The reason shitcoins have been rallying while bitcoin trends sideways is because right now it is a risk-on environment, as evidenced by stocks hitting all time highs. If bitcoin was a risk asset it would also be rallying. This might mean bitcoin is showing its first signs of shifting into the risk-off asset segment. This is what bitcoin should be doing. In preparation for further economic turmoil through the rest of 2020 and into 2021 bitcoin is morphing into a safe haven risk-off asset. As stock markets roll over later this year expect altcoins to fall alongside them while bitcoin rallies. The decoupling is at hand. Edit: some people see volatility and disregard the idea bitcoin could be a safe haven. Look at the charts, gold is rising in preparation for a huge bull market, silver is volatile but following gold, bitcoin is even more volatile but following silver. Just because silver tanked in march does not mean it won't follow gold to new all time highs, and similarly just because bitcoin tanked in march does not mean it won't follow silver to new all time highs. Gold will lead, silver will follow gold with more volatility, and bitcoin will follow silver with even more volatility. Gold will 5x, silver will 10x and bitcoin will 50x over the next 3 years.
DDDD - The Rise of “Buy the Dip” Retail Investors and Why Another Crash Is Imminent
In this week's edition of DDDD (Data-driven DD), I'll be going over the real reason why we have been seeing a rally for the past few weeks, defying all logic and fundamentals - retail investors. We'll look into several data sets to see how retail interest in stock markets have reached record levels in the past few weeks, how this affected stock prices, and why we've most likely seen the top at this point, unless we see one of the "positive catalysts" that I mentioned in my previous post, which is unlikely (except for more news about Remdesivir). Disclaimer - This is not financial advice, and a lot of the content below is my personal opinion. In fact, the numbers, facts, or explanations presented below could be wrong and be made up. Don't buy random options because some person on the internet says so; look at what happened to all the SPY 220p 4/17 bag holders. Do your own research and come to your own conclusions on what you should do with your own money, and how levered you want to be based on your personal risk tolerance. Inspiration Most people who know me personally know that I spend an unhealthy amount of my free time in finance and trading as a hobby, even competing in paper options trading competitions when I was in high school. A few weeks ago, I had a friend ask if he could call me because he just installed Robinhood and wanted to buy SPY puts after seeing everyone on wallstreetbets post gains posts from all the tendies they’ve made from their SPY puts. The problem was, he actually didn’t understand how options worked at all, and needed a thorough explanation about how options are priced, what strike prices and expiration dates mean, and what the right strategy to buying options are. That’s how I knew we were at the euphoria stage of buying SPY puts - it’s when dumb money starts to pour in, and people start buying securities because they see everyone else making money and they want in, even if they have no idea what they’re buying, and price becomes dislocated from fundementals. Sure enough, less than a week later, we started the bull rally that we are currently in. Bubbles are formed when people buy something not because of logic or even gut feeling, but when people who previously weren’t involved see their dumb neighbors make tons of money from it, and they don’t want to miss out. A few days ago, I started getting questions from other friends about what stocks they should buy and if I thought something was a good investment. That inspired me to dig a bit deeper to see how many other people are thinking the same thing. Data Ever since March, we’ve seen an unprecedented amount of money pour into the stock market from retail investors. Google Search Trends \"what stock should I buy\" Google Trends 2004 - 2020 \"what stock should I buy\" Google Trends 12 months \"stocks\" Google Trends 2004 - 2020 \"stocks\" Google Trends 12 months Brokerage data Robinhood SPY holders \"Robinhood\" Google Trends 12 months wallstreetbets' favorite broker Google Trends 12 months Excerpt from E*Trade earnings statement Excerpt from Schwab earnings statement TD Ameritrade Excerpt Media cnbc.com Alexa rank CNBC viewership & rankings wallstreetbets comments / day investing comments / day Analysis What we can see from Reddit numbers, Google Trends, and CNBC stats is that in between the first week of March and first week of April, we see a massive inflow of retail interest in the stock market. Not only that, but this inflow of interest is coming from all age cohorts, from internet-using Zoomers to TV-watching Boomers. Robinhood SPY holdings and earnings reports from E*Trade, TD Ameritrade, and Schwab have also all confirmed record numbers of new clients, number of trades, and assets. There’s something interesting going on if you look closer at the numbers. The numbers growth in brokers for designed for “less sophisticated” investors (i.e. Robinhood and E*Trade) are much larger than for real brokers (i.e. Schwab and Ameritrade). This implies that the record number of new users and trade volume is coming from dumb money. The numbers shown here only really apply to the US and Canada, but there’s also data to suggest that there’s also record numbers of foreign investors pouring money into the US stock market as well. However, after the third week of March, we see the interest start to slowly decline and plateau, indicating that we probably have seen most of those new investors who wanted to have a long position in the market do so. SPX daily Rationale Pretty much everything past this point is purely speculation, and isn’t really backed up by any solid data so take whatever I say here with a cup of salt. We could see from the graph that new investor interest started with the first bull trap we saw in the initial decline from early March, and peaking right after the end of the crash in March. So it would be fair to guess that we’re seeing a record amount of interest in the stock market from a “buy the dip” mentality, especially from Robinhood-using Millennials. Here’s a few points on my rationalization of this behavior, based on very weak anecdotal evidence
