Real Estate Investor March 2021 March 2021 - Page 34


Investing in the digital economy

Legitimacy of Cryptocurrencies
Carel de Jager
The perceptions around Cryptocurrencies are generally changing in cycles and are likely to have a long-term uptrend in society ’ s understanding ( and optimism ) about this asset class .

Typically , people would label the crypto phenomenon a scam or criminal enterprise upon first encounter and declare it dead as its inherent volatility causes another price crash and eventually forget about it .

What are Cryptocurrencies ? While everyone has a slightly different narration and understanding of what cryptocurrencies are , Investopedia explains these currencies as a digital or virtual currency that is secured by cryptography . This then makes it nearly impossible to counterfeit or double-spend . Many cryptocurrencies are decentralised networks based on blockchain technology ; a distributed ledger enforced by a disparate network of computers .
The Narrative VS Reality As cryptocurrencies live through another of their normal four-year cycles , and as they make their way back to the dinner table discussions , those who wrote their obituaries will start investigating why they have been wrong and a whole new world will open .
• We have seen these events play out at scale in Wall Street over the last four years . After threatening to fire anyone who mentions the word “ Bitcoin ” for being “ stupid ” in 2017 , the CEO of JP Morgan Bank now has a price target of $ 146 000 for the digital gold .
• Shark Tank celebrity Kevin O ’ Leary previously labelled cryptocurrency “ garbage ” and a “ giant nothing burger ”, but he is now diversifying 3 % of his net worth into Bitcoin .
• Ray Dalio , a famous billionaire American hedge fund manager and author of several books on macroeconomics , has been vocally critical about the magic internet money in the past . However , he , too , recently changed his mind , calling it “ one hell of an invention ”.
Although Warren Buffet and Bill Gates remain cynic , the list of those that changed their mind on the decentralised currency is growing fast .
The Proof Microstrategy was the first public company to buy Bitcoin in August last year , investing
16 MARCH 2021 SA Real Estate Investor Magazine
INVESTOR INTELLIGENCE this very uncertainty and fear create opportunities to purchase properties from panicked sellers who have no regard for the intrinsic value and long-term economic worth of the properties they are selling. 8 Lessons from investment legend Warren Buffet Jaco Grobbelaar By making great investments over his life time even at 90 years old, one of the most successful investors globally, Warren Buffett has created a huge and unstoppable snowball effect. A lthough I primarily invest in property and not stocks as he does, I’ve learned so many principles from him that I apply to my property investment strategy. Here are some of my favourite quotes by or lessons from Warren Buffett. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” To buy when everyone is selling and sell when everyone is buying is easier said than done. It requires tremendous emotional intelligence and discipline. When everyone is selling property, don’t be swept up 32 MARCH 2021 SA Real Estate Investor Magazine by fear, and follow the herd. Also, when everyone is buying property, don’t be swept up and buy for the sake of buying when the numbers don’t make sense. “Uncertainty is the friend of the buyer of long-term values.” We often fall into the trap of thinking that when the economy is doing well, it will never make a turn for the worst and when the economy is not doing well, it will never improve. Currently, there is a lot of uncertainty and fear in South Africa and the world. However, “It is not necessary to do extraordinary things to get extraordinary results. I don’t look to jump over 7-foot bars, I look for 1-foot bars that I can step over.” You don’t need to shoot out the stars or hit a home run on every pitch. The secret is consistency. Anyone that consistently acquires the right property at the right prices and with the right amount of cash reserves built up should move towards tremendous wealth. “Only when the tide goes out do you discover who’s been swimming naked.” When everything is going well, you can get away with building and running a sloppy property portfolio. But when the tide goes out, and the economy or property market is not doing so well anymore, your sloppiness will get exposed. You need to run a tight ship with the acquisition of properties and management of your property portfolio. You also need to ensure that you have sufficient cash reserves in your portfolio because you do not know when the next economic crisis can come or when interest rates will skyrocket again. “You can’t do well in investing unless you think independently. And the truth is, you are neither right nor wrong because people agree with you. You’re right because your facts and reasoning are right. In the end, that’s what counts.” Do not undermine independent thinking and do not mind others’ opinions too much. Listen to others, but think for yourself. “Forecasts usually tell us more of the forecaster than of the forecast” and “A public opinion poll is no substitute for thought”, Mr Buffet would often imply. There are a lot of opinions out there, but look at the facts. Success is like a snowball. And people’s opinions are the debris on the mountain that only serves to slow the snowball down. Facts allow you to grow your snowball so it can pick up momentum. “Price is what you pay. Value is what you get.” What you pay for a property determines the value you will get. If you pay too much for a property, you will only get a little value. In property investment, you make your money when you buy. So, you want to ensure that you don’t pay too much for a property. “You’ve got to be the kind of person that the snow wants to attach itself to. You’ve got to be your own wet snow in effect.” You are where you are in life because of WHO you are. And if you want to change where you are, you need to look inwardly and change WHO you are by developing yourself. You develop yourself with the books you read, the things you watch, and the people you spend time with. At a BRK Annual Meeting in 2010, Warren Buffett said, “Avoiding the dumb things is the most important thing to do. Learn more, know limitations, and avoid the dumb things.” Now, the question remains, are you going to avoid the dumb things by learning as much as you can about property investing and doing what is necessary to grow your snowball? Or will you be watching from the sidelines? SOURCE Prosperity Enterprises SA Real Estate Investor Magazine MARCH 2021 33