"Much of that investment (in technology start-ups) poured in last year, as the valuations of private start-ups were hitting a peak. Hedge funds, private equity firms, sovereign wealth funds, corporate VCs, and mutual funds between them supplied two-thirds of all the money that went into venture investing globally last year, according to data provider PitchBook." While most of the literature on behavioral finance has focused on individual decisions, it appears that the most sophisticated investors are also prone to the biases and emotions that distort the decisions of the less-knowledgeable investors. #investing #privateequity #investment #hedgefunds #finance #mutualfunds #technology #ezrazask #fintech #techstartups #venturecapital #valuations #behavioralfinance #behavioraleconomics #decisionmaking
Liquid alternative investments were introduced with great fanfare after the Credit Crisis of 2008. The pitch for the mutual funds and ETFs that used hedge fund strategies emphasized their advantage as substitutes for bonds in investment portfolios. These funds have proliferated in the intervening years and the pitch has not changed materially. Laurence Siegel presents a comprehensive analysis of liquid alternative investments from the standpoint of performance, risk, and portfolio diversification. His findings are that these investments do not live up to their hype. For the most part, their performance lags market indexes, partly because of high fees. With a few exceptions, they fail to provide diversification benefits (they are highly correlated with equities). As a result, Siegel discourages investments in alternative investments (including liquid alts) for high net-worth individuals (with assets of $1-10 million). He does recommend alternative investments for institutional investors and ultra-net-worth individuals with the resources and knowledge to understand and evaluate alternative investments. This recommendation aligns with the "endowment model," which is based on the work of David Swensen, who also states that alternative investments are only effective for these groups.
ncome, young males are the most likely to invest in cryptocurrencies. They tend to exhibit "herd-like behavior," investing when prices rise and losing money when they decline; typical behavior during financial bubbles. These latecomers are also the least knowledgeable and least able to withstand losses. These investors also follow a "hail Mary" strategy similar to investing in lotteries, making a low probability, high reward bet. Another reason given by crypto investors is the poor outlook for attractive returns on stocks and bonds. #investing #money #cryptocurrencies #ezrazask #investing #financialbubbles #investmentstrategies #digitalassets #digitalmoney https://www.jpmorganchase.com/institute/research/financial-markets/dynamics-demographics-us-household-crypto-asset-cryptocurrency-use#infographic-text-version-uniqId1677161899801
The valuations of VC-backed tech companies depend more on the supply of VC capital than on changes in the economics of the companies. The downturn in VC capital has caused a large drop in tech company valuations; as much as 80% for some
One of the clearest cases of the need to regulate cryptocurrencies. The manipulation of markets described in the article is reminiscent of the stock market before regulations were put in place to prohibit these practices. https://www.nytimes.com/2023/02/15/technology/ftx-modulo-capital.html?login=smartlock&auth=login-smartlock #cryptocurrencies #digitigalassets #FTX #ezrazask #investments #financialfraud #marketmanipution
https://www.ft.com/content/6e912f25-f1b7-4b19-b370-007fbc867246 This close-up look at the breakup of FTX shows so many red flags that we have to ask how Sam Bankman-Fried was able to hoodwink the investment world for so long, especially since many of the red flags were also present in the Madoff Ponzi scheme. It does seem like investors have to re-learn the lessons of previous fiascos every generation.
The U.K.'s intent to introduce a digital pound in the coming years is notable for its commitment to giving access to banks, credit cards, and payment systems such as PayPal access to the digital payment system, thus allowing them to compete with the digital pound. The U.K.'s move is a defensive attempt to forestall competition by cryptocurrencies and similar techniques. All major countries face the same threats and are examining the introduction of digital currencies. Paradoxically, cryptocurrencies may yet have a significant impact on the world's payment system, not as a substitute for existing payment systems, but as a spur to the development of national digital currencies. https://www.ft.com/content/1247a045-6750-45ee-b3a9-f5144d4efb4d
This reads like a novel, except the characters are kids.