They missed out of their chance of getting in the stock market at the start of the bull market that happened at the end of 2009
They’ve all seen the stock market make record gains throughout their adult lives, but believing that the market might be overheated, they were waiting for a crash
Most of them have gotten towards the stage of their lives where they actually have some savings and can finally put some money aside for investments
This stock market crash seems like their once-in-a-decade opportunity that they’ve been waiting for, so everyone jumped in
Everyone’s stuck at their homes with vast amounts of unexpected free time on their hands
Most of these new investors got their first taste in the market near the bottom, and probably made some nice returns. Of course, since they didn’t know what they were doing, they probably put a very small amount of money at first, but after seeing a 10% return over one week, validating that maybe they do know something, they decide to slowly pour in more and more of their life savings. That’s what’s been fueling this bull market. Sentiment & Magic Crayons As I mentioned previously, this bull rally will keep going until enough bears convert to bulls. Markets go up when the amount of new bullish positions outnumber the amount of new bearish positions, and vice versa. Record amounts of new investors, who previously never held a position in the market before, fueled the bullish side of this equation, despite all the negative data that has come out and dislocating the price from fundamentals. All the smart money that was shorting the markets saw this happening, and flipped to become bulls because you don’t fight the trend, even if the trend doesn’t reflect reality. From the data shown above, we can see new investor interest growth has started declining since mid March and started stagnating in early April. The declining volume in SPY since mid-March confirms this. That means, once the sentiment of the new retail investors starts to turn bearish, and everyone figures out how much the stocks they’re holding are really worth, another sell-off will begin. I’ve seen something very similar to this a few years ago with Bitcoin. Near the end of 2017, Bitcoin started to become mainstream and saw a flood of retail investors suddenly signing up for Coinbase (i.e. Robinhood) accounts and buying Bitcoin without actually understanding what it is and how it works. Suddenly everyone, from co-workers to grandparents, starts talking about Bitcoin and might have thrown a few thousand dollars into it. This appears to be a very similar parallel to what’s going on right now. Of course there’s differences here in that equities have an intrinsic value, although many of them have gone way above what they should be intrinsically worth, and the vast majority of retail investors don’t understand how to value companies. Then, during December, when people started thinking that the market was getting a bit overheated, some started taking their profits, and that’s when the prices crashed violently. This flip in sentiment now look like it has started with equities. SPY daily Technical Analysis, or magic crayons, is a discipline in finance that uses statistical analysis to predict market trends based on market sentiment. Of course, a lot of this is hand-wavy and is very subjective; two people doing TA on the same price history can end up getting opposite results, so TA should always be taken with a grain of salt and ideally be backed with underlying justification and not be blindly followed. In fact, I’ve since corrected the ascending wedge I had on SPY since my last post since this new wedge is a better fit for the new trading data. There’s a few things going on in this chart. The entire bull rally we’ve had since the lows can be modelled using a rising wedge. This is a pattern where there is a convergence of a rising support and resistance trendline, along with falling volume. This indicates a slow decline in net bullish sentiment with investors, with smaller and smaller upside after each bounce off the support until it hits a resistance. The smaller the bounces, the less bullish investors are. When the bearish sentiment takes over across investors, the price breaks below this wedge - a breakdown, and indicates a start of another downtrend. This happened when the wedge hit resistance at around 293, which is around the same price as the 200 day moving average, the 62% retracement (considered to be the upper bound of a bull trap), and a price level that acted as a support and resistance throughout 2019. The fact that it gapped down to break this wedge is also a strong signal, indicating a sudden swing in investor sentiment overnight. The volume of the break down also broke the downwards trend of volume we’ve had since the beginning of the bull rally, indicating a sudden surge of people selling their shares. This doesn’t necessarily mean that we will go straight from here, and I personally think that we will see the completion of a heads-and-shoulders pattern complete before