wachtwoord

That's gold. Bitcoin is an improvement over gold (e.g. fungiblity, not fakeable, fast/cheap/easy movable and truly limited) but trades for a 0.03% valuation (@ $200 a BTC, it's quite swingy) compared to gold. Buying BTC for an increase in value is a speculation because there is no good which will ever produce anything. However it is truly undervalued so buying and waiting for the market to correct itself can be highly profitable.

I find this a very good question and a very difficult thing to decide on. I have this problem with JNJ (bough @59.05) and NVS (bought @ 54.27 1 year ago). Both are very stable companies with nice moats but their valuation is now fair (I do not believe they are overvalued yet). For now I decided to just hold until a 30% overvaluation occurred but I'm very curious for other people's opinions on this as my motivation for this decision isn't completely solid.

It isn't fair to use taxes in these comparisons as these are different per jurisdiction (also you conveniently left out US capital gains tax in scenario 2). I pay 0% dividend-tax and, 0% capital gains tax. In the Netherlands we pay 30% tax on a fictive 4% yield on your net worth minus ~21k euros (so if I lose money I still pay this ;)). I can fully deduct foreignly withheld dividend taxes (to avoid double taxation).

MTGox is the biggest exchange atm and still has 61% of the exchange market (this has been much higher): http://bitcoincharts.com/charts/volumepie/ This will change in time (and is changing). The same is occurring with mining pools: http://blockchain.info/pools?timespan=4days

Only full nodes need to store the full blockchain (I run a full node) and the blockchain is only ~8GB. It won't really be a problem. Also, the illegal content in the blockchain might be a problem although I do not believe a judge is going to convict anyone of child pornography possession if it is included in the blockchain and millions of people have it on their computers for a completely different purpose. Please read https://en.bitcoin.it/wiki/Weaknesses for a summary of all weaknesses, discussion of things that are unlikely to be weaknesses and pure myths.

Since I discovered Bitcoin 2 years ago I have really liked the concept of a cryptocurrency. I believe in time one or more cryptocurrencies will replace fiat currencies. And no, cryptocurrencies aren't even remotely comparable to e-gold, if you believe that you haven't investigated it sufficiently. I would recommend anyone to read http://evoorhees.blogspot.nl/2012/04/bitcoin-libertarian-introduction.html And I'm not buying any at $90 as well, mainly because I find it impossible to value them (therefore they likely don't belong on a value investors forum as it's speculative at any price).

Thanks for the discussions in this thread, they helped me in my analysis of what I think is a great investment. I initiated a position today @ $66.32.

OMG! I have been investing for years, but never knew what I was doing. I was floating in a sea of despair. I knew I was searching for the right way to invest, but the fact that I didn't know what I was looking for made it that much harder to find. They say when the student is ready the teacher will appear. And here you are. Look at this treasure trove. Don't time the market. Check. Buy a high value wide moat business! Check . . . um, could you perhaps explain this "wide moat" concept? Also, you mention "the intelligent investor". What is that? Who wrote it? Thanks very much! Haha lol ;D I figured it would have been clear referring to the most-well known value investing book ever was meant jokingly. Perhaps I should have stopped after the first sentence. However the point I made stands. Tomorrow the market will either be flat, go up or go down ;)

I thought this was a value investors forum? OP, are you saying you never read the intelligent investor? Don't try to time the market (no one can). Buy when a high value wide-moat business is undervalued with a high enough margin of safety (and optionally sell when it's sufficiently overvalued).