Protecting your capital during a war(fritz.substack.com)
fritz.substack.com
Protecting your capital during a war
https://fritz.substack.com/p/protecting-your-capital-during-a
52 comments
Keynes was really good investor. Probably one of the best of his time. He practiced value investing before it had a name.
He made a fortune for himself despite constantly giving huge sums to charity and getting wiped out in 1929 crash. He also managed King's College's assets and they outperformed markets by 6-8% over 25 years.
He had nerves of steel. He would not cry out how unfair everything is when his assets depreciated "It is the duty of a serious investor to accept the depreciation of his holding with equanimity [...] any other policy is anti-social, destructive of confidence and incompatible with the working of the economic system."
He made a fortune for himself despite constantly giving huge sums to charity and getting wiped out in 1929 crash. He also managed King's College's assets and they outperformed markets by 6-8% over 25 years.
He had nerves of steel. He would not cry out how unfair everything is when his assets depreciated "It is the duty of a serious investor to accept the depreciation of his holding with equanimity [...] any other policy is anti-social, destructive of confidence and incompatible with the working of the economic system."
No doubt about that of course :)
Cryptocurrencies serve this purpose really nicely:
You can store them in your head by memorizing the cryptographic key ("seed phrase", e.g. random words of 128 bit of entropy).
So if you have to flee in emergency without being able to carry any physical belongings, you will still have your money.
You can store them in your head by memorizing the cryptographic key ("seed phrase", e.g. random words of 128 bit of entropy).
So if you have to flee in emergency without being able to carry any physical belongings, you will still have your money.
Don't forget that cryptcurrencies are valuable only because people think they are valuable. People might reconsider whats valuable during a war. Like food or something.
So is "normal" money
Only if you're 100% in crypto pretty much before the war gets serious. Otherwise the cost of crypto relative to your local assets is just going to rise like everything else - who wants to exchange for a currency which might be about to cease existing?
Crypto is a great utility in this respect, when physical commodities and fiats are severely regulated or vulnerable to seizure in times of strife.
But when using crypto, you are fundamentally trading high utility in exchange for high risk. The extremely volatility of crypto makes the stock market look like a playground. There’s nothing in the way of your life savings being reduced to zero when you need to make a life-changing transaction.
Nationalized paper fiats such as the US dollar are at least protected from extreme volatility by the Federal Reserve, but to obtain such protections, you must trade the high utility for encumbrances like heavy regulation.
But when using crypto, you are fundamentally trading high utility in exchange for high risk. The extremely volatility of crypto makes the stock market look like a playground. There’s nothing in the way of your life savings being reduced to zero when you need to make a life-changing transaction.
Nationalized paper fiats such as the US dollar are at least protected from extreme volatility by the Federal Reserve, but to obtain such protections, you must trade the high utility for encumbrances like heavy regulation.
I feel you are especially vulnerable to wrench attacks though.
Then memorize a second seed which holds a small amount for plausible deniability.
If countries start segregating the internet doesn't this break the cryptocurrency model?
https://www.euronews.com/2019/02/12/russia-planning-to-disco...
How would bitcoin work if, say, half the network couldn't talk to the other half?
https://www.euronews.com/2019/02/12/russia-planning-to-disco...
How would bitcoin work if, say, half the network couldn't talk to the other half?
Bitcoin, and probably any other cryptocurrency, uses flooding [1] to propagate transactions.
So it would be very difficult to prevent transactions from leaking out of or into the isolated zone:
A single peer in the whole country which is connected to the outside would be enough to leak all transactions.
[1] https://en.wikipedia.org/wiki/Flooding_(computer_networking)
So it would be very difficult to prevent transactions from leaking out of or into the isolated zone:
A single peer in the whole country which is connected to the outside would be enough to leak all transactions.
[1] https://en.wikipedia.org/wiki/Flooding_(computer_networking)
If it is a valid threat model I don't know, but there are people streaming Bitcoin blocks over satellite for this very reason. So it is likely two islands of the network would be reconnected, provided that any one node is relaying blocks in this way.
I'd really like to see a serious analysis about the viability of a government, or an alliance of governments, to block / split the btc blockchain.
I find it hard to believe the US couldn't really do it if it wanted to, or even China (since most btc is mined there), but details like these make me wonder. Does anyone have any interesting material to read regarding this?
