Bitcoins in Your Duffle Bag

By Lloyd Graff

A few years ago, I asked a  pawnbroker acquaintance if he would sell me a little certified high-quality gold. 

It was not an investment. I was not betting on the appreciation of the precious metal. It was strictly a “what-if” purchase, contemplating the possibility Risa and I would have to flee our home. Currency might rapidly erode in the event of an invasion, a tyrant, or a natural catastrophe, “but gold would always be accepted as valuable” we reasoned.

We had watched too many Holocaust documentaries, read too many books about refugees perhaps, but the images of gold sewn into duffle bag compartments enabling people to survive the worst, haunted us both, so we invested some of our savings in certified weight gold ingots.

Our pawn shop owner friend told us he’d sold gold fairly often for exactly the same reason to occasional clients like us. 

If it had been 2021 when I considered a “what-if metal,” I probably would have made a different choice. I would have bought Bitcoin.

So much has changed in the three years since we bought the gold. As an investment, Bitcoin has gone up close to ten times what it was worth then. Gold is up 20%. 

More and more places accept the digital currency today, probably more than do gold, and if you had to flee within minutes, all you would need to take is your cell phone and your passwords to access the Bitcoin.

Many people, often my age, are Bitcoin skeptics, but younger people are not. To them, digital money seems more rational than $100 bills, bank accounts, stocks, or corn silos. Gold in a suitcase, if you have to pass through a TSA line at an airport, sounds like lunacy in a national emergency.

At a family gathering during Thanksgiving, Bitcoin, and not the Bears or Cubs, was the primary topic of table conversation. Recently, when Mark Cuban was asked where he was putting his money these days, he said “digital currency and gaming” because that is what the kids are interested in, and he always likes to invest where young people are putting their money. 

Cuban is usually right.

***

Nobody has offered to buy a Citizen nor Star Swiss screw machine from us yet in Bitcoin, but it will probably happen next year.

The Chinese Communist leaders seem to be terribly afraid of Bitcoin, which means the leaders probably have a big stash of Bitcoin to go along with their Swiss bank accounts. For sure Putin owns Bitcoin.

Jamie Diamond and Warren Buffett say Bitcoin is phony. I wonder how much they have bought secretly. They may feel that legitimizing digital currency would harm their business interests.

I don’t know if Bitcoin and Ethereum and other wannabe Bitcoins will stand the test of time, but will gold save me if it seems like America is going to fall apart? If climate change really is an existential threat will anybody take gold in the great flood? 

Bitcoin? Maybe they will take it if you throw in one of those gold trinkets as a tip.

Question: Do you think Bitcoin is the real deal?

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12 thoughts on “Bitcoins in Your Duffle Bag

  1. Rod

    Lloyd,
    It’s kinda real?
    Seems like it could vanish with one stroke of a key.
    With all the hacking and digital information manipulation who knows what is real anymore?
    Fake Bitcoin?
    You would really need to have faith in it.
    No internet no Bitcoin?
    Don’t lose your phone.

     
  2. Bill Badura

    Lloyd
    Back in the late 90’s, Warren Buffet famously avoided tech stocks and caused many investors to wonder if his approach to investing was outdated . His stated reason at the time was that he wouldn’t invest in things he doesn’t understand. Looked pretty smart a
    couple of years later. I am still there on Bitcoin. Other than an increase in interest, I don’t know what’s driving the valuation. Have made a dime or 2 on Blockchain and still think that is the most investable part, long-term.
    One question: How quick can you unlock the value of Bitcoin if cell towers or the electric grid go down?

    Happy Holidays to you and your family

     
      1. Bill Badura

        It is a world-wide system. But bitcoin
        doesn’t keep you warm or feed you. How do you trade it for something you need without access to the world? The strangers you meet might not value it the same as you.

         
  3. Robert Ducanis

    The government will have to step in to regulate cryptocurrencies. Having competition to the US dollar will not be a good thing for the USA.

    Take the following example….I bought 1 Bitcoin at $10,000. It has now appreciated to $45,000. I buy a new car for $45,000. How is the capital gain of $35,000 taxed, if at all?

