Returns as of 12/20/2021
Returns as of 12/20/2021
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Non-fungible tokens (NFT) have taken the investing world by storm, and some long-term investors are buying in. In this segment of Backstage Pass, recorded on Dec. 3, Fool contributors Toby Bordelon, Jose Najarro, and Rachel Warren discuss their takes on the NFT craze and investing in this speculative space.
Toby Bordelon: A couple of things on crypto. Were today CNBC reported Charlie Munger, Vice Chair Berkshire Hathaway, who I think its 97. Said he wishes cryptocurrencies have never been invented. I think he went even further and said that he’s glad China banned them. Strong words coming from him.
In related news, the NFT market is a lot going on there. That’s heating up. Lots of money changing hands. These though, especially for some digital art, digital collectibles, NFTs. But a lot of experts are remain skeptical about the long-term value of NFTs. Let’s make us just a broad thought.
Let’s address these. Let’s address Charlie Munger’s concerned. Let’s address NFTs, the skepticism there. What do you guys think? What’s your take on crypto if you just want to give me a brief thought or two on that? Where do you see going on a couple of years? Would you buy NFT? Would you buy NFT, and if so, what NFT would you want to buy? Let’s start with you, Rachel.
Rachel Warren: Yes, I thought it was interesting. I think his assessment was a little over dramatic, but I get where he’s coming from. I have a healthy dose of skepticism surrounding crypto. I have for a long time. I don’t think that all crypto’s created equal. I think it can definitely be part of a broader long-term investment portfolio.
I personally have not invested in crypto yet, partly because I think that my understanding of it as a whole is still not where I would want it to be in order to really make a solid long-term investment. I think that’s important as well. Another thing for me that I think about this sometimes I don’t know that it’s always discussed quite as much. There is an interesting environmental impact to consider with certain cryptos, for example, Bitcoin for one.
There was an interesting article about this in Discover Magazine. But a lot of Bitcoin mining facilities, they run off of coal power. There was a study done that found that in 2018, every dollar worth of Bitcoin mined cost on average $0.49 to $0.37 worth of climate damages in the U.S. and China, which explains a lot of also why China has come down so hard on crypto.
I don’t think it’s necessarily a reason not to invest in that, but I do think it’s something to be aware of. Honestly, out of this space, the thing that really fascinates me is NFTs. I don’t currently own any. But to me, this whole NFT craze and particularly the movement within the space of buying digital art assets, I find really fascinating and we’re seeing a lot of legitimacy being lended to this area by a major auction houses.
Back in October, Coinbase, but Sotheby’s which has been around since 1744, they both said that they were going to be launching NFTs marketplaces. That absolutely astounded me. There was a Christie’s sale recently, according to CNBC, where digital artwork was priced at $69 million [laughs]. There are people making bank from sales of these digital assets. I think that’s definitely the draw. These are probably, I would say the exception of the rule in terms of people trading in these digital art works. I think this is a really interesting space.
A broader thesis, not a space I’m investing in right now. I’m super fascinated by NFTs and where that could go, particularly digital art. I think this is something that we’re seeing, like I mentioned, these major auction houses are lending a lot more legitimacy to. I don’t think it’s going anywhere. It’s something I intend to watch for sure over the next few years. I think it’s something that investors are going to be contending with for a long time. I don’t think it’s just going to fade.
Toby Bordelon: Jose, what about you?
Jose Najarro: I agree with Rachel with especially at the beginning of the crypto. I wouldn’t consider myself a bear nor a bull in the crypto market. I do believe it’s here to stay for a long time. I do think what Charlie mentioned was a little bit intense. He wished they’d never got created. I feel every new technology starts with a lot of skepticism.
Like I said, I’m neither a bear or a bull. But I believe maybe the tools that are being used for it right now might not be the best use of it, but maybe in the future, there could be better usage, and it could have only been done because cryptocurrencies were made. I believe it’s still too early to determine if, hey, I wish it would have never been made.
Now, going into the NFT market. I personally do. I have a few NFTs I invest in. But when I take a look at NFTs, this is something, it’s a very small percentage of my portfolio. Let’s say my stock market portfolio, it would be probably 2-3% of my portfolio. Very very small. I find the NFT market very interesting.
Not for the digital art. These NFTs come out with, I want to say a new project comes out every single day. For me the NFT market is small micro-cap companies. I want to say, all these 100 micro-cap companies, maybe only one of them might succeed and do super well. What I just enjoy is most of these projects are usually backed by some form of team. I don’t know if it’s just the investor in me, I like to locate who are these team members? Who’s the leadership behind this project?
What have they done in the past? Why are they working on this project? What is the roadmap they’re taking this kind of NFT into? I think that’s what is really driving me into learning more about the market.
Just hey, “Let’s see if I can take my stock analysis moves into another new market and see if it works in similar method by hey, looking at leadership how is management dealing with the project that they are working in.” What is the future aspect that this project is trying to lead to? It’s a very small market for me. I do own a few.
But again, it’s not something that I would I believe to me it’s more I’m going to say, casino money to some extent where it’s, I know this can go to zero really, really quickly. But for me the best way to learn something is usually by getting that first-hand experience. That’s my learning method and for that, I entered within that market.
Toby Bordelon: I mean, you learn by buying. There’s nothing wrong when taking a little bit of your portfolio and being, I don’t actually care about this a little bit. I am going to have fun. That’s one reason I bought Virgin Galactic. I actually, it just seems fine. It may go nowhere [laughs] but whatever. It’s cool to own.
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