumption, claiming that Bitcoin miningis not good for the environment. In the midst of all that, it was reported that Tesla had sold its bitcoin position and would no longer accept the asset as payment for their products. However, Tesla CEO Elon Musk, tweeted in response to the heat he had been receiving from the cryptocurrency community, saying that “Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving the market. When there’s confirmation of reasonable (~50%) clean energy usage by miners with a positive future trend, Tesla will resume allowing bitcoin transactions.”

To date, the company still holds 42,000 bitcoin and is said to have no plans of selling.

THE CHANGE OF AN INSTITUTIONAL VIEWPOINT

It is interesting to think about how things have changed though. A few years ago, a number of these corporations and institutions that are now hovering around bitcoin and some of the major altcoins, had a completely different opinion.

In 2017, analysts at Morgan Stanley, the American multinational investment bank, stated that “Bitcoin’s real value could be zero.” Fast-forward to 2021, Morgan Stanley became “the first big U.S. bank to offer its wealthy clients access to bitcoin funds.”

Also in 2017, Jamie Dimon, a long time to-date opponent of bitcoin and CEO of JPMorgan Chase & Co., another investment bank, was quoted as saying, “Bitcoin is a fraud that will blow up;” furthermore that, “cryptocurrency is only fit for use by drug dealers, murderers and people living in North Korea.” Fast forward yet again to 2021, two of the investment bank’s strategists Amy Ho and Joyce Chang wrote; “In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.” Jamie Dimon himself, still unchanged in his view, recently stated that he still sees bitcoin as “worthless,” but “our clients are adults. They disagree. If they want to have access to buy or sell bitcoin, we can’t custody it — but we can give them legitimate, as clean as possible access.”

Goldman Sachs, yet another multinational investment bank, reopened their cryptocurrency trading desk, a little over a year after they listed five reasons “why bitcoin is ‘not an asset class’, nor ‘a suitable investment.’”

PayPal and Visa, the payment processing behemoths who have also in the past expressed their stances against bitcoin, calling it “ridiculous as a store of value” and “unacceptable as a payment system,” now both have completely different stands. PayPal now allows users to buy and sell bitcoin as well as a few other cryptocurrencies on their platform, while Visa is working on enabling bitcoin purchasing on theirs. A complete 180-degree turn from where they both were years ago. An interesting turn of events by all standards, no?

There are currently a few arguments floating around on this topic: Some schools of thought will argue that without the corporations and institutions, the entire bitcoin and cryptocurrency network won’t reach its full potential, and that mainstream adoption is vital for its continued growth, seeing as the corporations have the ability inject so much capital into the networks.

Data has it that the Global Asset Management industry holds $103 trillion as AUM (assets under management). Retail portfolios, representing 41% of global assets at $42 trillion and institutional investments amounting to $61 trillion, or 59%.

From the data gathered, if the global institutions were to adopt the 1% portfolio allocation model to bitcoin as suggested by JPMorgan Chase & Co., this would mean an additional $1.03 trillion would flow into bitcoin, which already has a $1.15 trillion market capitalization. That would probably see the price of the digital asset shoot towards the $120,000 range. So is there a valid point in that argument?

Another argument is that these corporations and institutions are only getting into bitcoin and other cryptocurrencies — not because they support the growth of the networks nor have beliefs in the blockchain technology, decentralization and its impact on the future — but that they are all capitalists who will sell as soon as they make a profit, much like Ruffer did. If we are being completely honest, who isn’t in it for the profit? Though most of the participants in the cryptocurrency space can boldly say that they are in it for a whole lot more. However, there’s no doubt that wealth creation and preservation remains an underlying incentive. The increase in institutional interest and involvement within the space will inherently bring some form of stability reducing the wild price volatility that the digital asset market has been known for. The market will certainly have a whole lot more liquidity. It all makes for a bit of a conundrum because the lack of liquidity in the market is one of the reasons why institutions aren’t jumping in mass just yet.

“The crypto asset class is relatively still too small, illiquid and lacking depth to absorb large pension funds like institutional investments that would otherwise move the markets,”

– Amber Ghaddar, cofounder of decentralized capital marketplace AllianceBlock.

