After a miserable Thanks Giving Weekend in the markets we are starting to see some signs of a bullish reversal. So is this the beginning of Santa Rally or a Sequel of the Grinch that stole Christmas?
Despite the pessimists and constant expert trad... errrrrrr trolls on TV' we remain optimistic and Long Bitcoin' in the LONG TERM. I have to capitalize LONG TERM to be clear I am in this for a 3-5-10 year time frame. So if you think I need a stop loss for my long term investments, please refrain from making yourself look like a Frooll. A little on cost averaging before we get into the technicals.
Let's take a hypothetical investor that was a terrible market timer. She started buying the NASDAQ' fund in 2000 at the peak of the dotcom market and continued to dump $500 a month in no matter the price. Yes the Trolls at the time told her she was an idiot. But she remained on course and bought through the dotcom pop, and continued through the 2009 recession as a diligent investor, ignoring her colleagues investing $90 in Starbucks lattes every week. Yes she bought a $125 espresso maker on eBay' and saved that money. By 2015 her investment was worth about 190,000 on an initial investment of 90k. Not bad seeing she started buying at the worst possible time. If she never added another dollar after 2015 that investment today would be worth nearly 300k even after the recent market pullback.
This is why we have no issue buying as the market falls. We look to buy the dips not time the bottom. You need two things in order to time the bottom. Solid Brass Balls and Luck, and few of us have both, most have neither. In order to time the bottom you have to be able to jump in front of the train when it is bearing down on you. You also have to be lucky enough that this time it was the bottom. In the end nobody knows for certain whether this is the bottom, or a stop on the way to 2k. We don't claim to. What we do know is a statistical fact that being out of the market is more risky than being in. At least in the long term (AGAIN I AM TALKING ABOUT INVESTING NOT DAYTRADING WITH A $1200 ACCOUNT LEVERAGED ON BITMEX). Why?
Most of the gains in any market, be Bitcoin or stocks, come within a short term period after a selloff. History repeats and there has never been a 20 year period where the market was lower than it was 20 years ago. In simple words markets move higher in the long term. I believe it is 90% for a 10 year period, but I would have to check. Look at the stock market today, everyone was calling for dooms day on Monday, today 2%+ rally? Were you out? Bitcoin went from 3500 to 4200, 20% gains in a day or two were you out? Look at NBEV' which is part of our cannabis portfolio. 20% rally today, and most came between 2:00-4:30. Again no-one knows when the rally comes, the question is are you in when it does.
The current rally is a positive note, but this could merely be shorts covering. As they buy back, those that shorted at lower levels are forced to close positions and take their loss. Those that were depressed two days ago, have taken their Prozac and are ready to jump in as the market moves higher. However there are many that bought the dip between 4200 and 4500 and some will be looking to get out. So this could be a temporary swing or the beginning of a bullish structure. We just need more time for it to evolve and provide a clearer structure before the probabilities are in the bulls favor. A close above 4650 increases this probability and this is the level we are looking to for confirmation.
In the short term we are looking for a retest of the 3500 -3750 area and a higher low to add capital. If 3500 fails to hold, 2800-3100 is the next support area. I am not saying we get there, all I am saying is we can not discount those levels at this point. As far as trading goes, this is a risky market period. Only the market knows the future, and this is why we call it "speculating". Notice how the bear trolls only come out during selloffs to run smack. And most, if not all are likely trading in their mother's basement with mini-me accounts. Maybe we should call them Gremlins ;).
There are other markets that offer better trading opportunities like stocks right now. This is why we have been issuing options trades for NBEV', NVDA' and have others on our radar. The structure of many Cannabis stocks is favorable for a bullish move and we have accumulated inventory through our options strategy to write calls into any rally. Keep in mind we have two portfolios, one is an investment portfolio, and the other a trading portfolio. We do not mix the two. Investments do not become trades, and trades do not become investments.
Yet I am an investor first and have been through the 1987 selloff, 2000 dotcom, and the 2010 great recession. I have no issue with adding into pullbacks regardless of the perfect market timers on TV. If it pulls back to 3100 I am a buyer, 2500 a buyer, and I have a strategy, which I stick to pertaining to risk management. I know there is always a troll that throws up there I bought at 13k 8500 and 7400. I don't care, nobody knows where the bottom is, and using our capital allocation strategy our cost averaging is compounded. Many do not even know how to cost average correctly. More do not even know when to cost average. But a little about cost averaging.
Roll back to 1977, and three investors adding 10k a year to the S&P' index. One was the perfect timer always buying the annual market low (like the trolls on TV who always seem to be on the right side of the trade), the other bought the first day of trading every year, and the third, (the worst market timer in history) always bought the high. You would think the perfect timer would way outperformed both right? Though he did outperform, their returns annualized were 11.4%, 11.1% and 10.8% respectfully. Wait the guy that was the worst market timer only under-performed the perfect market troll by 0.6%? YES!
Now over 40 years the difference of 0.6% annualized is meaningful, but regardless what are the chances of you being the perfect market timer? More often than not trying to time the market leads to under performing the worst cost average timer. Don't believe me, 90% of professional fund managers under performed their benchmark index over a 15 year time horizon. Yes I know all the good ones are on Trading View LMAO! Those professionals managing billions of dollars have nothing on swissmiss, phil's-mommy, and boonie baby trading in their mom's basement. All the decades errrrr months of combined market experience I think GS' is calling.
Now there is a time for dollar cost averaging in our portfolio strategy. There is also a time to lump sum invest as well. Do you know when to do one or the other? Are you doing either, or just trying to time the market perfectly?
In the long term it is not that you are the perfect market timer, it is that you are not investing in the perfect latte! It is not how good you are at nailing the bottom, it is how good you are at saving and disciplined as an investor! So is this the beginning of the Santa Rally or the Grinch that stole Christmas? Nobody knows. What is important is that in 20-30 years there are some presents under your tree and it is not a Starbucks Diamond Member Card!
Remember even if Bitcoin' goes to $10 that Starbucks Latte is always a 100% loss.
#1 - Bitcoin and moreover cryptos are speculative and you should never invest in ANY speculative instruments unless you understand it can go to zero. This does not imply for the four future trolls that will say "ride it to zero, great investment philosophy". It implies you CAN LOSE YOUR MONEY!!!
#2 - IMO nothing is an investment unless it pays you a return in the form of a dividend, other than gold. If it does NOT pay a dividend it is speculative. There may be a few exceptions like Google or maybe Amazon, but JNJ is an investment for 20-30 years.
#3 - IN NO WAY SHAPE OR FORM have I ever recommended cryptos is your only investment. It should be part of your speculative investments and a small portion, one you are willing and able to ride to zero.
#4 - The article is about positioning your mind to not worry about short term losses is ANY market. IT hopefully has you thinking the next time you go to Starbucks of if you need a Latte or you need to invest for your future. You only have so much sweat equity and how you invest your sweat equity will determine your long term success.
#5 - If you just put all your money in Bitcoin because I or anyone says you should you deserve to lose your money. This will be your awakening and entrance into adult hood. Education is not cheap and it is not my obligation to make investing your money a safe space with cupcakes and hot chocolate. If you think I need to put warning labels on my articles at the beginning, middle and the end, you need to grow up and put a pair of big boy pants on. Too many softies anymore.
#6 - There is NO participation trophy or getting your money back in cryptos or any market. Your momma is not going to wipe your tears, and buy you ice cream at the end of the day. This is the real world WELCOME TO IT CUPCAKES!