    Now if I bought $10,000 worth of stock and sold it for a $45,000 gain to buy a vehicle, I will be on the hook for IRS taxes on the realized $35,000 capital gain. To make the vehicle purchase ($45K) I might have to tap my personal bank account to come up with differential due to tax obligations.

    Due to the above, I would tend to think of all cryptocurrencies as investments, not valid currencies. The volatility in their value also would diminish their use as a day-to-day currency.

     
  4. Scott

    Something invented by drug lords, the mafia and a host of other illegal trades in order to launder money should give you pause.

     
  5. Miles Free

    Prices of manufactured goods over a long enough time span have, over my lifetime, been almost always cheaper in Gold than in Dollars.

    A problem that I give to my MBA students is who paid more for the car?

    In 1965 my dad bought a four door Ford V8 with all the options for $3500.

    In 2011, my assistant bought a Ford Taurus (one level of trim down from the SHO) very nicely equipped, for $32,000. Almost exactly the same level of utility and “luxe.” They were even both, coincidentally the same rich shade of what ford called back in the day “Caspian Blue.”

    Who paid more for the car?
    My dad paid $3500. My assistant paid $32,000.
    Who. Paid. More?

    You are correct that Gold is not an “investment.” It is true that Gold itself is not “appreciating.” Gold is an immutable, fundamental, chemical element. A metal with unchanging properties. Perhaps that is the key to understanding, the Gold does not change- everything else does. Gold is the “gage”- the benchmark- for value and equivalence. The physical properties of gold do not change. density remains the same, Reactivity remains the same. Malleability remains the same. Conductivity remains the same. Anything that you could do to or with gold in the 1960’s you can do today. It’s properties are fixed, a constant.

    The credibility, faith, and credit of the institutions issuing our day to day currency- that changes by the sound bite in real time and with every electronic entry created by the Federal reserve. Gold is a “store of value” as a tangible and real thing. the fluctuations seen in the gold price compared to currencies reflect not a change in gold, but the change in the market’s perception of those currencies.

    Will the gold that you and Risa purchased save you if things come apart? It certainly provided a means for its prior owners to obtain cash at the local pawn shop where you bought it, when they needed cash as a last resort…

    Answer to who paid more for the car? I’ll post the answer to my question tomorrow.

     
    1. Miles Free

      In 1965 the price of Gold was $35 an ounce. My dad’s car cost 100 oz of gold.
      In 2011, My assistant’s $32,000 car cost just 20 ounces of gold at $1600 an ounce.

      The currency is what fluctuates- NOT the Gold.

       
  6. Jerry Johnson

    Bitcoin and The U.S. Dollar are Fiat currencies; i.e. not backed by anything other than a promise. As long as people and businesses are willing to do things and sell things in exchange for these currencies, everything continues to march.

    When that changes, gold and silver which are a store of value and fungible assets will be the only things that work. Keep buying it Lloyd !!

    The U.S.A should never have gone off the Gold Standard !! That was the protective mechanism for the dollar’s “value”.

     
  7. Russ Ethridge

    What a great discussion !! You folks are all really smart.
    I don’t understand bitcoin at all. How does something have value that isn’t tied to government backing (in itself, a “trust” decision) or a thing that has value in a physical or legal sense (gold, land, intellectual property, etc.) ? Who guarantees bitcoin?
    Until I can figure it out, I’m on the sidelines on digital currency.

     
  8. Lloyd Graff

    Mixing metaphors.

    I wonder if Mark Cuban would sell a season ticket for Dallas Maverick games in Bitcoin?

     
  9. Marina Teramond @ N.M.P.L.

    To tell the truth, I can say that Bitcoin is a really controversial thing which has a lot of unclear points. I can say that it is not really surprising that as an investment, Bitcoin has gone up to high indicators because this currency is characterized by sharp ups and downs. I absolutely agree with you that younger people are not Bitcoin skeptics because, I think, they are engrossed in digital reality and they have an absolutely different view on such things. I can say that Bitcoin is like a soap bubble and it is not stable or reliable. I think that it is not reasonable to invest a lot of money in this cryptocurrency because you can be in a disadvantageous position afterwards. It’s really important to approach this matter seriously, weighing the pros and cons.

     

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