The third argument is that for the institutions to be committed fully to allocating portions of their portfolio into bitcoin or other digital assets, regulatory clarity has to be achieved within the space. Institutions operate within certain regulatory frameworks, that’s a known fact. Bitcoin and other cryptocurrencies are largely unregulated. The philosophy behind the creation of bitcoin in the first place has decentralization at its core, which makes it a bit of a nightmare for regulators.

MY THOUGHTS

It is as clear as a bright, sunny day that regulators worldwide have bitcoin and the entire cryptocurrency market in their crosshairs. Why has it now become a thing after over a decade of being in existence? Is it because the entire space has now garnered so much popularity that it can no longer be ignored? Or is it because the regulators are only just starting to figure out how to peek through the multiple complex layers of this otherwise nascent financial innovation? Of these two scenarios, the first can certainly be considered valid to some extent. But the second scenario, if the regulators only just started scrambling to try and regulate the space because they think they have figured it out, then it probably means they haven’t.

Bitcoin was designed to self-regulate and preserve. Embedded within the codes of the protocol are set rules and mechanisms put in place to enforce any and all needed regulations, from supply schedules to security. Its adherence to these rules is pertinent to the network’s existence, buttressing the earlier mentioned self-regulatory and preservative point. There is a reason why it is considered a “trustless” payment network after alI, no?

Now the argument that institutional adoption is required for bitcoin to attain its status as the hardest, most sound form of money, as well as a store of value is false, to say the least. The Bitcoin network was meticulously designed to be self-sustaining and its native currency transacted peer-to-peer by individuals who freely opted into its usage. As the number of users grows, so will its security, and as a result its value. With all that said, for lack of a better way to put these next few words, it’s a “if you can’t beat them, join them, or just leave them alone” thing.

Tyler Durden
Wed, 11/10/2021 – 22:45



Author: Tyler Durden

Economics

Why Inflation Is A Runaway Freight Train

Why Inflation Is A Runaway Freight Train

Authored by Charles Hugh Smith via OfTwoMinds blog,

The value of these super-abundant follies will…

Why Inflation Is A Runaway Freight Train

Authored by Charles Hugh Smith via OfTwoMinds blog,

The value of these super-abundant follies will trend rapidly to zero once margin calls and other bits of reality drastically reduce demand.

Inflation, deflation, stagflation–they’ve all got proponents. But who’s going to be right? The difficulty here is that supply and demand are dynamic and so there are always things going up in price that haven’t changed materially (and are therefore not worth the higher cost) and other things dropping in price even though they haven’t changed materially.

So proponents of inflation and deflation can always offer examples supporting their case. The stagflationist camp is delighted to offer a compromise case: yes, there are both deflationary and inflationary dynamics, and what we have is the worst of both worlds: stagnant growth and declining purchasing power.

What’s missing in most of these debates is a comparison of scale: deflationists point to things like big-screen TV prices dropping. OK, fine: we save $300 on a TV that we might buy once every two or three years. So we save $100 a year thanks to this deflation.

Meanwhile, on the inflationary side, healthcare insurance went up $3,000 a year, childcare went up $3,000 a year, rent (or property taxes) went up $3,000 a year and care for an elderly parent went up $3,000 a year: that’s $12,000. Now how many big-screen TVs, shoddy jeans, etc. that dropped a bit in price will we have to buy to offset $12,000 in higher costs?

This is the problem with abstractions like statistics: TVs dropped 20% in cost, while healthcare, childcare, assisted living and rent all went up 20%–so these all balance out, right?

There are two glaring omissions in all the back-and-forth on inflation and deflation:

1. Price is set on the margins.

2. Enterprises cannot lose money for very long and so they close down.

Let’s start with an observation about the dynamics of price/cost: supply and demand. As a general rule, things that are scarce and in high demand will go up in price, and things that are abundant and in low demand will drop in price.

Whatever is chronically scarce and necessary for life will have a ceaseless pressure to cost more, whatever is abundant and no longer desirable will have a ceaseless pressure to cost less.

Now we come to the overlooked mechanism #1: Price is set on the margins. Housing offers an example: take a neighborhood of 100 homes. The five sales last year were all around $600,000, and so appraisers set the value of the other 95 homes at $600,000.

