On Wednesday, Guggenheim’s Scott Minerd chatted with Bloomberg Television, as he’s wont to do, usually several times per month.
As a handful of longtime readers have mentioned in various correspondence recently, I’ve stopped dedicating space to Minerd’s musings, just as I’ve eschewed coverage of Jeff Gundlach and several other “known quantities.”
The rationale behind that editorial decision is pretty simple, really. I don’t think they’ve got much to say that’s very interesting. And if you think otherwise, Minerd’s commentaries are available on Guggenheim’s public website, and last I checked, it’s free to register for Jeff’s webcasts.
More often than not, I find myself lampooning these “name brands,” and that’s not constructive, so I’ve gone the Thumper route: “If you can’t say somethin’ nice, don’t say nothin’ at all.”
However, I’m going to make an exception on Thursday because what Minerd said about Bitcoin this week was virtually impossible to ignore, coming as it does from an ostensibly serious person. For those who missed it, the clip (below) is — how should I put this? — a bit grandiose.
Minerd reminded the audience that “we made the decision to start allocating to Bitcoin” when it was around $10,000.
In a November 27 filing, Guggenheim Partners explained that “the Guggenheim Macro Opportunities Fund may seek investment exposure to Bitcoin indirectly through investing up to 10% of its net asset value in [Grayscale Bitcoin Trust].”
On Wednesday, Minerd acknowledged that Bitcoin is “a little more challenging with the current price closer to $20,000.”
So far, so good. You reserved the right to allocate a relatively small percentage of one fund to a speculative asset that subsequently doubled, and now you’re admitting that after that kind of run, the situation is “a little more challenging.” Nothing wrong with that, unless of course you think it’s a bit strange that a fund which traditionally invests “across a broad array of fixed income securities” has decided that part of its “alpha generation” strategy may henceforth involve exposing investors to the vagaries of cryptocurrencies.
Then, Minerd told Bloomberg that “our fundamental work shows that Bitcoin should be worth about $400,000.”
“Whoa,” an anchor interjects. Tom Keene was curious. “How do you frame a $400,000 Bitcoin? Is it just based on scarcity.”
“Right, Tom. It’s based on scarcity and the relative valuation to things like gold as a percentage of GDP,” Minerd explained. “So, you know, Bitcoin actually has a lot of the attributes of gold, and at the same time…”
Keene then interrupted to note (jokingly or not) that the network’s Mike McKee was a bit incredulous that Bloomberg decided to dedicate a portion of the air time around the December FOMC statement and Jerome Powell’s post-meeting press conference to Scott Minerd’s $400,000 Bitcoin thesis.
“McKee, jump in here and save this Fed special,” Tom said.
Alas, it was too late.
“You know we’re going to get emails, Tom, about Bitcoin” McKee nervously chuckled.
It is funny, that’s for sure.
What arguably isn’t funny, though, is Bloomberg entertaining this kind of rhetoric which suggests to the investing public that there’s a “fundamental” rationale for Bitcoin at nearly a half-million dollars.
In my opinion (which I suppose I’m just as entitled to as Scott is to his $400,000 opinion) there isn’t a “fundamental” case for Bitcoin at any price. Importantly, that’s not to say it’s worthless. I think it’s worthless, but that’s totally beside the point. The point in this context is that Bitcoin simply isn’t amenable to “fundamental” analysis. You can analyze it and call that analysis “fundamental” if you like, but that doesn’t make it so.
And look, if Minerd really thinks Bitcoin is “fundamentally” worth $400,000, then one obvious question is why he doesn’t move heaven and earth to figure out a way to plow a larger percentage of Guggenheim’s considerable AUM into this grossly “undervalued” asset.
After all, if you’re a global asset management and investment advisor with $233 billion in total assets and your team identifies a stock currently trading at $21 but “fundamentally” worth $400, surely you’d be willing to dedicate more than 10% of a $5.4 billion fund to it, right?