The 10th Man

The Upward Sloping Demand Curve

December 14, 2017

Demand curves are usually downward-sloping because people will buy more of a product when it is cheaper and less of it when it is more expensive. See, you just passed 11th grade Economics.

Some things—like stocks, and especially bitcoin—have upward-sloping demand curves, which should be theoretically impossible. But they are observable in the real world—people really want bitcoin when it is expensive, but nobody was interested when it was cheap.

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Every day when I am sitting at my computer, stories and anecdotes are pouring in from my readers about how grandma is suddenly interested in bitcoin, or maybe conservative grandma is suddenly interested in tech stocks, when perhaps she should be interested in 1-year bills at 1.66%, which I wrote about last week. Or a 5-year CD ladder for over two percent, which will give you income that is superior to the dividend yield on the S&P 500 index. Or some ultrashort duration bond funds. There are lots of ways to make 2% without taking a whole lot of duration or credit risk. Hardly any at all.

But nobody is interested in making 2 percent! People want to make 79,000% percent, which is about what you would have made in bitcoin had you held it since inception. You’ve seen these comments floating around the internet. “If you invested $10,000 in bitcoin in 2010, you would have $710,458,109 today.”

Go pack sand.

First of all, most of us would not have invested ten grand in a piece of computer code in 2010. Second of all, 90% of us would have sold it when it turned into twenty grand. The number of people who bought and held bitcoin and realized those pornographic returns are…small. The whole purpose of statements like these is to stoke envy and resentment and fear of missing out.

Don’t just take it from me.  Even Vanguard (and Jack Bogle himself) is out there telling people that they should have sharply reduced expectations for financial markets going forward.

What Gets Me Excited

Back to the upward-sloping demand curve.  When it comes to bags of fertilizer, normal people get excited about lower prices. If they go into Lowe’s, and see that bags of fertilizer are half off, they might get two instead of one. If they go into Lowe’s and see that prices have doubled, they might get none instead of one.

When it comes to goods that you consume, most people get excited by lower prices and demoralized by higher prices.

But when it comes to financial assets, most people get excited by higher prices and get demoralized by lower prices.

I’ll be honest—this is not entirely irrational. If you believe that markets trend, then high prices should be followed by still higher prices. There are people who buy high and sell higher and do just fine. But that’s not for everyone. You wouldn’t tell grandma to buy high and sell higher.

The crazy thing about today’s markets is that the people who are the most vocal crypto bulls are also the biggest Buffett adherents.  But that doesn’t make any sense!  Buffett (allegedly) buys undervalued assets that produce copious cash flows and holds them forever.  And every shred of evidence on how to get rich boils down to one simple concept: buy stocks with dividends that grow over time.

A humblebrag: I am wired a bit differently. When it comes to stocks, I like lower prices. Which means I miss out on most bubbles, but also means…I miss out on the busts. I stay out of trouble. I lead a relatively boring investing existence. (If you want to see how boring, check out ETF 20/20. The business of investing for the long run is exceptionally unglamorous, but we have fun with the letter!)

What we have in December of 2017 is a lot of people looking for shortcuts. But there are no shortcuts. If you’re 50, and you’re not where you want to be financially, probably the best explanation is that you didn’t start soon enough. It’s the longest of long games, and if you’re not compounding in your 20s, then you missed out. Tough luck. Bitcoin isn’t going to save you. Neither is FANG.


In the past few weeks, I’ve advised you to

  • Pay down your mortgage
  • Invest in T-bills
  • Stay liquid
  • Avoid bitcoin
  • Get rich slow

It’s a sign of the times that I’m the one being accused of financial malpractice.

There are lots of lowbrow personal finance books out there. Dave Ramsey, Tony Robbins, the Rich Dad Poor Dad guy, the Millionaire Next Door guy. I disagree with Jack Bogle on a lot, but pick any Jack Bogle book. Pretty sure none of them tell you to invest in growth stocks at the top of a cycle. Financial assets are objectively overvalued. Buying overvalued assets sometimes works. Buying extremely overvalued assets sometimes works. But the trade has large negative expectation, which is a mathematician’s way of saying that you’re probably gonna get rinsed.

Jared Dillian
Jared Dillian


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Dec. 19, 2017, 8:35 p.m.

I notice Bitcoin is the cover story of January, 2018 Scientific American. When bubble subjects make magazine covers it is a good indication of the top.

I get excited about the bonus interest specials on savings accounts. 2.5%-2.75% on cash isn’t so bad and it’s pretty close to risk-free return.

Dec. 14, 2017, 12:35 p.m.

I worry about confirmation bias. And the authors intent. I have read all the scary stuff on Mauldin since 2004. I have also read Jeff Saut from Raymond James for about 4 years. They live on different planets. Most of the stories that Mauldin & team have put out about the dire future have not come true. The articles are elegant and well written, heck I have believed them and been super cautious. Yet, Greece & Portugal are still with us. The EU has not blown up. The UK is doing OK. The financials are still alive. Ben Bernanke did not drive us into the ground. ISIS has not taken over the world. Healthcare has not totally imploded. Demographics have not sunk Japan. The balance sheet of the Fed has not imploded markets. All the while the biggest bull market in our life time continues. I just do not know who to believe anymore. Perhaps I am reading the wrong stuff. Or do I just wait longer for confirmation of your prediction that all this is going to hell. Everything seems overvalued, stocks, bonds and now bitcoin! I do believe unsustainable trends are unsustainable and that last long period of low volatility did not end well. I feel totally outmatched by the experts. I see some of the great returns and think what would these be on a risk adjusted basis? But they are great returns and that is an absolute, until it isn’t.

Jim Handshaw

Dec. 14, 2017, 10 a.m.

72 year old in T bills.

Thank you Jared,

Jim Handshaw

Dec. 14, 2017, 9:59 a.m.


The reason the economy, the stock market, and Bitcoin appear to be going up is because the U.S. Government is running a Ponzi scheme.  I have named this Ponzi scheme, USAPonzi, and have two websites and two books that explain this fraud!
“USAPonzi” on Amazon
“USAPonzi2” on Amazon

Things go up because the U.S. Government has printed $109.2 Trillion of counterfeit money and is printing $15.5 Billion more every day!

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