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". The annual volatility of Bitcoin is about 3.8x the volatility of the S&P 500. That means that the average annual return of Bitcoin needs to be about 30% per year to make it break even with the S&P 500 on a compound return basis. Bitcoin managed to do that over the last five years, with an average annual return of 40%. But do you really think Bitcoin is going to average more than 30% per year over the next five years? Or more generally, do you think that Bitcoin is going to average returns in the long run that are 3x the return of the US stock market?" -Klement on Investing

". The annual volatility of Bitcoin is about 3.8x the volatility of the S&P 500. That means that the average annual return of Bitcoin needs to be about 30% per year to make it break even with the S&P 500 on a compound return basis...

I'm no fan of putting money into bitcoin, to say the least, but this is innumeracy. To match the "compound return", it has to have the same start-to-end CAGR. By definition. That will of course vary with the time period chosen, for both choices, but the size of the squiggles along the way don't change your ultimate annualized rate of return.

They are perhaps thinking of risk adjusted returns using volatility as a proxy for risk? That's an entirely difference species of idiocy.

Jim

Tulip mania.

reading back issues of his thoughts; another citing https://papers.ssrn.com/sol3/papers.cfm?abstract_i...

"Stocks with high investor attention show extreme price momentum effects, while forgotten stocks that are ignored by investors show extreme earnings momentum effects."

suggesting those whom use price momentum should stick to stocks with high attention. Google search volume and Wikipedia requests among the signs: Google Search Volume (GSVI) Attention → Abnormal Returns

From:

Da, Engelberg & Gao (2011):
“In Search of Attention.”

There are two effects, depending on search type:

A. Short-term underreaction → short-term positive return continuation

If searches reflect genuine investor attention (not panic), then:

Returns show continuation over 1–2 weeks
(classic short-term momentum)

✔️ Timeframe: 1–10 trading days, sometimes up to 2 weeks.

B. If GSV spike reflects investor fear (e.g., crisis terms):

Then:

Returns show reversal over 2–5 days.

So GSV can predict either continuation or reversal depending on context.

https://klementoninvesting.substack.com/p/the-most... people can read his data and argument for themselves

Tulip mania.

Indeed.

And like the tulip bubble, this one may do a good deal of collateral damage when its bursts. I believe the intricacy of today's financial engineering is such that it is difficult to foresee exactly how the implosion of the bitcoin universe will impact the one I'm living in, but I fear it will be unpleasant. The Trump administration is friendly toward the bitcoin folks, and to the tech barons generally. It has also gone some distance toward dismantling the regulatory safeguards that were put in place after 2008. I think not owning bitcoin is not going to offer nearly as much protection as people may imagine.

Baltassar

I'm no fan of putting money into bitcoin, to say the least, but this is innumeracy. To match the "compound return", it has to have the same start-to-end CAGR. By definition. That will of course vary with the time period chosen, for both choices, but the size of the squiggles along the way don't change your ultimate annualized rate of return.

They are perhaps thinking of risk adjusted returns using volatility as a proxy for risk? That's an entirely difference species of idiocy.

I think they do. A simple example will explain it better than a verbal explanation.

Stock 1. you start at 100. It goes up 20% year 1, and 0% year 2. You have 120.00

Stock 2. It starts at 100 and goes up 10% year 1, and you have 110. It goes up 10% year 2, and you have 121.00.

Example 2. Stock 1 starts at 100, and goes down 50%, and you have 50.00. It then goes up 50% and you have 75.

Stock 2 starts at 100, and goes up zero, and you have 100.

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