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Friday File: Blockchain Week ends, Two Buys, One Sell and some portfolio thoughts

Adding two small positions in cobalt and tech, a stop loss in Axis, and thoughts on CoreSite, Berkshire and more for the Friday File

By Travis Johnson, Stock Gumshoe, December 8, 2017

It turned out to be blockchain week here at Stock Gumshoe, with the massive wave of bitcoin-related teasers hitting my inbox, so I should update you on that…

The tiny fragment of cryptocurrencies that I still had in my wallets after selling essentially all of those positions in September has once again grown from a rounding error into something that’s actually countable… which is absurd on the face of it, but there you go. So now bitcoin and ethereum together, if they were stocks, would tally up as about four tenths of a percent of my stock portfolio again. The prices don’t make any sense to me, but I don’t mind risking that little as the mania continues to unfold.

And yes, it is a mania. It’s a bubble. Bitcoin prices moved about 25% in the course of one hour on Thursday. This will be studied like the tulip bubble or the dot-com bubble or the 2000s real estate bubble. That doesn’t mean it will pop the way that those bubbles did, but I expect it does have to pop or deflate at some point — otherwise, if this wildly exponential growth continues for a while longer, we’re going to stop all productive activity and put all our electricity to use mining bitcoin and end up effectively building digital Easter Island monuments to a mania that has no rational relationship to the economics of the “asset.” That doesn’t mean I know when it will peak (if I did, of course, I wouldn’t have sold my position in September), and I have no real certainty about any of the coins at all… I just don’t understand their pricing, and I think it’s A-OK to just avoid things that don’t make sense. You’ll miss some manias, but you’ll miss some disasters, too.

All of this mania also means there’s probably going to be some awesome technology that comes out of bitcoin and blockchain, and probably some great companies… just like awesome technological advancements came out of the late 90s tech boom — likely billions of dollars are going into trying to build the next blockchain breakthroughs, from venture funding to ICOs to R&D at huge fintech companies and banks, so even if that money doesn’t all generate returns it will likely generate innovation and progress. You can make great leaps forward and also drive people into bankruptcy in the same ...

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