Predictions

One of the most famous former residents of Belize, (notorious if you ask some people), John McAfee, has been in the news lately regarding his once bold claim back in 2017 that Bitcoin would reach a price of $1 million.
 
He famously wagered on Twitter that he would eat his own “unprintable body part” if it didn’t happen by the end of 2020. Many are holding their breath on whether he’ll follow through on his bet.
 
To call John McAfee an eccentric would be an understatement.
 
McAfee’s been open about his liberal drug use and womanizing (he’s married to an ex-prostitute). After making a fortune from the anti-virus software bearing his name, McAfee set up shop in Belize hoping to retire in the surf and sun of the Caribbean. Things didn’t go as planned when in 2012 things took a dark turn.
 
In 2012, McAfee was wanted for questioning by local authorities in connection with the murder of his neighbor (I was personally interviewed by the local media about it).
 
Fearing prosecution for a murder he claimed he didn’t commit, McAfee fled Belize for Guatemala where he was arrested for entering illegally and extradited to the United States. No charges were ever filed against McAfee for his neighbor’s murder.
 
In 2016, when he was running for President on the Libertarian ticket, McAfee suggested his neighbor was killed accidentally by government assassins that were likely targeting him.
 
Say what you will about McAfee, he knows how to make a buck, which brings me back to Bitcoin.
 
After predicting in 2017 that Bitcoin would hit $1 million, earlier this year, he walked back that prediction in a tweet labeling Bitcoin as “the most crippled” crypto technology, describing it as “ancient” tech. He brushed off his earlier prediction by saying it was simply a trick to lure new users into the space to boost the price.
 
Many will point to McAfee’s prediction as just the latest rantings and ravings of a madman.
 
Why would anybody believe McAfee about anything investment related?
 
In reality, this is no different from Wall Street pundits who run their mouths no less than McAfee. They flip flop like with the wind but because we don’t consider them crazy or eccentric like McAfee we’ll give them more credence.
 
The reality is we should be just as – if not more – leery of Wall Street pundits, advisers, professionals, etc. who are doing the exact same thing as McAfee – trying to make a buck.
 
By pumping up the merits of Bitcoin, McAfee was taking a page out of the classic Wall Street playbook with a pump and dump scheme. After pumping up the price of Bitcoin, then cashing out, McAfee moved onto his next scheme.
 
Con men like McAfee run rampant on Wall Street because the system allows them to.
 
Stocks and Bitcoin values are purely speculative, rising and falling with the news cycle, social media, and herd behavior – with no intrinsic value or any underlying economic fundamentals.
 
Experts are warning stocks are currently overvalued by at least 15% but that’s not stopping the investing public from continuing to snap up high-risk stocks. The public doesn’t care about underlying fundamentals.
 
Why invest in something that can be manipulated by the likes of John McAfee and the many Wall Street shysters? 
 
How can the price of a stock skyrocket within hours of an internet rumor when the economics of the underlying company hasn’t changed?
 
It’s because investors are betting – betting the price will go up based on unsubstantiated rumors.
 
Sensible investors don’t leave their investing fate to speculators where the price of the asset they’re investing in can change with the whims of the investing public.
 
They’re more interested in assets with intrinsic value – value that can be calculated.
 
A commercial real estate property can be valued based on historical and reasonably projected income.
 
That value can’t be manipulated by the rantings of a madman or moved by crowd behavior. An agricultural venture will have concrete data on past sales with reliable models for predicting future sales.
 
It’s these reliable models that can peg a reasonable value on a business.
 
The same can’t be said about Bitcoin or most public stocks with no measurable value. Their values are solely based on investor mood and sentiment.
 
TIME FOR AN HONEST ASSESSMENT
 
Fraught times like what we’re experiencing now with COVID-19 is an opportunity to make an honest assessment of our portfolios.
 

  • Do our assets have measurable value?
  • Do their prices have concrete fundamentals and data to back them up?
  • Are they susceptible to manipulation and extreme volatility?
  • Are you tired of worrying about the ups and downs of your portfolio from outside sources?

 
MAYBE IT’S TIME FOR A REALLOCATION
 
Follow the smart money like the ultra-wealthy, institutional investors, and university endowments who flock to tangible assets with intrinsic value, insulated from herd behavior and trivial factors.
 
Consider reallocating to assets that cash flow and grow over time – all backed by hard assets.

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John Turley

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