Things change and the next sale is at $450,000. This is dismissed as an outlier, but then the next two sales are also well below $500,000. By the fifth sale at $450,000, the value of each of the 95 homes that did not change hands has been reset to $450,000. The five houses that traded hands set the price of the 95 houses that didn’t change hands. Price is set on the margins.

The biggest expense in many enterprises and agencies is labor. Those who own enterprises know that it’s not just the wage being paid that matters, it’s the labor overhead: the benefits, insurance and taxes paid on every employee. These are often 50% or more of the wages being paid. These labor overhead expenses have skyrocketed for many enterprises and agencies, increasing their labor costs in ways that are hidden from the employees and public.

It’s important to recall that roughly 3/4 of all local government expenses are for labor and labor overhead–healthcare, pensions, etc. Where do you think local taxes are heading as labor and labor-overhead costs rise? What happens to pension funds when all the speculative bubbles all pop?

The cost of labor is also set on the margins. The wage of the 100-person workforce is set by the five most recent hires, and if wages went up 20% to secure those employees, the cost of the labor of the other 95 workers also went up 20%. (Employers can hide a mismatch but not for long, and such deception will alienate the 95% who are getting paid less for doing the same work.)

Labor is scarce for fundamental reasons that aren’t going away:

1. Demographics: large generation is retiring, replacements are not guaranteed.

2. Catch-up: labor’s share of the economy has declined for 45 years. Now it’s catch-up time.

3. Cultural shift in values: Antiworkslow livingFIRE–all are manifestations of a profound cultural shift away from working for decades to pay debts and enrich billionaires to downshifting expenses and expectations in favor of leisure and agency (control of one’s work and life).

4. Long Covid and other chronic health issues: whether anyone cares to admit it or not, Long Covid is real and poorly tracked. A host of other chronic health issues resulting from overwork, stress and unhealthy lifestyles are also poorly tracked. All these reduce the supply of labor.

5. Competing demands of family and work. Work has won for 45 years, now family is pushing back.

Put these together–diminishing supply of labor and labor being priced on the margins–and you get a runaway freight train of higher labor costs. Add in runaway increases in labor overhead and you’ve got a runaway freight train with the throttle jammed to 11.

Deflationists make one fatally unrealistic assumption: that enterprises facing sharply higher costs for labor, components, shipping, taxes, etc. will continue making big-screen TVs, shoddy jeans, etc. even as the price the products and services fetch plummets below the costs of producing them.

The wholesale price of the TV can’t drop below production and shipping costs for very long. Then the manufacturers close down production and the over-abundance of TVs, etc. goes away. Nation-states can subsidize production of some things for a time, but selling at a loss is not a long-term winning strategy: subsidizing failing enterprises and money-losing state-owned companies is a form of malinvestment that bleeds the economy dry.

The only thing that will still be super-abundant as demand plummets is phantom-wealth “investments”, i.e. skims, scams, bubbles and frauds. The value of these super-abundant follies will trend rapidly to zero once margin calls and other bits of reality drastically reduce demand.

Real-world costs: much higher. Speculative gambles: much lower. As in zero.

*  *  *

Thank you, everyone who dropped a hard-earned coin in my begging bowl this week–you bolster my hope and refuel my spirits. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Tyler Durden
Tue, 11/30/2021 – 06:30




Author: Tyler Durden

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Economics

Lucid Group Stock Is More Than Fully Priced, But It Has a Beautiful Car

Lucid Group (NASDAQ:LCID) stock may not have much further to go, but its Air Grand Touring model sure does.
Source: ggTravelDiary / Shutterstock.com
Lucid…

Lucid Group (NASDAQ:LCID) stock may not have much further to go, but its Air Grand Touring model sure does.

Source: ggTravelDiary / Shutterstock.com

Lucid is finally in production and the rubber is hitting the road to great reviews.

Here’s what a recent MotorTrend review has to say after comparing the Lucid Air Grand Touring against Mercedes Benz top of the line EQS 580 4matic:

“[Lucid] presents one of the biggest threats to both legacy automakers and Tesla; we’re excited to see how the Lucid Air changes the game, and we’re even more excited to see what the company’s second effort looks like.”

This is the equivalent of winning a Pulitzer Prize for your first novel, or an Academy Award for your first film.