I find it hard to believe the US couldn't really do it if it wanted to, or even China (since most btc is mined there), but details like these make me wonder. Does anyone have any interesting material to read regarding this?
blocks can be broadcast over any communications medium. the shared state of the ledger would be smuggled in via any means necessary, from radio to messenger pigeon.
this remains true if retail payments migrate to second layer solutions. the important thing is sharing the same base layer anchor.
block confirmations would have to increase to mitigate the likely orphaning of chains coming out of different zones.
it's a good example of why achieving its civilisational infrastructure goals requires lightweight blocks.
this remains true if retail payments migrate to second layer solutions. the important thing is sharing the same base layer anchor.
block confirmations would have to increase to mitigate the likely orphaning of chains coming out of different zones.
it's a good example of why achieving its civilisational infrastructure goals requires lightweight blocks.
Unless you're tortured.
And what's your defence against torture for literally any other class of asset?
Overseas real estate and other holdings was generally immune to that - in some cases you wouldn't even be able to hand it over to the occupying gov't if you wanted to (since the country with the wealth was hostile to that occupying gov't), in other cases property seized that way was returned through legal means, again through the judiciary of the country where the assets reside, as any contract or transfer under duress is illegitimate and the transfer is reversible.
Focus on getting your ass out of there and forget about your assets. Value of an asset to you is zero if you're dead.
That applies to any property and/or secrets hidden away, cryptocurrency or not. Smashing your kneecaps with a wrench until you start singing will work just as well no matter if you have stashed some gold away or if you've memorized a private key.
They would have to know you have crypto assets first. Easy to hide that bit of information.
You can memorize a second seed which holds a small amount for plausible deniability.
- Where are your millions?
- Take this Bitcoin wallet with 10 Bitcoins, please!
- Ok, but where are your millions?
- Take this Bitcoin wallet with 10 Bitcoins, please!
- Ok, but where are your millions?
> During WWII, a number of stock markets had “permanent breaks” with the market closing and never restarting again. That happened in [--] Finland when they were taken over by the Soviet Union.
Only Finland was never taken over by the Soviet Union. I haven't heard of a Finnish stock market not restarting either, so perhaps they are thinking of some other country?
Only Finland was never taken over by the Soviet Union. I haven't heard of a Finnish stock market not restarting either, so perhaps they are thinking of some other country?
Oh, good. So the next time WW2 rolls around we'll all be prepared.
It's quite a valid point: How much of the knowledge we have from WW2 will be applicable to a hypothetical WW3?
Based on the article, the only solid advice would be to maintain the ability to feed yourself and your loved ones while avoiding property that is likely to be seized or destroyed.
Based on the article, the only solid advice would be to maintain the ability to feed yourself and your loved ones while avoiding property that is likely to be seized or destroyed.
Yes yes yes, WW2 part 2
Capital preservation during war is often a rifle and a shovel, and I think the author glossed over those bits.
See also the story of Alan Turing's buried silver[0], which although a rational thing to do in the circumstances didn't end well.
[0] https://news.ycombinator.com/item?id=22347294
[0] https://news.ycombinator.com/item?id=22347294
> During WWII, a number of stock markets had “permanent breaks” with the market closing and never restarting again. That happened in Hungary, Czechoslovakia, Romania, Poland and Finland when they were taken over by the Soviet Union. Communism is clearly the greatest enemy of wealth preservation.
The author forgets about the Baltic republics. Estonia, Latvia and Lithuania were also occupied by the USSR, incorporated into it even.
> A working farm often protected both wealth and your life, providing safety and food. There are number of anecdotes of affluent French families that shuttered their Paris houses in 1940 and retreated with their most precious possessions to family farms in the deep countryside, living in relative comfort through the war.
My significant other and I have consciously invested in a remote countryside property with adjacent agricultural land. Great holiday house. Decent returns as a holiday rental. Comfortable to live in if everything goes poof.
With some research, this is surprisingly affordable in many EU regions. I'm not just speaking of eastern Europe. Even western Europe has super affordable pockets. Check out northern Spain, remote regions of France, and most of Portugal.
The author forgets about the Baltic republics. Estonia, Latvia and Lithuania were also occupied by the USSR, incorporated into it even.
