It’s taken a long time for professional wrestling to be treated like a legitimate sport.
For its first fifty years, to see one of these scripted matches you’d have to show up on a Saturday night to your local armory. But eventually pro wrestling began to get some fringe slots on cable TV. And now World Wrestling Entertainment (also known as WWE) is generating $1.33 billion a year. Even more amazing, it’s having the results of its matches reported by the major sports media.1
Yes, the folding chairs are real. The excitement of the fans is genuine. But the competition is fake.
The financial world also has “investments” that, at first, were not accepted by the mainstream, but by sticking around and generating excitement among a loyal following, are now treated as legitimate. The one grabbing headlines right now is cryptocurrency.
Scott MacKillop, CEO of First Ascent Asset Management, writes that crypto is becoming so mainstream, every corner of the financial services industry is looking for ways to profit from its popularity.
“Its old image as the currency of choice on the dark web is being painted over to give it a more comfortable quality of familiarity and acceptability,” says MacKillop. “For example, crypto is being packaged to make it look like our old friends, mutual funds, ETFs, and SMAs.” (An SMA is short for Separately Manage Account.)2
To help with this makeover, they’ve even given crypto a new description. It’s an “alternative investment.” This euphemism makes crypto sound innovative compared to older asset classes like stocks, bonds, and fiat currencies.
Unfortunately, the biggest way these new assets differ from traditional ones is that the traditional ones are backed by something of value. For example, the dollar is backed by the full faith and credit of the U.S. government. Cryptocurrencies, being purely digital, are backed by nothing.
But there’s no denying that crypto has been exciting. Bitcoin, the most popular of the cryptocurrencies, has performed impressively over the past 12 months, gaining more than 150%.3
However, its value relies solely on the willingness of other investors to buy it from you. Contrast this with a share of stock that gives you a fraction of ownership in a company that makes something or provides a useful service. How good it is at either of those things is generally reflected in its present market value.
Even if you invest in fine art, and your collection of Dutch seascapes of the 18th century falls out of favor, you still have some nice paintings to enjoy. But as MacKillop points out, “Crypto’s essence is supply and demand. In the absence of demand for it, it is worthless and does not exist.” (Emphasis added.)
For that reason, cryptocurrency cannot be analyzed like traditional assets and should not be grouped together with them.
If you have questions about how the various instruments in your portfolio have been chosen to give you the best chance for long-term success, talk with your trusted fiduciary financial advisor.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020
Sources:
1. http://go.pardot.com/e/91522/wwe-revenue-/94wj5b/2256948525/h/LPS-9gKtNVOsutCR3nqGzHfjLCkMx9uwISzcCP225xU
2. http://go.pardot.com/e/91522/cryptocurrency-you-own-nothing/94wj5f/2256948525/h/LPS-9gKtNVOsutCR3nqGzHfjLCkMx9uwISzcCP225xU
3. http://go.pardot.com/e/91522/nvesting-cryptocurrency-btcusd/94wj5j/2256948525/h/LPS-9gKtNVOsutCR3nqGzHfjLCkMx9uwISzcCP225xU
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