The trouble with that is, then everyone waits for a second vehicle to top it. When Tesla (NASDAQ:TSLA) started down this quixotic road it had its high-end sports coupe.

Of course, there was no competition and no one even thought it would work. Sales weren’t part of the expectation, simply building a functional EV was the accomplishment.

Currently, TSLA has four models in production, although it has had eight different models since it started building cars.

LCID Stock, Like Its Car, Ain’t Cheap

What we’re seeing with all of the EV makers that have been producing vehicles is their stocks are all outrageously overpriced. And I include TSLA in that lot.

Look, we’ve been living in a world where central banks have controlled money supply and interest rates for over a decade now.

That has been a boon for companies and billionaires who can borrow at next to nothing and fund ventures off their assets.

But most people aren’t realizing similar gains sitting in money markets, CDs, or even index funds.

So this era has become a great bonanza for new ideas, whether it’s EVs, crypto, decentralized finance (defi), fintech, meme stocks, or any of the dozens of other “home run investments” that are out there.

There’s no doubt this is all very exciting, and LCID stock deserves its accolades. The company has delivered a world-class car and that is certainly inspirational.

But the challenges that TSLA is still grappling with – parts and servicing issues, consistent build quality, etc. – are key to the success of these newcomers.

For example, if I have a problem with a Ford (NYSE:F) Lightning, I can go to a dealer to get it fixed. How do I get my LCID fixed? Watch a YouTube video?

When you have a market cap that rivals a company that produces millions of cars per year and you’re producing dozens, your real value is an illusion.

Bright Prospects, Patient Money

After all this and the other comments I’ve made in previous articles, my advice is this: If you own, hang on to it for the long term.

You have jumped in with more enthusiasm than forethought but it’s a good company with smart management.

It also has a very interesting partner in the Saudi Arabia Public Investment Fund. There’s a lot of potential in that piece of the deal.

If you haven’t purchased it, wait. LCID stock is like a dotcom stock in 1999 at this point. Not all dotcoms crashed and burned when the bubble burst, but the good companies that survived were significantly cheaper.

Interest rates are heading higher and the markets are starting to rotate into different investment sectors.

LCID stock is going to need more money and that money will be borrowed at higher rates. It’s going to have to start proving its value sooner rather than later.

TSLA stock had a much longer runway for success than LCID stock has. It will get cheaper. And when it does, buy it.

On the date of publication, GS Early did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

GS Early has been an award-winning financial writer and editor for nearly three decades, working with many of the leading financial editors (Louis Navellier, Richard Band, Steven Leeb, Jim Collins, Roger Conrad, Elliott Gue, Maria Bartiromo, Neil George, Keith FitzGerald, Michael Robinson, and more) during that time. He’s seen a few things and hears more.

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Author: GS Early

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Economics

7 Dumbest Investments of 2021 That Made Many People Millionaires

It’s the sentiment that matters, particularly when it comes to the concept of dumbest investments of 2021.
According to English economist John Maynard…

It’s the sentiment that matters, particularly when it comes to the concept of dumbest investments of 2021.

According to English economist John Maynard Keynes, the market can remain irrational longer than you can remain solvent. The quote may be apocryphal according to Jason Zweig of the Wall Street Journal, but it rings true for a reason.

You’ll recall that in the years prior to the novel coronavirus pandemic, mainstream business headlines constantly ran stories about how millennials were not investing in the markets and therefore were falling behind in terms of wealth-building compared to prior generations.

When Covid-19 become our everyday reality, though, everybody was a day trader. While this bolstered market engagement, it also led to some of the dumbest investments.

Don’t get me wrong. Clearly, many of the dumbest investments of 2021 made people millionaires.

According to The Guardian, the world gained 5.2 million millionaires last year during the Covid crisis. That’s just so awesome, which brings me to the real victim of this pandemic: China.

The international community blasted the Chinese government for its handling of the pandemic but why? It was because of Covid that the dumbest investments actually became profitable.

Would toilet paper command a golden premium? Since when did everyone become an epidemiologist? And what is so gosh-darn special about a strip mall retailer?

These questions would ordinarily leave the dumbest investments of 2021 where they typically belong: in the trash heap. Instead, the unique circumstances that the global health crisis catalyzed made for some incredibly powerful (though far-fetched) ideas.

