Gyroscopic Investing

I don't know about the rest of you, but I'm splitting my PP 5x20% just so I can invest in one of these:

http://finance.yahoo.com/news/175-000-m ... 16725.html

OK, not really, but are these people serious?

My favorite comment:

Curled Latin American horse tail is the BEST kind of curled horse tail! Let the other mattress companies cut corners and use cheaper Canadian or Australian horse tail, some of which is UNCURLED, or worse, given a bad perm. If you want the real thing you gotta go to THESE guys!

It's also a great place to stash your cash if the banking system fails 

Given the recent news headlines, perhaps the PP's 5th pillar should be actual arable, defensible land well-removed from metropolitan areas. 

Sounds great! Is it eligible for Amazon free shipping?

cnh wrote: Given the recent news headlines, perhaps the PP's 5th pillar should be actual arable, defensible land well-removed from metropolitan areas. 

I would say that the fifth pillar is already in place and it is your career.

MediumTex wrote: I would say that the fifth pillar is already in place and it is your career.

Oh, don't say that!

I wanted to keep my PP long after I get rid of my career!

I currently allocate about 33% to my career, and was hoping to cut that down to maybe 5%-10% before eliminating it entirely.

For me, the 5th pillar is a mortgage-free home.  Working on that one.

I'm with AgAuMoney -- the pillars are to support the roof.  The career is to fund building them to the needed height and strength. 

Of course, now I also need to work more to afford my nice new mattress.

How about for a fifth pillar one or more offspring trained to support their parents in old age.

Trouble with offspring is they can be so darned unreliable.  I have some spares, but still.  If we can solve the determinism problem then I can program mine...  But I'm not holding my breath.

Maybe the fifth pillar is bitcoins?

AgAuMoney wrote: Maybe the fifth pillar is bitcoins?

+1

AgAuMoney wrote: Trouble with offspring is they can be so darned unreliable.  I have some spares, but still.  If we can solve the determinism problem then I can program mine...  But I'm not holding my breath.

Maybe the fifth pillar is bitcoins?

Why?

frugal wrote:

AgAuMoney wrote: Trouble with offspring is they can be so darned unreliable.  I have some spares, but still.  If we can solve the determinism problem then I can program mine...  But I'm not holding my breath.

Maybe the fifth pillar is bitcoins?

Why?

Because children are free agents.

Because bitcoins seem to be gaining in value and usefulness.  But it might all be speculation which looks especially likely given last week's 50% gain.  However the log chart still looks reasonable.

Next time it would be appreciated if you would differentiate the target of your interrogative.

AgAuMoney wrote:

frugal wrote:

AgAuMoney wrote: Trouble with offspring is they can be so darned unreliable.  I have some spares, but still.  If we can solve the determinism problem then I can program mine...  But I'm not holding my breath.

Maybe the fifth pillar is bitcoins?

Why?

Because children are free agents.

Because bitcoins seem to be gaining in value and usefulness.  But it might all be speculation which looks especially likely given last week's 50% gain.  However the log chart still looks reasonable.

Next time it would be appreciated if you would differentiate the target of your interrogative.

AgAuMoney
AgAuMoney
AgAuMoney

I understand the general concept of Bitcoins. I don't understand why it is limited in number.

I would like to invest a very small % on it, but don't know how.

Regards!

I'll take a stab at answering why there will only be 21 million bitcoins...

The algorithm/cryptography that is the core of bitcoin only supports 21,000,000 bitcoins. If you were to write another program using an algorithm that made more than 21 million bitcoins possible, your node would immediately be rejected by the network. The only way to participate is to play by the rules that are set forth in the agreed upon protocol.

Now the 2nd question. What's the best way to invest a small amount?

There are lots of different ways. Probably the easiest with the least hassle (highest fees) is to check out bitinstant.com. They have an arrangement with Moneygram so that you can go in any CVS or Wal-mart and pay for your bitcoins and have them almost instantly. The cheapest way is to set up accounts at mtgox.com and dwolla.com. You then link your bank account to dwolla. ACH transfer money from your bank --> dwolla --> mtgox --> bitcoin. That's the best way to avoid fees that I know of. You can also try localbitcoins.com to find someone who is willing to sell but I've found that the markup is higher from local dealers than just going through mtgox.

