Coinspeak Technical and Fundamental Market Analysis
Very few things make sense in 2020. With Seattle’s CHOP zone, the now iconic St Louis gun toting couple and the destruction of statues coast to coast it seems Fight Club’s Project Mayhem has become the norm rather than the exception.
I am reminded of this final scene in Fight Club in which the protagonist has his epiphany just as the world around him crumbles.
While I love the movie Fight Club I don’t want to live through it. For me, life in 2020 has been more like this:
But enough of indulging in metaphors from one of my all time favorite movies, being a doom bear is not healthy or productive. However, certain things do need to be acknowledged and one of those things is we are living in very unique times.
So, what is the best course of action for portfolio and wealth protection? Well, I’ll offer some thoughts (not financial advice).
Stocks are clearly in a bubble. Fog of war can make a bubble difficult to see in real time but putting aside the clear signs of over valuation and the disconnect from average Joe, unemployment, inflation, company bankruptcies, empty and failing malls or any form of reality we are hearing pundits call this market a “new paradigm”. TSLA is not worth more than every other car company on the planet. AMZN cannot replace every retail job worldwide. AAPL did not sell more iPhones in Q2 during a 20M increase in unemployment. Period.
The calls that we are in a New Paradigm free from the constraints of a somehow outdated and irrelevant past signals we are reaching this point in the markets:
The latecomers to the market, AKA RobinHood investors, driven by the insane and easy gains and the promise of the new paradigm, are the final nail in the coffin. The tipping point is reached when the uber driver tells you about how much he’s making buying Tesla stock in his Robinhood app. Then you can be assured the very end is near because there are no new suckers to draw into the ponzi.
The caveat here is the Fed. Having propped up the economy through multiple bubbles this may be the one hand of poker they can’t walk away from. The Fed’s bluff may get called by China and Russia and in that case we’ll have a big fat cherry to go on top of the cake that has been 2020: an unimaginable new market blow off top followed by hyperinflation and global reserve currency reset. It will not be a smooth ride and the effects will be felt globally.
For stocks, if I had any open positions remaining, I would either sell this week or put in a 20% stop loss. A 20% stop on TSLA would take you all the way back to 8 days ago. I think you’ll survive. Given the Fed’s unblinking resolve to prop up the markets a stop loss may be a more profitable strategy than proactive profit harvesting, but either way the best offense at the moment is a good defense.
But if you sell your stocks what do you do then?
Real Estate is also in a bubble. However, hard assets like Real Estate have some advantages over stocks. Real Estate is a complicated investment with many variables so take this as a gross overgeneralization. If you can transfer ridiculous gains in stocks into Real Estate, even at these elevated prices, you can build in some portfolio protection. Going from one bubble to another is not ideal but the goal here is to move gains from stocks to dollars to hard assets. Real Estate, in some cases, may make sense but is likely for the minority. Those who can afford to transfer large sums to buy properties in cash. These real estate whales are the sole reason I believe we have not seen Real Estate already collapse, but I do think a Real Estate collapse is coming. Real Estate is a long term and complicated hedge, which is exactly part of the problem today. Real Estate should be your home or an investment, not a financial instrument designed to eek out alpha. But we don’t get to choose the times we live in, we play the hands we are dealt.
Gold is the undisputed world champion, the GOAT, of surviving currency collapse. While Gold is awful for using in any practical manner other than as protection for the cyclical 50 year currency devaluation that cycle may be near thus making Gold attractive for protecting assets. Gold may always be valuable but it’s threatened by a future of provably scarce and much more usable/practical digital assets. Gold deserves a spot in your portfolio, but not a large one.
Bitcoin SV is high risk / high reward. But it has advantages over Stocks, Real Estate and Gold. BSV is the world’s first digital, scalable, usable, global, digital ledger and hard money. BSV can truly change the world but that doesn’t mean it will succeed. I believe BSV deserves a spot in your portfolio, likely above Gold, unless you are extremely conservative.
To summarize, stocks will likely correct hard this Summer. You’ll want to look at protecting profits with stops, diversifying now or outright eliminating this asset in the near term.