> A working farm often protected both wealth and your life, providing safety and food. There are number of anecdotes of affluent French families that shuttered their Paris houses in 1940 and retreated with their most precious possessions to family farms in the deep countryside, living in relative comfort through the war.
My significant other and I have consciously invested in a remote countryside property with adjacent agricultural land. Great holiday house. Decent returns as a holiday rental. Comfortable to live in if everything goes poof.
With some research, this is surprisingly affordable in many EU regions. I'm not just speaking of eastern Europe. Even western Europe has super affordable pockets. Check out northern Spain, remote regions of France, and most of Portugal.
Except that Finland was not taken over by Soviet Union and the Helsinki Stock Exchange was kept open after the war. Though apparently 1940-1960 was quite a slow period for the exchange, as Finland was in the process of recovering from the war.
Interestingly, around half of late 40's trade in the exchange was from obligations, which were distributed to population relocated from areas of Finland that were lost to the Soviet Union[1]
[1] https://www.taloustieteellinenyhdistys.fi/wp-content/uploads..., page 315, in Finnish
Interestingly, around half of late 40's trade in the exchange was from obligations, which were distributed to population relocated from areas of Finland that were lost to the Soviet Union[1]
[1] https://www.taloustieteellinenyhdistys.fi/wp-content/uploads..., page 315, in Finnish
The last part on government bonds seems like a traders mentality. If you buy a bond and hold it to maturity you should be fine. You'll get your money back with interest. If you were looking to sell bonds then it may have been at a loss as indicated. This is why US treasuries are so popular in times of crisis. They are immune to everything but inflation and total government collapse.
Immune to everything but inflation and total government collapse does not buy you a lot in times of hyperinflation and total government collapse though.
The article mostly looks at WWII. It would have been interesting to also include other spectacular breakdowns like the Congo after the oil crisis, the fall of the USSR, Venezuela and more.
The article mostly looks at WWII. It would have been interesting to also include other spectacular breakdowns like the Congo after the oil crisis, the fall of the USSR, Venezuela and more.
Only if you are in the winning side and inflation does not destroy valuations. In Germany bond investors were wiped out.
In the US bonds maintained wealth relatively well during the war (inflation adjusted): https://fred.stlouisfed.org/graph/fredgraph.png?g=ATg2
In the US bonds maintained wealth relatively well during the war (inflation adjusted): https://fred.stlouisfed.org/graph/fredgraph.png?g=ATg2
[deleted]
Isn't a war the complete opposite of protecting capital? I mean if by capital we mean things like know-how and assets, it's the opponents goal to destroy as much capital as possible.
I would say based on this, the best way to protect personal capital is to invest in the war itself, i.e. buy war bonds, buy infrastructure to build weapons and train soldiers, etc.
I would say based on this, the best way to protect personal capital is to invest in the war itself, i.e. buy war bonds, buy infrastructure to build weapons and train soldiers, etc.
Only if your side wins. It's also unclear how to do that sometimes. For example, Post-911 you could invest in companies that make munitions, airport scanners, etc. But it turned out that companies like Google and real estate ended up being the best value.
In the end, it's difficult to know what to do. If you're living in a warzone, protecting you and your family is the priority. Beyond that, real property and commodity assets are the thing to have. Everything else depends on the situation.
In the end, it's difficult to know what to do. If you're living in a warzone, protecting you and your family is the priority. Beyond that, real property and commodity assets are the thing to have. Everything else depends on the situation.
I would say a majority of wars are fought purely as a means of transferring ownership of capital, not destroying it. You wouldn't want to destroy the factory for producing weapons - it's too valuable to destroy. Rather, you'd probably want to capture it.
The article is talking about this from a unilateral perspective. Yes, multi-laterally the optimal strategy is to invest together in the war. This looks like a classic prisoner's dilemma to me.
This article was pretty insipid and included some valuable insights like "The experience of WWII is that stocks generally did preserve wealth. But stocks had substantially higher returns if their home country was on the winning side. Losing the war and becoming occupied destroyed a country’s long-term return in equities." Like no shit sherlock.
This is 9.66% per year, on par with the Dow Jones which gives 9.48% per year from '40 to '80 (dividend reinvested). Not that I wouldn't like to own a Cézanne or two...