Bitcoin craze distracting SMSFs from poor investments
While SMSF practitioners and investors may have been inundated with warnings about the imminent demise of bitcoin, assets that are overvalued in more traditional markets may be slipping under the radar, an economist warns.
ABC Bullion chief economist Jordan Eliseo said warnings about a potential crash in bitcoin have been well publicised in recent months with the search ‘bitcoin is a bubble’ in Google returning close to 40 million results.
“These warnings are largely falling on deaf ears for now, with major Bitcoin trading exchanges like Coinbase seeing record levels of account opening and trading, in some cases more than 100,000 accounts a day,” said Mr Eliseo.
Mr Eliseo said there are still significant governance and regulatory issues with bitcoin and investors should be limiting any investment to small amounts that won’t impact their lifestyle.
However some of the people from the mainstream finance community that are ringing the alarm bell on bitcoin, he said, “conveniently ignore the almost certain bubbles that exist in more traditional financial markets".
For example, advisers and their clients, he said, many want to consider that at the end of 2017 US equities were sitting at close to 32 times cyclically adjusted earnings, their second most expensive in history, he said.
Over $11 trillion in sovereign debt trades at negative yields also, he added.
"Argentina, the home of six series sovereign defaults in the past century alone, just raised $2.75 billion through a 100-year bond that was three times oversubscribed," he said.
Veolia, a French BBB rated corporate, he said, issued a 500 million Euro 3-year bond last year at a negative yield. It was four times oversubscribed.
"The point I’m making of course is that if Bitcoin is indeed a bubble, then it’s likely in very good company. More importantly, bubble or not, Bitcoin is not the most important risk SMSF trustees and their advisers will need to monitor as 2018 unfolds," he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.