The USD, at the moment, is strong. It may gain some steam in it’s own blow off top and there is a possibility it goes from deflation to inflation in a hurry. USD is a hot potato. I wouldn’t want to hold too much of it long term.
Real Estate may be a poor investment in terms of recent history but a better place than stocks or USD in a market shakeout. It will only apply to high net worth individuals who need to lock up a lot of liquidity in a stable hard asset and who can successfully navigate the complicated process of buying properties. Medium term I expect Real Estate to collapse but it’s collapse may look good in relation to how USD performs.
Gold is a shiny rock that has held value for thousands of years. I quite enjoy holding a sleeve of gold coins in my hands. It feels good. That’s about all the positives I can say about Gold, but it’s enough in these strange times to consider holding some Gold purely because others may also value holding shiny rocks more than worthless paper.
Bitcoin SV is a risky investment, but given the crazy world we live in and the potential pay off, I think it will prove to be a winner in your portfolio over the next 12-36 months. BSV can be the hard money and digital ledger needed to bring integrity to government and trade as well as represent a single source of truth as a timestamped global ledger. If BSV fails, then I fear for how humanity navigates the next decade and I expect we’ll have bigger problems than where is the best place to invest.
While they never made a sequel to Fight Club I hope we don’t have to find out happens when society collapses in real life.
So, sell in 2020 and go away. Far away. You’re bothering me.
Phenomenal. This is absolutely brilliant analysis of these current unprecedented times and the investment possibilities of the future. If I may add another asset class–Rookie Cards of certain sports heroes. I’ve been carefully examining the Sports Card Market for over 20 years. Michael Jordan, Mickey Mantle, Derek Jeter and a few other mega stars have held up tremendously well in the face of stock market pullbacks. I was trying to pry a few of the 1993 SP Jeter Rookie Cards in Gem Mint condition during the crash of 2008. I was offering $12,000 on a PSA 10 1993 Jeter SP (there were only 12 in existence at that time) while its book value was only $5000 and no one was willing to sell. Today only 21 copies (out of hundreds of thousands that were printed) are graded PSA 10 Gem Mint and the last one just sold for $160,000. The Michael Jordan Rookie Card was about $8000 in a PSA 10 holder and now it is well over $100,000. There is just too much demand and barely any supply. People are attached to their sports heroes and their memorabilia. I imagine in a Mad Max type of situation, it won’t matter what assets we hold, but I have a feeling this asset class will hold up quite well compared to gold and stocks. BSV makes perfect sense for any environment. The only thing that concerns me with Crypto is the institutions and the Lemmings that HODL will continue to buy up the wrong coin (BTC) and tether will keep pumping the Ponzi. Then more Lemmings will MOMO and FOMO BTC all the way up. Tether can keep the charade going for quite some time and Lemmings will continue to think BTC is the correct coin because the price is being artificially held up. BSV would be $10,000 and more right now if humans were intelligent. Thanks so much, en1gma! Continued success to you!
Interesting idea on the sports cards. Collectibles and memorabilia do hold sentimental and therefore monetary value. I wonder if there is a shelf life though. Also, you have the odd risk of having a rookie OJ Simpson card and would his deeds later in life make that card go up or down?
Not a bad hedge tho, especially if the collecting brings you joy as a hobby.
Thanks, en1gma. That’s a valid point. Oddly enough, OJ cards more than held their value. Ever since the advent of grading card companies, values of rare cards in top condition have gone straight up and have held their gains. Baseball card collectors do have the risk of their players getting busted for steroids, however assumed steroid users from the 80s have had renewed interest. Bonds, Clemens, and Mark McGwire cards initially took tremendous hits to their value. Today they are all making new highs. Mike Trout rookie cards from 2009 in pristine condition go for $100,000+++. That is insane. I’m not saying he’s definitely on something (would not be shocked at all), but I would not recommend his cards at these levels. I would recommend rare rookie cards of players with extremely passionate fan bases–Ronaldo and Messi in Gem Mint condition. They are currently selling for about $15,000-$20,000 in PSA 10 holders. I expect them to reach $100,000 within a few years. Now if we can just get the current owners to sell them. Excellent work on your markets calls, en1gma!