Ok, so I often decide what to write based on what my clients are asking about. And currently there’s a ton going on. With a tax reform bill a new tax law, Federal Reserve rate hikes, and the stock market at all-time highs, there was a lot to choose from. But, probably the biggest buzz right now, is Bitcoin. Please note that this is not a recommendation for or against Bitcoin, but merely my assessment of what’s going on.
For those of you not familiar, Bitcoin is a cryptocurrency created in 2008. Basically, it is a token that is created by long and complicated computer processes. These processes create and maintain a network of public information that no one person, company or government owns, called a blockchain. The blockchain is the basis for validating the accuracy and uniqueness of each Bitcoin, which gives them their theoretical value.
The most common way to think about Bitcoin is as a digital currency. That is, you can use it in exchange for goods and services. As a digital currency, Bitcoin trades just as any other currency would trade. And this is really what I want to focus on. According to coindesk* (a cryptocurrency exchange), at the end of 2010, you could buy one Bitcoin for about 29 cents (USD). Three years later, the price had skyrocketed to $817 USD. Fast forward to the beginning of this year, when Bitcoins were trading at $985 each. Less than one year later (i.e. today 12/22/2017), Bitcoin trades at $14,475.44!
Why this is happening is highly disputed. As is the legitimacy and future of Bitcoin itself. Many see Bitcoin specifically, and cryptocurrencies in general, as the future of money. Others feel it is a form of a pyramid scheme. More important to this discussion is the underlying technology that makes Bitcoin possible: the blockchain. Blockchain technology makes it possible to create a record of transactions that is indisputable and unchangeable, that could change the way we interact and trade with each other. Transactions could not be forged or altered once they became part of the blockchain. This could mean the end of many security concerns, certain intermediaries and much red tape.
When considering the potential impact of blockchain technology, an immediate comparison comes to mind: the Internet. And this is true with the associated asset prices as well. When the Internet was in its infancy, there were tons of companies sprouting up claiming to be the latest and greatest Internet sensation. And, stock prices reflected this. Back in the year 2000, the tech heavy NASDAQ stock index hit a high of 5046. After the Internet bubble burst, it would take 15 years for the NASDAQ to regain that record level.
A notable similarity is that back in the late 90’s, companies were adding the suffix “.com” or the prefix “e-“ to their names. And their stocks would skyrocket. Today, we are seeing random companies announce they are going to focus on blockchain technology as a business model. The latest being Long Island Iced Tea Corp. Yes, they make non-alcoholic beverages. Their stock price jumped 289% after they changed their name to Long Blockchain and announced they were going to partner with, or invest in blockchain companies^.
I guess the point to all this is to be careful with your investments. As we know, the Internet did not go away. Nowadays, it’s almost impossible to imagine a world without it. And, who knows? Blockchain technology could be the same. But there will be winners and losers. Not every blockchain company will be an Amazon (trading at $76.12 at the end of 1999, now $1,168 (12/22/2017)). Some will be Pets.com (bankrupt nine months after going public in 2000). So, always know what you are investing in and why. And keep your focus on your own goals and portfolio. Because, as always, investing for the long term is your best chance for financial success.
Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members
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An Investment Advisor registered through CUSO Financial Services, L.P., Gavin has 22 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football, and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of WA, OR, CA, AZ, FL, HI, ID, IL, MN, NM, NY and VA.
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