I found this video to be very helpful in understanding how bitcoin works. It's from a 2012 Libertarian festival and it's about 1 hour long.
https://www.youtube.com/watch?v=088le0gCh-0

If you want the minute and a half version watch this one instead...
https://www.youtube.com/watch?v=Um63OQz3bjo

Check out bitcointalk.org and educate yourself about keeping your wallet secure before you put in much money. Also keep in mind that Bitcoin is fairly new and experimental. It could definitely drop to zero. On the other hand, the upside potential is huge. There are 50 million ounces of gold mined per year. There will only ever be 21 million bitcoins. In theory, Bitcoin is also a better medium of exchange than gold. You can send it anywhere in the world instantly. You can carry massive amounts in your pocket (can't do that with gold). It's more easily divisible (try trading gold for a pack of gum). In my opinion, Bitcoin is superior in these respects. Where Bitcoin fails in comparison to gold is that gold has been used for thousands of years and widely recognized as a store of value. Bitcoin has been around for 4 years and is not widely recognized....that will change with time imo. The time to buy is before your shoeshine guy tells you about it. Sell some when it hits the front page of the wsj.

herbgoat wrote: I'll take a stab at answering why there will only be 21 million bitcoins...

The algorithm/cryptography that is the core of bitcoin only supports 21,000,000 bitcoins. If you were to write another program using an algorithm that made more than 21 million bitcoins possible, your node would immediately be rejected by the network. The only way to participate is to play by the rules that are set forth in the agreed upon protocol.

Now the 2nd question. What's the best way to invest a small amount?

There are lots of different ways. Probably the easiest with the least hassle (highest fees) is to check out bitinstant.com. They have an arrangement with Moneygram so that you can go in any CVS or Wal-mart and pay for your bitcoins and have them almost instantly. The cheapest way is to set up accounts at mtgox.com and dwolla.com. You then link your bank account to dwolla. ACH transfer money from your bank --> dwolla --> mtgox --> bitcoin. That's the best way to avoid fees that I know of. You can also try localbitcoins.com to find someone who is willing to sell but I've found that the markup is higher from local dealers than just going through mtgox.

I found this video to be very helpful in understanding how bitcoin works. It's from a 2012 Libertarian festival and it's about 1 hour long.
https://www.youtube.com/watch?v=088le0gCh-0

If you want the minute and a half version watch this one instead...
https://www.youtube.com/watch?v=Um63OQz3bjo

Check out bitcointalk.org and educate yourself about keeping your wallet secure before you put in much money. Also keep in mind that Bitcoin is fairly new and experimental. It could definitely drop to zero. On the other hand, the upside potential is huge. There are 50 million ounces of gold mined per year. There will only ever be 21 million bitcoins. In theory, Bitcoin is also a better medium of exchange than gold. You can send it anywhere in the world instantly. You can carry massive amounts in your pocket (can't do that with gold). It's more easily divisible (try trading gold for a pack of gum). In my opinion, Bitcoin is superior in these respects. Where Bitcoin fails in comparison to gold is that gold has been used for thousands of years and widely recognized as a store of value. Bitcoin has been around for 4 years and is not widely recognized....that will change with time imo. The time to buy is before your shoeshine guy tells you about it. Sell some when it hits the front page of the wsj.

But it is an investment for a few thousands and to buy in 5 years?

Thank you for your explanation!

frugal wrote:

herbgoat wrote: Where Bitcoin fails in comparison to gold is that gold has been used for thousands of years and widely recognized as a store of value. Bitcoin has been around for 4 years and is not widely recognized....that will change with time imo. The time to buy is before your shoeshine guy tells you about it. Sell some when it hits the front page of the wsj.

But it is an investment for a few thousands and to buy in 5 years?

Thank you for your explanation!

I think it's been on the front page of the WSJ before.  Seems likely to be again the way things are going.

I think bitcoin is extremely speculative at this stage of its development.  It could easily just die out and be worthless for any of many possible reasons.