Of course, I was being facetious earlier: I don’t think Covid-19 was in any way a positive, but that also drives the lasting point we should all take away from this.

Yes, let’s marvel for a moment at these dumbest investments of 2021 but let’s also not forget that eventually, the fundamentals matter.

  • Bitcoin (CCC:BTC-USD)
  • Dogecoin (CCC:DOGE-USD)
  • GameStop (NYSE:GME)
  • Consol Energy (NYSE:CEIX)
  • Naked Brand (NASDAQ:NAKD)
  • Koss Corporation (NASDAQ:KOSS)
  • Dillard’s (NYSE:DDS)

Bitcoin (BTC)

Source: Shutterstock

Just to let you know that there are no hard feelings regarding this article of dumbest investments, I’m going to lead off with a few names that I personally own. Considering the scope and scale of its euphoria, I don’t think there’s any riskier idea than Bitcoin.

Woah, hold the phone there, buddy! Don’t you own BTC? Yes, and that’s exactly the point. Just because a market idea is classified as one of the dumbest investments doesn’t necessarily mean it can’t make people money.

As I’ve written about multiple times, Bitcoin — and perhaps Elon Musk — changed my life.

But there are two reasons why I think Bitcoin is contextually a dumb idea. First, its power comes from participation. Thus, no participation equals no power.

In contrast, major fiat currencies have incredible “intrinsic” power because governments force you to participate. Don’t believe me? Look at what the IRS did to Wesley Snipes, even though some questions exist regarding allegations of tax evasion.

Second, neither Bitcoin nor any other cryptocurrency democratized wealth disparities. Indeed, the wealth gap is still gapping. Once people realize that, BTC could face a correction.

Dogecoin (DOGE)

Dogecoin CryptocurrencySource: Orpheus FX / Shutterstock.com

While I understand that so many meme cryptos have sprouted since the mainstreaming of Dogecoin, I must still give credit to the one that started it all.

Ironically, the digital asset that started off as a joke became no laughing matter, generating astounding profits thanks in part to the law of small numbers.

To clarify, I’ve written many supportive commentaries about Dogecoin and other meme coins and tokens not because they’re intrinsically valuable but because, in my humble opinion, they offer better risk-reward profiles compared to Bitcoin.

Long story short, it’s better to take a small bet with a higher reward potential than the other way around.

In and of itself, I don’t see how you can’t classify DOGE as one of the dumbest investments of 2021 that made people millionaires.

On one hand, you’ve got to give credit to those who took bold moves to generate lifesaving profits. On the other hand, such stories encourage mass-scale speculative behavior, which inevitably ends poorly at some point.

When that point is, however, is the big question mark. All I can say is be extremely careful if you’re getting in now.

GameStop (GME)

Photo of the Gamestop (GME) logo On a Mobile Phone.Source: Shutterstock / mundissima

When you’re dealing with the random walk that is the financial market, you’re going to come across some hits and misses.

Looking back at some of my write-ups over the post-Covid years, I might, unfortunately, earn a reputation for being a whisperer of the dumbest investments.

You see, before seemingly everyone was going nuts about strip-mall retailer GameStop, I was urging people to consider the company’s contrarian bullish case.

Even more so, on the disclosure at the end of my article, I mentioned that I was seriously considering acquiring GME stock. The time was June 1, 2020, when shares traded hands for a little more than $4 a pop.

Back then, I was thinking GME could be due for a two-banger, maybe a three. Instead, it banged out a multiple that I thought extended well beyond the boundaries of credulity.

Of course, I can appreciate the moral directive that saw GameStop soar to the moon. Essentially, traders took the opposite bet of the shorts and went long on a company that fundamentally appeared destined for bankruptcy.

However, I’m not sure if this business model can sustain itself so be careful if you’re not playing with house money.

Consol Energy (CEIX)

A man holds coal in his hands over a pile of more coalSource: Shutterstock

Sometimes, the dumbest investments are not necessarily based on intellectually flawed reasoning or merely the product of fortuitous wagers.

Instead, they can be genius moves, capturing the sentiment of the time, which is exactly what’s going on with Consol Energy.

