The casino training room is a great place to learn about investment. Inside there are several roulette tables laid out with stacks of sparkling chips, just like in a casino. The trainers stand over apprentice croupiers who take it in turns to practice dealing roulette.
However, the real lessonsare learnt by the other rookies who are all provided with stacks of chips to give the dealer a workout. In this way you can try to beat the house running through all your theories about lucky numbers, doubling up losses, going with your gut, looking for streaks, "to the moon", or whatever other nonsense you have about your ability to beat the laws of probability. It's a decent education in unregulated financial markets and it doesn't cost you a penny. (Spoiler alert: you will lose.)
Of course, the casino training room is not available to everyone and sadly a lot of inexperienced investors have been learning the hard way in the wild west of crypto markets where the cost of tuition can be everything you own. Currently, Bitcoin is down 70 per cent from its high last November and two trillion US dollars have been wiped out. The nature of the collapse means that things may have got far worse since I wrote this article five minutes ago. Celsius, a crypto "bank", had to cease trading after pressure from nervous investors wanting their money back. Still, if you deposit your money anywhere offering you a return of 18 per cent then what did you expect?
According to Finder.com, 6.8 per cent of Kiwis claim to have put money into crypto, with twice as many men being involved as women. The majority of those are aged 18-34 so, hopefully, most people will have time to recover their losses. Across the Tasman, three times as many Australians have bought cryptocurrency as Kiwis, which is further evidence of the West Island's love of gambling.
While the wise old heads of business, like Warren Buffet and Bill Gates, consistently rubbished crypto, FOMO, heavy digital advertising and the lure of easy money won out on the impressionable.
Of course, some people got out early with a profit, but this was based on the Greater Fool theory: all you need do is find somebody stupider than you to sell to. At the same time stocks, particularly tech, are also hugely down and with further falls in house prices and a recession looming, nobody looks to be coming out of this well. But there are degrees of badness.
Celebrities have been fronting elaborate campaigns to encourage people to buy cryptocurrency.
Is there any hope of a rebound for crypto? Well, there are still those who desperately want to see the current market conditions as being just another blip in its rise and that it will pick itself up and head off for the moon (again). This seems unlikely.
There are plenty of people still trying to talk it up, but they're all still invested in crypto markets in search of more fools to help bail them out. The belief that cryptocurrencies, like gold, would be a solid hedge against falling markets has been disproved. Those brave souls tempted to buy the bottom should be aware that several commentators believe cryptocurrencies will eventually go to zero. Zilch. Nada.
Wired Magazine recently ran an article about how a global paedophile ring (a real one, not a QAnon conspiracy) had been busted by the individuals concerned being traced through their use of Bitcoin. If criminals can no longer trust crypto to keep their machinations secret, it becomes even harder to trust it as a retirement plan.
I first wrote about crypto in January when I suggested it might be the biggest pyramid scheme since Giza. I take no great pride in the markets suggesting that I'm right (okay, maybe just a little) but I feel sincerely bad for the inexperienced investors who have come out with a bloodied nose and a dented bank account.
I really hope that schools will do more to help young people learn about their finances in the outside world, because it can be a really disheartening, expensive lesson to learn. I was very lucky to experience the mirage of chasing free money in the casino training room where my education was free. I'm not saying this made me a good investor, but it undoubtedly helped make me a less bad one. Which right now is about the most anyone can hope for.