I have now about 1yrs gross income in bitcoins.  I'd like to cash some out, but the fees, tax questions, trust issues...  It seems to me things really aren't yet ready for that kind of interaction with the real world.  Maybe they never will be.  Perhaps bitcoin will be mostly relegated to internet goods and underground stuff.

Or maybe it will take over a small country(s) and become a fully recognized international currency.

Right now it is too soon to say.  Anybody that tells you the future will be bright is deceived or deceiving.  The future may be bright.  Or it may not.  Bitcoin is yet very speculative.

If you can afford a 100% loss of a few thousands, go ahead.  But treat it almost like you would lottery tickets.  With lottery tickets the odds are known, and definitely against you, but the payoff might be huge.  With bitcoin the odds are completely unknown but the payoff might be huge.

When bitcoins first came out I was really interested in how they worked and read the original paper, and was underwhelmed. It's really vague on how cryptography is actually used and doesn't really have a clear threat model or rigorous proof of resilience to specific attack modes. The document is only 9 pages long and aside from a passing reference to SHA-256 there is no discussion of specific hashes or ciphers or how they interact.

You can't just throw crypto on something and presto have security. There are counterintuitive ways that strong crypto can be compromised (e.g. http://en.wikipedia.org/wiki/Block_ciph ... _.28ECB.29 or http://en.wikipedia.org/wiki/Birthday_attack) if the entire system is not analyzed very carefully. So until I see someone perform that kind of analysis with convincing rigorous proofs I'm going to be leery about investing in bitcoins.

Is a bitcoin-like digital currency a viable concept? Yes. Is bitcoin.org a truly secure implementation of that concept? Inconclusive.

I still don't get the idea of bitcoins. Who cares how many there are, or how hard they are to create? What are they good for other than as part of a pyramid scheme?

As explained in Austrian economics, money originates as a useful commodity. I don't see anything useful about them, nor are they a commodity.

Maybe I'm just old-fashioned.

Libertarian666 wrote: As explained in Austrian economics, money originates as a useful commodity. I don't see anything useful about them, nor are they a commodity.

Aristotle said that a good form of money would be 1) durable 2) portable 3) divisible 4) have intrinsic value.

Based on those 4 attributes, let's compare gold with bitcoin.

1) Durability
Gold doesn't rust, corrode, or fade.
As Bitcoin is 'virtual' it also doesn't rust, corrode, or fade. It also has the added benefit of being stored in hundreds of thousands of locations around the globe. Any full bitcoin node has the entire blockchain on file so in effect, you're bitcoins are stored anywhere and everywhere.

Tie

2) Portability
Gold is a very dense metal. Fortunately it's also very rare so that it doesn't take a huge amount to purchase something. You could put enough in your pocket to buy a car. If you want to buy a house, you'd better have big pockets.
Bitcoin is stored in an electronic wallet so it doesn't matter the amount that you have, it always fits in your pocket. You can easily carry enough to purchase 10 houses. No problem!

+1 Bitcoin

3) Divisibility
Gold is pretty easy to divide since it's a soft metal. It comes in standard sizes in fractions of an ounce so you could make an exchange without having to weigh the gold content. Not bad for larger transactions, but what about tiny transactions? You end up having to saw off a fragment and weigh it. Not really ideal.
Bitcoin is extremely easy divide all the way down to .00000001 of a bitcoin. You never have to ask for change since you can always make exact payments.

+1 Bitcoin

4) Intrinsic Value
Intrinsic Value means that the item can be used for some purpose. It's good for something other than just being money, right?
Gold has intrinsic value because it has several industrial uses. People also like to make jewelry out of it.
Bitcoin has intrinisc value because it has the ability to be transferred anywhere in the world instantly and securely. In effect, it combines the usefulness of Paypal with the other benefits mentioned above. So both Gold and Bitcoin are useful in their own right. Gold is useful in industry and jewelry. Bitcoin is useful as a secure method of value transfer across great distance. Since I'm the one dallying out points here (it's my post), I award this one to Bitcoin. We are talking about money, and I'd rather my money have the intrinsic value of easy transfer rather than industrial use.