One of the few and the proud, Consol Energy specializes in coal. While an anachronistic energy source, it still represents a significant source of primary energy consumption in the U.S. at 10%, according to the Energy Information Administration.

But that alone didn’t contribute to the dramatic rise of CEIX stock. Instead, the world is facing a coal shortage, particularly in India.

As demand for the energy source skyrockets, many nations have turned to hydrocarbons, especially with a projected colder-than-normal winter coming. Naturally, this dynamic has contributed to the rising gasoline prices that we’re all suffering from.

In fact, I recently wrote a piece about hedging higher oil prices through purchasing shares of coal stocks. Therefore, I don’t consider Consol Energy as one of the dumbest investments in a contextual sense.

I just worry that broadcasted success stories will lead people into trades they shouldn’t be engaging.

If you do buy coal stocks, just be careful that their narrative can turn, depending on how this unique crisis pans out.

Naked Brand (NAKD)

a man and woman wear plain white underclothes from Naked Brand (NAKD)Source: Shutterstock

Easily one of the dumbest investments that delivered extraordinary gains for speculators in 2021, Naked Brand remains a remarkable trade.

Since its January peak to the time of writing price of 64 cents, NAKD stock has hemorrhaged nearly 62%. Yet on a year-to-date basis, shares are up a staggering 188%.

Again, I must emphasize here that just because a publicly-traded company is one of the dumbest investments of the year doesn’t mean it hasn’t been incredibly profitable for the fortunate gamblers.

Whether Naked Brand is a worthwhile investment moving forward is really the main inquiry, though, and celebrations of past profitability shouldn’t detract you from extracting an objective answer.

While ardent proponents of NAKD will likely object fiercely, from an outsider’s perspective, it’s hard not to view its rise as primarily the product of speculation.

When you look at the top performers of the Covid years, many if not most of them featured narratives tied to the crisis. Though Naked’s core products of intimate apparel are important, the brand itself isn’t a must-have (especially since millennials tend to not care about labels).

If you’re still adamant about NAKD, just be careful: other speculative names have stolen its thunder.

Koss Corporation (KOSS)

A Koss (KOSS) Porta Pro headset in a box.Source: SiljeAO / Shutterstock.com

Koss Corporation has made the absurd a reality over the past 11 months.

From its closing peak in January to the time of writing price of $14.03, KOSS stock has dropped an unfathomable 77% of market value. Yet shares are up 358% on a YTD basis.

At the beginning of this year, KOSS closed its first session at $3.19. By Jan. 29, you could buy the equity unit but it would cost you, $64 to be exact.

So inside one month, KOSS pulled off a 20X return. Hopefully, if you did acquire shares, you did so on the earlier end of the spectrum.

Since its dramatic rise, the stock has suffered an equally crushing low. While the meme crowd devastated anyone “silly” enough to short the company, the fundamentals couldn’t be papered over indefinitely.

In my view, the main challenge with Koss is that its headphone products aren’t particularly distinct. Plus, it’s an extremely saturated and competitive market.

You can hate me, but I wouldn’t touch shares at this juncture.

Dillard’s (DDS)

A photo of the exterior of a Dillard's (DDS) store with the company logo above the entrance.Source: JHVEPhoto/ShutterStock.com

I hesitate to put department store chain Dillard’s on this list of dumbest investments because it’s very much a debatable inclusion.

As I’ve discussed myself with my interview with CGTN America anchor Rachelle Akuffo, retail revenge is a very real concept. After having been cooped up in their homes for a year or longer, millions of Americans are ready to reclaim their lives.

Therefore, I understand that people will flock to physical retail channels in part because they want to and also because doing so makes them feel human again.

For one thing, the intensity of online shopping has declined from its peak during the second quarter of 2020. Second, Americans are sitting on a crisis savings war chest of $2.7 trillion, according to Bloomberg.

It’s no surprise, then, that retail stocks have boomed. But with DDS soaring 551% on a YTD basis, I have to question if sentiment hasn’t gotten out of hand.

Sure, the company has been delivering impressive quarterly performances but it remains to be seen whether this trend will continue into 2022 and beyond.

Simultaneously, I get it but I don’t. If you want to venture in, do so extremely cautiously.

On the date of publication, Josh Enomoto held a LONG position in BTC, DOGE and GME. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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