The Lure of the Sirens' Call

One of the most dangerous things we can do in life is to go unprepared and unprotected into the world of finance. Without a clear vision beyond a desire to make a quick buck we're easily prey for all sorts of scams. We end up jumping from one bad idea to another, loosing our money in the the process, and being smart is no guarantee against this. It may even work against us. There's no lack of cases where very smart people lost their money this way. Newton lost a fortune on the South Sea Bubble. Other's lost so much, they ended up committing suicide. It's a horrible way to go.

This is why I've written a book for myself, outlining the principles that I use when investing. It anchors me, preventing me from jumping into trouble. It allows me to watch insanity unfold without being drawn into it. But even then, it can be hard to resist the temptation. The draw of the Bitcoin bubble was very strong back in late 2017 when I made a large investment in gold, and the draw is similarly strong today, with Bitcoin making new highs. But it's a doomed currency. It commands price, but no utility. It's an idea with no real world use. It cannot possibly work as money. However, none of this will stop those enthralled by this bubble. Many are going all in.

The draw of a bubble like Bitcoin is comparable to the lure of the sirens' call described by Homer in his famous work. Our tendency to be pulled into trouble in this way may in fact be the real significance of this story. To avoid the lure of the sirens' call, Ulysses tied himself to the mast of his boat. His men were ordered to put wax in their ears so as not to hear anything. The boat's course was staked out ahead of time. There was no room for alternatives. Only then did they enter the waters of the sirens.

When reading about Bitcoin's latest burst higher in price, I very much feel like Ulysses. I can feel the pull. I can see what's going on, and I can only pity those who didn't either tie themselves to the mast or put wax in their ears, because they are all jumping into the waters, eager to take part in the madness. They are setting themselves up for great losses, which many will make worse by buying more. Some will bankrupt themselves in the process.

Without a proper map, we're lost. But even with a map, we must anchor ourselves or put wax in our ears. We must never venture into siren infested waters without proper precautions.

Ulysses and the sirens

By Herbert James Draper - 1. Art Renewal Center 2. Unknown source 3. The Bridgeman Art Library, Object 96235, Public Domain, Link