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Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer, Ken Fisher, explains what long-term investors should keep in mind before investing in bitcoin and gold.
For example, he discusses their risk/reward profiles, how they behave compared to traditional asset classes, like stocks, and more. While Ken recognizes the allure of investing in cryptocurrencies—especially in periods like today—he details potential risks for long-term investors and why timing is paramount to success.
Transcript
Ken Fisher:
So with crypto and Bitcoin and all hitting new all time highs it’s logical that there’s just a lot more interest in it. And again, people wanting to ask, “is this the thing in the future that I ought to be in now, is crypto, is Bitcoin, the new gold? And so, first I just want to go on” a tangent in trying to answer that.
Forgetting about crypto for a moment. Gold was never gold. Gold has never been what people think it is.
Let me put that into perspective for you. You got stocks, you got bonds, you got cash, you got other stuff. That pretty much covers everything.
Gold is one of those other things, and there’s nothing terrible about that. But the fact of the matter is, when you think about how you construct portfolios and when you think about investment opportunities, you say to yourself, what kind of returns do you get out of them versus what kind of volatility you suffer for getting those returns?
And the part about gold that goldbugs will never accept but it’s 100% true, 100% true, is that gold gets lower long term—long term—returns than stocks, bonds or cash with markedly higher volatility than stocks.
If you don’t like the volatility of stocks, the volatility of gold will clobber you and crypto falls into that same category.
I’m going to come back to that. But before I do, let me stick with gold for a second. Gold gets all of its net return out of about 15% of its calendar life. The other 85% of the time, it’s a wasting asset.
Goldbugs never believe that because they’re never thinking about that. Gold has had very, very long periods of time, years and years—one period 28 years—where gold fell in price overall.
If you got something that’s going to fall for 28 years in price, or fall for five years in price, or fall for ten years in price, it’s going to drive you crazy before you ever get to that 15% where you do get big, sharp run ups. Now, my point about gold and my point about crypto is that if you can time things that are exceptionally volatile—much more volatile than stocks—you don’t need any advice from me at all about anything.
The fact of the matter is stocks rise 75% of the time in history. Some periods they don’t rise as much. But overall, about 75%, 73% overall since 1925.
In something that rises that often, the odds are it doesn’t drive you quite as crazy—although stocks drive people crazy—than something much more volatile that drives people even more crazy.
If you’re that good a speculator and know when to get in and get out and move this and move that. If you’re that good a trader, you need no advice from me. But most people aren’t; most people buy these things high, sell them low later, get disappointed. People say, oh, I just buy it and put it away. Most people can’t do that. Most people can’t do that with stocks.
The average passive fund is actually only held a little less than two years because they can’t hold on to it because some scary news story gets them out of it; some price swing gets them out of it.
In reality, time in the market is as important as timing the market, and most people can’t time the market from beans some bananas.
Now let me go back to another point about Bitcoin. And this isn’t always true with gold, although it’s been true with gold recently.
Bitcoin and gold have correlated positively with stocks; they’ve moved up, basically, when stocks have moved up and they’ve moved down, basically, when stocks have moved down. In 2022, they’re both falling, in 2023 into 24, they’re both rising.
They act just like high volatile—not just like, that’s an overstatement—they act similarly to a very high volatile stock because when the market’s falling or the stock market’s rising, not all stocks are doing that perfectly. Some act a little differently.
Bitcoin and gold both act a lot like a high volatile stock. Is there anything wrong with that inherently? No. But the point is overemphasizing what they are, which is something that doesn’t actually do anything, is highly speculative, is highly volatile, and may go through the roof—or the floor—is not a way to put much money into a portfolio that you want to actually have take care of you over the long future that you probably have ahead of you.
Again, I reiterate: if you think you’re that good a speculator, my hat’s off to you. You’re probably wrong. You’re probably not that good a speculator.
Most people aren’t. Most people are wrong on timing more often than they’re right on timing. And you’ve got to be pretty good to do timing and most aren’t. Most ride a hot period until they get their clocks cleaned. So with that, my point would be to be cautious when you think of these.
Now, let me go back to one more point. Since we’re doing Bitcoin, let me give you two more bits on Bitcoin. The fact of the matter is that when you think about so called coin, when you think about cryptocurrency, let’s get real for a moment. Money and crypto are not the same thing.
Money is supposed to be relatively stable value. Money is a thing that we use to lubricate a transaction, buyer and seller, so both know what they’re getting so they can take the outcome—I get the stuff, you get the money, you get the stuff, I get the money—and then to know in a reasonable period of time what I can do with that money that I got from selling you the stuff.
That I can turn around and use it in a semi predictable value. Yes, inflation eats into it, but inflation eats into it pretty slowly, most of the time.
It stretches the measuring rod of what money is. But with anything volatile, like gold, or Bitcoin, or any part of crypto, or any other highly volatile commodity. It isn’t money because you don’t know what it’ll be worth three weeks later.
You can’t count on it for your next transaction at a known value; it isn’t money. So, the people that think it’s money, they’re making a mistake. It is a highly volatile commodity and needs to be thought of as such.
It is closer to gold, but it’s not the new gold because gold was never the new gold anyway because the volatility I mentioned earlier, I sorry to be sounding like I’m a jaundiced grumpy old man, although I am an old man, but I thank you for listening to me.
I hope you found this useful, and I suggest that if you’re thinking about Bitcoin or crypto in any regard, be very sure you really know what you’re doing. Be very sure you know about its volatility. Be very sure you know about the risk that you have that it blows up in your face. And be careful. Thank you much for listening to me. I hope you found this useful.
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