Bitcoin vs Romanian Real Estate

As bitcoin is was plunging, it’s a good idea to look at how Romanians invest and financial literacy in general, while it hurts to own and before it jumps back up. We only have time to take a quick look at real estate as an alternative to crypto.

composite of Romanian flag (red yellow blue) and BitcoinVarianta în limba română pe FaṭăCarte Meta.

  • Bitcoin will go back up, but I don’t care much because I’m diversified.
  • Investing in the stock market allows me to follow issues and companies I am interested in, from an investor’s vantage point.
  • Romanian real estate is an investor’s dead end.

Bitcoin has been going down for a while now and I’m reading increasingly bleak predictions. If anything, this is a good time to buy. But even if the magic is gone, never to come back, I don’t care, as it currently makes only a very small portion of my portfolio. (Full disclosure: I own $ETHX.B.TO & $BTCX.B.TO allowing me to reap profits tax-free in my TFSA, and they together make less than 5% of my portfolio. I expect BTC to end the year at USD 60K or more.)

This is an excellent example why it’s important to diversify especially if you are investing in a volatile assets: it hurts more when you lose money than you are happy for a win of the same magnitude. Having uncorrelated assets helps soften the blows over time.

I have a friend who was an investment banker in Romania and is now an investment banker in Toronto (though he still spends time in Romania, where he has family). We had some kind of business relationship in the past and I occasionally ask him about his views. We both invest in the Canadian and US market, but given his closer ties to Romania, I asked him if he invests anything in the Romanian market (BVB) – he told me NO. Not only that he isn’t investing his own money in Romania, but he even helped other Romanians to invest in North American markets.

I usually provide links to Wikipedia for terms that may be lesser known by a typical reader. When it comes to finance and investing, however, Investopedia is a better resource and links in this article and the ones that will come mostly point there. Needless to say, to be able to make sense of it you will have to be able to read and understand English, which, as previously recommended, you can learn with Duolingo. BTW, these guys IPO’d on NASDAQ in 2021 (yhf-duol) and are now worth 4 billion USD. You can also try Drops.

Gabriel Resources GBR and Euro Sun Mining ESM financial / investment data from WealthSimpleAs a Canadian investor, I was able to find two public companies with a strong connection to Romania: Gabriel Resources (of Rosia Montana memory; gbu below) and Euro Sun Mining (esm below; currently the focus of MiningWatch Romania – mnwr; eir-declic). They’re not doing great and even if they did, I probably wouldn’t want to invest in them (the small amounts used are indicative of commission-free trading). Investing a small amount allows me the status of “investor” in these companies and as such I receive their official filings. Since I wrote so much about Dacia, I might as well invest in Renault, but for me that would be an OTC investment and I try to avoid that.

A quick look on Twitter suggests that younger Romanians invest in cryptocurrencies, and, given the very high rate of home ownership, one would assume that older Romanians have their capital stuck in their own homes.

realestate

Eurostat quoted by Agerpres (d24-rore) finds that 96% of Romanians lived in 2020 in their own homes, whereas the EU average is 69.7%.

  • other countries with mass home ownership are Hungary and Croatia at 91%
  • only in Germany there are almost half renters at 49.6% (increasing)
  • low home ownership also in Austria (55%) and Denmark (59%)
  • 65.9% of Romanians live in a house
  • Romania is last at avg rooms/person (1.1) in EU (1.6); best: Malta (2.3), Belgium, Ireland (2.1)
  • Romania is the most crowded (45.1%) in EU (18%)

It’s difficult to make sense of Romanian real estate, particularly in the context of suburban migration; property taxes there are also unknown to me (they’re quite low in Toronto now, especially considering the meteoric rise of real estate -bnn-rs- values), but I doubt they’re zero in Ro. The real estate market has been exploding here in Toronto (more so than anywhere else in the world) for many reasons, among them the highest immigration per capita in the world and constrained supply: Toronto has only 3200 homes for sales left (trd-3200).

Without dwelling too much on this, the Romanian real estate market will forever underperform that in high immigration countries such as Canada and Australia for quite a few reasons, chief among them being the demographic bomb and the nationalism / hostility to migration most Romanians have, despite the widespread home ownership (by which I mean that it would make sense for most Romanians, given that they own their homes, to wish for that value to appreciate, and the easiest way is to allow more immigration INTO the country). Even if the Romanian real estate market did better, it would still make more sense to invest in it via a REIT rather than by buying houses directly.

Investing in Romanian real estate alone is a bad idea though it’s better than not investing at all. Throughout the world, home-buying as a sole investment is typically something that lower middle class people do. “Investing in cryptocurrencies” alone is similar to playing lottery – it’s fun, but it’s not really investing. Furthermore, one should differentiate between “investing” (which typically means deploying capital with a time-horizon of a year or more) and trading, which is usually meant as “day-trading” which means frequent trades with the intent to make a daily profit or “swing-trading” which involves trading weekly. I suspect that most crypto is “traded” rather than an “investment”.

I was going to tell you more about “financial literacy”, but I’m running out of time and of runway here. Furthermore, when I started this article, Bitcoin was plummeting and now it’s going up again, so I’d better publish before my prediction is completely validated by reality. Once again, don’t invest in only one thing, DIVERSIFY! And check out my upcoming article on financial literacy and BVB.

Also, check out the new wave in Costa Rica - crypto mining.

Sources / More info: mw-btcinv, bnn-wrst, d24-rore, gbu, esm, mnwr, yhf-duol, bnn-rs, bnn-3200, eir-declic, sdr-esm

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