JAMIE CARR: Still more juice to be made from bitcoin
There may still be a bit more juice to be made from bitcoin while the enthusiasm lasts, while the normally festive streets of Stellenbosch may well be a spot to avoid in the aftermath of the Steinhoff debacle
Waiting for the bitcoin ride to end
It may cause the crusty old traditionalist to splutter into his pink gin, but there’s little doubt that bitcoin has been the most banging investment of the year.
The cryptocurrency has done a perky 2,300% since January at the time of writing, though at the time of reading this may well have changed — the price goes up and down at a rate that would place it comfortably in the premier league of global roller-coasters.
Clearly there are some who would still feel safer if their currency were backed by something as substantial as the might and majesty of the US government, for example, rather than an obscure group of libertarians.
And the currency’s early prominence as an anonymous means of exchange in the murkiest corners of the dark Web may not do a great deal to inspire confidence.
Then there’s the suspicion that many of its loudest advocates appear to have been taking full advantage of the West Coast’s liberal attitude to marijuana, which doesn’t feature largely in the Warren Buffett guide to useful investment tools.
It’s clearly a huge crash waiting to happen, and the wobbly nature of the trading platforms when prices tumble and investors attempt to sell should be a giant red flag.
But there may still be a bit more juice to be made while the enthusiasm lasts — as long as you can find a greater fool to take it off your hands.
Hedge funds have started to pile in, and the appearance of leveraged CFDs move the risk level from ridiculous to totally nuts, but there’s no doubt it’s been quite a ride so far.
Destruction on a grand scale
There’s a certain irony to the fact that the best-performing investment of the year has been something that looks to the disinterested observer like it’s so flimsy a breeze could dispatch it, while the biggest catastrophe has been something that should have been as rock-solid as you could imagine.
Flogging furniture in Europe, mattresses in the US and low-cost products into Africa sounds like the sort of enterprise into which you could happily stick your pension. But clearly this is not the case with Steinhoff.
The normally festive streets of Stellenbosch may well be a spot to avoid in the aftermath of the debacle, with a town that has recently been known as an investor’s darling suddenly coming to terms with the reality that there has been value destruction of truly monumental proportions.
It’s far too early to suggest what exactly has caused the collapse, and there will be much learned analysis to come. But for the average investor it’s an unhappy situation, given Steinhoff’s former position as a major slice of the JSE, and has flattened the performance of many a tracker.
The truly bold investor might think the company has so many solid assets, acquired in its recent buying spree, that there has to be some value there, and arguing that at current levels the price is reflecting far too much nervousness. However, there is still limited clarity as to quite how bad the accounting issues and the restatement of accounts might be. It’s a total and utter crapshoot, and probably worth avoiding until the full extent of the manipulation of accounting becomes apparent.