SPY goes below 274, which in itself is a strong support level. In other words, SPY might go from 282 -> 274 -> 284 -> 274 before breaking the 274 support level. VIX Daily Doing TA is already sketchy, and doing TA on something like VIX is even more sketchy, but I found this interesting so I’ll mention it. Since the start of the bull rally, we’ve had VIX inside a descending channel. With the breakdown we had in SPY yesterday, VIX has also gapped up to have a breakout from this channel, indicating that we may see future volatility in the next week or so. Putting Everything Together Finally, we get to my thesis. This entire bull rally has been fueled by new retail investors buying the dip, bringing the stock price to euphoric levels. Over the past few weeks, we’ve been seeing the people waiting at the sidelines for years to get into the stock market slowly FOMO into the rally in smaller and smaller volumes, while the smart money have been locking in their profits at an even slower rate - hence an ascending wedge. As the amount of new retail interest in the stock market started slowed down, the amount of new bulls started to decline. It looks like Friday might have been the start of the bearish sentiment taking over, meaning it’s likely that 293 was the top, unless any significant bullish events happen in the next two weeks like a fourth round of stimulus, in which case we might see 300. This doesn’t mean we’ll instantly go back to circuit breakers on Monday, and we might see 282 -> 274 -> 284 -> 274 happen before panic, this time by the first-time investors, eventually bringing us down towards SPY 180. tldr; we've reached the top EDIT - I'll keep a my live thoughts here as we move throughout this week in case anyone's still reading this and interested. 5/4 8PM - /ES was red last night but steadily climbed, which was expected since 1h RSI was borderline oversold, leaving us to a slightly green day. /ES looks like it has momentum going up, but is approaching towards overbought territory now. Expecting it to go towards 284 (possibly where we'll open tomorrow) and bouncing back down from that price level 5/5 Market Open - Well there goes my price target. I guess at this point it might go up to 293 again, but will need a lot of momentum to push back there to 300. Seems like this is being driven by oil prices skyrocketing. 5/5 3:50PM - Volume for the upwards price action had very little volume behind it. Seeing a selloff EOD today, could go either way although I have a bearish bias. Going to hold cash until it goes towards one end of the 274-293 channel (see last week's thesis). Still believe that we will see it drop below 274 next week, but we might be moving sideways in the channel this week and a bit of next week before that happens. Plan for tomorrow is buy short dated puts if open < 285. Otherwise, wait till it goes to 293 before buying those puts 5/5 6PM - What we saw today could be a false breakout above 284. Need tomorrow to open below 285 for that to be confirmed. If so, my original thesis of it going back down to 274 before bouncing back up will still be in play. 5/6 EOD - Wasn't a false breakout. Looks like it's still forming the head-and-shoulders pattern mentioned before, but 288 instead of 284 as the level. Still not sure yet so I'm personally going to be holding cash and waiting this out for the next few days. Will enter into short positions if we either go near 293 again or drop below 270. Might look into VIX calls if VIX goes down near 30. 5/7 Market Open - Still waiting. If we break 289 we're probably heading to 293. I'll make my entry to short positions when we hit that a second time. There's very little bullish momentum left (see MACD 1D), so if we hit 293 and then drop back down, we'll have a MACD crossover event which many traders and algos use as a sell signal. Oil is doing some weird shit. 5/7 Noon - Looks like we're headed to 293. Picked up VIX 32.5c 5/27 since VIX is near 30. 5/7 11PM - /ES is hovering right above 2910, with 4h and 1h charts are bullish from MACD and 1h is almost overbought in RSI. Unless something dramatic happens we'll probably hit near 293 tomorrow, which is where I'll get some SPY puts. We might drop down before ever touching it, or go all the way to 295 (like last time) during the day, but expecting it to close at or below 293. After that I'm expecting a gap down Monday as we start the final leg down next week towards 274. Expecting 1D MACD to crossover in the final leg down, which will be a signal for bears to take over and institutions / day traders will start selling again 5/8 Market Open - Plan is to wait till a good entry today, either when technicals looks good or we hit 293, and then buy some SPY June 285p and July 275p 5/8 Noon - Everything still going according to plan. Most likely going to slowly inch towards 293 by EOD. Will probably pick up SPY puts and more VIX calls at power hour (3 - 4PM). Monday will probably gap down, although there's a small chance of one more green / sideways day before that happens if we have bullish catalysts on the weekend. 5/8 3:55PM - SPY at 292.60. This is probably going to be the closest we get to 293. Bought SPY 290-260 6/19 debit spreads and 292-272 5/15 debit spreads, as well as doubling down on VIX calls from yesterday, decreasing my cost basis. Still looks like there's room for one more green day on Monday, so I left some money on the side to double down if that's the case, although it's more likely than not we won't get there. 5/8 EOD - Looks like we barely touched 293 exactly AH before rebounding down. Too bad you can't buy options AH, but more convinced we'll see a gap down on Monday. Going to work on another post over the weekend and do my updates there. Have a great weekend everyone!