+1 Bitcoin

---------------------------
So that's how I think of it anyway. To each his own and I definitely understand your viewpoint. As mentioned earlier, Bitcoin is in it's infancy and should be treated with extreme caution. When I broke Bitcoin down into the fundamental attributes of money and compared it with the other options, the brilliance of Bitcoin became obvious to me.

KevinW wrote: When bitcoins first came out I was really interested in how they worked and read the original paper, and was underwhelmed. It's really vague on how cryptography is actually used and doesn't really have a clear threat model or rigorous proof of resilience to specific attack modes. The document is only 9 pages long and aside from a passing reference to SHA-256 there is no discussion of specific hashes or ciphers or how they interact.

I suggest you are misremembering.

Additionally, the 9pg PDF is only a fraction of the original documentation.  The code is the rest.

In combination the use of the crypto is clearly specified as is the use of the SHA-256.

Libertarian666 wrote: I still don't get the idea of bitcoins. Who cares how many there are, or how hard they are to create? What are they good for other than as part of a pyramid scheme?

As explained in Austrian economics, money originates as a useful commodity. I don't see anything useful about them, nor are they a commodity.

Maybe I'm just old-fashioned.

Being limited in quantity and hard to create is a necessary attribute of money.  This was also true of the commodity money at origin, e.g. nobody just used any old shell or whatever sand or stick you could find.  There has always had to be something special about what was used as money.  We also see as various commodities became plentiful they lost their use as commodity money (e.g. iron or aluminum) and we also see in history that some "money" became so plentiful it lost its place as money, perhaps because it was too easy to create.

Bitcoin is no more a pyramid scheme than is any other natural resource production or farming or invention of a new gadget.  The original producers always have an advantage IF other people come to desire their goods.  E.g. Apple and the i{gadgets}.

Use of bitcoin is already well covered by herbgoat.

As for the commodity theory of money, that is essentially the Mises regression theorem.  There are many counter examples in the current world, and as I have followed the debate over the years, it appears to be settling more on a slight variant from Mises original.

The variant is, that the IDEA of money originates as a commodity.  Once the idea of money is well known and understood then anything can be used as money if it meets similar constraints, with more or less success depending on how well it meets each of the various constraints and the purposes for which it is needed/used.  And again, herbgoat has nicely illustrated some of those constraints.

A bit more on pyramid schemes and bitcoin specifically...

The commonality is that those who come early have an advantage.  This is the same for mining, farming, invention, etc.  Thus that early advantage is insufficient to define a pyramid scheme.

A pyramid scheme has to have the "scheme" that purposefully controls the "investment" of newcomers so as to pay off those who came before.  As the SEC says:

SEC wrote:The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.

Nobody is in control to be able to make that promise for bitcoin.  Some may try, but such has far more in common with stock "pump and dump" than with a pyramid scheme.

AgAuMoney wrote:

KevinW wrote: When bitcoins first came out I was really interested in how they worked and read the original paper, and was underwhelmed. It's really vague on how cryptography is actually used and doesn't really have a clear threat model or rigorous proof of resilience to specific attack modes. The document is only 9 pages long and aside from a passing reference to SHA-256 there is no discussion of specific hashes or ciphers or how they interact.

I suggest you are misremembering.

Additionally, the 9pg PDF is only a fraction of the original documentation.  The code is the rest.

In combination the use of the crypto is clearly specified as is the use of the SHA-256.

Can you point me to a rigorous analysis then?

Code is not a proof...

Libertarian666 wrote: Maybe I'm just old-fashioned.

Money doesn't have to be a store of value to serve as a socially useful medium of exchange, i.e. FRN's.  Bitcoins have both features, however. 

The Bitcoin supply is fixed, so it cannot act as a pyramid scheme which requires an ever increasing new supply of money.  Hence it serves as a non-inflationary medium of exchange.

And each Bitcoin is backed by the expense of the electricity and hardware used to mine it.  Hence it serves as an increasing store of value.  The competitor Freicoins operates on the fiat premise under guise of senoirage, i.e. about 5% a year is inflated away to force velocity, and it has yet to attract much interest.

All human value is etheral, so you're just conflating intangible with the tangible.  I'm sure there is a cognitive bias that makes us favor the latter.