It was a sobering week for crypto bros, as yet another epic collapse has exposed the supposed “future of money” as little more than a house of cards. Crypto trading platform FTX, which landed high profile partnerships with the likes of Tom Brady and Steph Curry, and signed a $135M agreement with the Miami Heat to rename their arena, filed for bankruptcy on Friday.
This comes less than four months after major crypto lender Celsius Network filed for bankruptcy, and less than six months after the collapse of major tokens terraUSD and luna.
Exactly one year ago (Nov 12, 2021) Bitcoin reached an all-time high of $80,827 CAD. Today, one coin is worth $21,118 – a 74% decline from its heights.
Ethereum (or Ether), the second most popular digital coin, reached a peak of $5,829 CAD at the same time last year. Today it trades at $1,583 – a similar 73% decline in value.
The space is so rampant with fraudulent activity and bad actors it makes the characters and events described in The Big Short look like choir boys running a small-time grift.
For regular investors, it’s a tale as old as time. It’s called the Greater Fool Theory. Assets soar in value, beyond any sensible metric or fundamentals. Investors pile in, thinking they can still make money as long as there is a “greater fool” behind them ready to buy at even higher levels. Soon, we run out of buyers and the price plummets.
The reasonable takeaway is to avoid this space. That includes mainstream coins like Bitcoin and Ether. That includes NFTs. That includes so-called stable coins and crypto savings accounts promising high returns. It’s quite possibly all a Fugazi:
This Week’s Recap:
No posts from me this week, but I received a lot of good responses to my Master List of Financial Goals post last week. I hope that has helped you think about your own financial goals and how to support that vision of your life.
It’s also timely to re-share this post on the trouble with GICs. US inflation numbers came in lower than expected this month, and the S&P 500 responded with a massive 5.54% increase in a single day.
Reader: My stocks are tanking but I can get a 1-year GIC at 5%.
— Boomer and Echo (@BoomerandEcho) November 10, 2022
Promo of the Week:
If you’re a small business owner then you need to take advantage of the American Express Business Platinum Card and all of the perks that come with it.
New card members can earn 90,000 Membership Rewards points when they spend $6,000 in the first three months.
I transfer Membership Rewards 1 to 1 to Aeroplan where I value Aeroplan miles at 2 cents per mile*. That means your initial 80,000 welcome bonus points can be worth up to $1,600.
*Note that I recently redeemed Aeroplan miles for four business class tickets from Calgary to Rome. The tickets would have cost a whopping $33,000 in cash, which means I got an incredible 10.5 cents per mile value out of those Aeroplan miles.
You’ll also get hotel perks and airport lounge access.
The $499 annual fee may be tax deductible as a business expense.
We’re starting to get into Christmas mode now, but with a potential house sale on the horizon we’re looking for ways to simplify things this holiday season. I got some inspiration from a minimalism blog – 69 festive minimalism tips for a simpler Christmas.
Travel expert Barry Choi reviews the American Express Aeroplan Reserve Card – it’s one of our go-to cards for travel.
More on the FTX collapse, which wiped out the founder’s entire $16B fortune.
Here’s Mike Drak on why we need to shift from traditional retirement planning, which focuses exclusively on how much an individual needs in retirement, two longevity planningwhich includes the often overlooked non-financial aspects of retirement.
My Own Advisor Mark Seed takes a look at the cost of elder care in Canada:
“The range I suggest is $1500 to $4000 per month for eldercare costs, which includes everything from personal care, companionship, home maintenance (external and internal), personal response systems, home and personal adaptation accessories and transportation. The lower end of the range is for individuals with lighter needs (and likely a family caregiver nearby or a couple where one is caring for the other) and the higher end is for more complex needs and/or frailer seniors living alone.”
Fred Vettese has been writing up a storm at the Globe and Mail about CPP and OAS. The first is about what the expansion of CPP will mean for our retirement (subs). Note, it will take more than 40 years before the expansion is fully phased in.
Next, here are two ways that retirees who haven’t lived in Canada that long can increase their OAS benefits (subs). If you can’t access the article, the gist is that by waiting until 70 to take OAS you can increase either your “residency-adjustment” or your “age-adjustment” (but not both).
Jason Heath says it may be necessary or advisable to withdraw from your RRSP in your 60s. Here’s why (and how much you should take).
The always clever and creative Andrew Hallam explains what the psychology of rats can teach you about lump sum investing.
A question I’m seeing more and more. Should clients use home equity to help fund retirement?
A Wealth of Common Sense blogger Ben Carlson explains how you should choose your asset allocation.
I really enjoyed this piece from Rob Carrick on the right things a brutally honest advisor would tell you about fees, returns, and more (subs):
“You know how we told you that prudent portfolio diversification is the path to long-term investing success? Funny story. Those bonds and bond funds we put in your portfolio for stability dropped like a rock. Sorry about that, chief. Investing means getting punched in the face every now and then, even as you keep progressing towards meeting your long-term financial goals.”
Finally, we all know interest rates were sky high in the 1980s. But are Canadians worse off financially now than they were back then? The answer may surprise you.
Have a great weekend, everyone!