Can Crypto Outperform Equities In The Long-Term?

Can Crypto Outperform Equities In The Long-Term? By Alex Kimani for Safehaven

About a decade ago, Warren Buffett famously wagered $1M against Ted Seides, CIO at Protégé Partners, that the S&P 500 would outperform a group of hedge funds over a 10-year stretch. Last year, the Oracle of Omaha collected his winnings after the market walloped a group of five hedge funds (undisclosed) hand-picked by Ted with a return of  85.4 percent vs. 22 percent.

And now, another asset manager is raring to go up against the stock market, but this time from cryptoland.

Anthony Pompliano, co-founder and partner at Morgan Creek Digital, has recreated Buffett’s $1 million wager that he has dubbed “Buffett Bet 2.0” and invited any investor who believes the S&P 500 will beat the crypto market over the next decade to take the other side of the bet.

Anthony points out the erratic performance of the equities market this year, highlighted by heavy losses by tech and FANG stocks in recent months.

Never mind that the crypto market itself is in very bad shape right now, with bitcoin having plunged to a 14-month low on Friday.

(Click to enlarge)

Source: CNN Money

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Source: Coinbase

Bear Market Looms?

Anthony’s bold bet is no doubt encouraged by the ominous signs that have been building up in the public equities market.

On Tuesday, the dreaded yield curve inversion rattled the markets after the 2-year Treasury yield crossed above the 10-year Treasury. A normal curve is one where the short-term 2-year and 3-year Treasuries offer a lower yield than the longer-term 5-year and 10-year notes. A yield curve inversion is said to occur when the 2-year or 3-year yields more than either or both the 5-year and 10-year Treasuries, signaling that the market believes the economy is going to be much worse in the future.

Indeed, all recessions since 1962 have been preceded by a yield curve inversion. The big inversion, where the 10-year yield slips below the 2-year, is usually considered the main harbinger of an economic contraction with a recession following on average 18 months after the event. In the case of a smaller inversion such as the current scenario, a recession takes longer to kick in—about 26.3 months on average.

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At some point in your life you will want to, or be forced to consider an investment program. The main criteria in choosing one that is right for you is summed up in three words "Preservation of Capital". Sounds pretty simple doesn't it? Remember, "Investing is not Saving"! The mainstream media would lead us to believe otherwise and seldom comment on the risks inherent in equity ownership or debt investments. They are quick to point out the positive aspects of every news event with prepared soundbites of information. They provide simple, continual commentary on the respective markets to show they are up to date with the latest developments. They don't comment on developing trends until the trend is obvious to everyone; acting as cheerleaders for the greatest bull market of the twentieth century. A cautious and more reasoned approach is needed.