Cryptocurrencies that seemed to be defying gravity just weeks ago came back down to earth this week. The two main digital currencies, bitcoin and ethereum, fell as much as 30% and 45% respectively, but significantly pared losses after two of their biggest backers – Tesla’s CEO Elon Musk and Ark Investment’s CEO Cathie Wood – indicated their support for bitcoin. But, the damage was done. The sell off continued into Friday.

SPACs (Special Purpose Acquisition Companies) went through a similar process, tumbling over 30% from their February peak, slaughtering investors who went looking for returns beyond what the major indices were giving them. The Wall Street Journal reported a story of a physician who had over 50% of his portfolio in SPACs only to see it whittled down in less than two months and is in complete bewilderment of why or how that happened. An appropriate response to the physician would be – “Sir, may we remind you that you invested in companies that have no business plans”.

Future Wealth’s View

There are cliches of all forms that come to mind but those are not important. What is important is that chasing returns that have no basis for growth ultimately results in disaster. Not too long ago we had cautioned investors about cryptocurrencies and SPACs in our weekly reports. The articles are here:

But, this is not about claiming that somehow that we, at Future Wealth, have the unique insight that nobody else has that made us come to this conclusion. It is more fundamental. It is about stepping back, doing the research and determining if there is indeed value in these investments. It is easy to follow the herd and Cramer on CNBC and buy into whatever everyone is talking about. If it was that easy, everyone would be a billionaire. Education, experience and wisdom has taught us that becoming adept at anything takes countless hours of hard work and patience.

But, mankind would be very different if power, greed, sex and deception did not exist.  That’s a list of vices that even Bill Gates would concur with us.