Testing the Tide | Monthly FIRE Portfolio Update - June 2020
We would rather be ruined than changed. -W H Auden, The Age of Anxiety This is my forty-third portfolio update. I complete this update monthly to check my progress against my goal. Portfolio goal My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars). This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent. Portfolio summary Vanguard Lifestrategy High Growth Fund – $726 306 Vanguard Lifestrategy Growth Fund – $42 118 Vanguard Lifestrategy Balanced Fund – $78 730 Vanguard Diversified Bonds Fund – $111 691 Vanguard Australian Shares ETF (VAS) – $201 745 Vanguard International Shares ETF (VGS) – $39 357 Betashares Australia 200 ETF (A200) – $231 269 Telstra shares (TLS) – $1 668 Insurance Australia Group shares (IAG) – $7 310 NIB Holdings shares (NHF) – $5 532 Gold ETF (GOLD.ASX) – $117 757 Secured physical gold – $18 913 Ratesetter (P2P lending) – $10 479 Bitcoin – $148 990 Raiz app (Aggressive portfolio) – $16 841 Spaceship Voyager app (Index portfolio) – $2 553 BrickX (P2P rental real estate) – $4 484 Total portfolio value: $1 765 743 (+$8 485 or 0.5%) Asset allocation Australian shares – 42.2% (2.8% under) Global shares – 22.0% Emerging markets shares – 2.3% International small companies – 3.0% Total international shares – 27.3% (2.7% under) Total shares – 69.5% (5.5% under) Total property securities – 0.3% (0.3% over) Australian bonds – 4.7% International bonds – 9.4% Total bonds – 14.0% (1.0% under) Gold – 7.7% Bitcoin – 8.4% Gold and alternatives – 16.2% (6.2% over) Presented visually, below is a high-level view of the current asset allocation of the portfolio. [Chart] Comments The overall portfolio increased slightly over the month. This has continued to move the portfolio beyond the lows seen in late March. The modest portfolio growth of $8 000, or 0.5 per cent, maintains its value at around that achieved at the beginning of the year. [Chart] The limited growth this month largely reflects an increase in the value of my current equity holdings, in VAS and A200 and the Vanguard retail funds. This has outweighed a small decline in the value of Bitcoin and global shares. The value of the bond holdings also increased modestly, pushing them to their highest value since around early 2017. [Chart] There still appears to be an air of unreality around recent asset price increases and the broader economic context. Britain's Bank of England has on some indicators shown that the aftermath of the pandemic and lockdown represent the most challenging financial crisis in around 300 years. What is clear is that investor perceptions and fear around the coronavirus pandemic are a substantial ongoing force driving volatility in equity markets (pdf). A somewhat optimistic view is provided here that the recovery could look more like the recovery from a natural disaster, rather than a traditional recession. Yet there are few certainties on offer. Negative oil prices, and effective offers by US equity investors to bail out Hertz creditors at no cost appear to be signs of a financial system under significant strains. As this Reserve Bank article highlights, while some Australian households are well-placed to weather the storm ahead, the timing and severity of what lays ahead is an important unknown that will itself feed into changes in household wealth from here. Investments this month have been exclusively in the Australian shares exchange-traded fund (VAS) using Selfwealth.* This has been to bring my actual asset allocation more closely in line with the target split between Australian and global shares. A moving azimuth: falling spending continues Monthly expenses on the credit card have continued their downward trajectory across the past month. [Chart] The rolling average of monthly credit card spending is now at its lowest point over the period of the journey. This is despite the end of lockdown, and a slow resumption of some more normal aspects of spending. This has continued the brief period since April of the achievement of a notional and contingent kind of financial independence. The below chart illustrates this temporary state, setting out the degree to which portfolio distributions cover estimated total expenses, measured month to month. [Chart] There are two sources of volatility underlying its movement. The first is the level of expenses, which can vary, and the second is the fact that it is based on financial year distributions, which are themselves volatile. Importantly, the distributions over the last twelve months of this chart is only an estimate - and hence the next few weeks will affect the precision of this analysis across its last 12 observations. Estimating 2019-20 financial year portfolio distributions Since the beginning of the journey, this time of year usually has sense of waiting for events to unfold - in particular, finding out the level of half-year distributions to June. These represent the bulk of distributions, usually averaging 60-65 per cent of total distributions received. They are an important and tangible signpost of progress on the financial independence journey. This is no simple task, as distributions have varied in size considerably. A part of this variation has been the important role of sometimes large and lumpy capital distributions - which have made up between 30 to 48 per cent of total distributions in recent years, and an average of around 15 per cent across the last two decades. I have experimented with many different approaches, most of which have relied on averaging over multi-year periods to even out the 'peaks and troughs' of how market movements may have affected distributions. The main approaches have been:
An 'adjusted income' approach - stripping out the capital gains components of Vanguard funds to reach an estimate of underlying income generation, both across the entire investment period, and during the sharpest low of the Global Financial Crisis
A long-term asset class approach - relying on long-term historical data on averages of the income produced by various asset classes
A 'tax method' approach - this derives an income estimate as a percentage of the portfolio by drawing on taxable investment income totals from tax return records
Simple historical rolling average - this is a rolling three-year measure, based on the actual distributions record of the portfolio
Average distribution rate approach - this method uses a long-term average of annual distributions received as a percentage of the total portfolio since 1999
Each of these have their particular simplifications, advantages and drawbacks. Developing new navigation tools Over the past month I have also developed more fully an alternate 'model' for estimating returns. This simply derives a median value across a set of historical 'cents per unit' distribution data for June and December payouts for the Vanguard funds and exchange traded funds. These make up over 96 per cent of income producing portfolio assets. In other words, this model essentially assumes that each Vanguard fund and ETF owned pays out the 'average' level of distributions this half-year, with the average being based on distribution records that typically go back between 5 to 10 years. Mapping the distribution estimates The chart below sets out the estimate produced by each approach for the June distributions that are to come. [Chart] Some observations on these findings can be made. The lowest estimate is the 'adjusted GFC income' observation, which essentially assumes that the income for this period is as low as experienced by the equity and bond portfolio during the Global Financial Crisis. Just due to timing differences of the period observed, this seems to be a 'worst case' lower bound estimate, which I do not currently place significant weight on. Similarly, at the highest end, the 'average distribution rate' approach simply assumes June distributions deliver a distribution equal to the median that the entire portfolio has delivered since 1999. With higher interest rates, and larger fixed income holdings across much of that time, this seems an objectively unlikely outcome. Similarly, the delivery of exactly the income suggested by long-term averages measured across decades and even centuries would be a matter of chance, rather than the basis for rational expectations. Central estimates of the line of position This leaves the estimates towards the centre of the chart - estimates of between around $28 000 to $43 000 as representing the more likely range. I attach less weight to the historical three-year average due to the high contribution of distributed capital gains over that period of growth, where at least across equities some capital losses are likely to be in greater presence. My preferred central estimate is the model estimate (green) , as it is based in historical data directly from the investment vehicles rather than my own evolving portfolio. The data it is based on in some cases goes back to the Global Financial Crisis. This estimate is also quite close to the raw average of all the alternative approaches (red). It sits a little above the 'adjusted income' measure. None of these estimates, it should be noted, contain any explicit adjustment for the earnings and dividend reductions or delays arising from COVID-19. They may, therefore represent a modest over-estimate for likely June distributions, to the extent that these effects are more negative than those experienced on average across the period of the underlying data. These are difficult to estimate, but dividend reductions could easily be in the order of 20-30 per cent, plausibly lowering distributions to the $23 000 to $27 000 range. The recently announced forecast dividend for the Vanguard Australian Shares ETF (VAS) is, for example, the lowest in four years. As seen from chart above, there is a wide band of estimates, which grow wider still should capital gains be unexpectedly distributed from the Vanguard retail funds. These have represented a source of considerable volatility. Given this, it may seem fruitless to seek to estimate these forthcoming distributions, compared to just waiting for them to arrive. Yet this exercise helps by setting out reasoning and positions, before hindsight bias urgently arrives to inform me that I knew the right answer all along. It also potentially helps clearly 'reject' some models over time, if the predictions they make prove to be systematically incorrect. Progress Progress against the objective, and the additional measures I have reached is set out below. Measure Portfolio All Assets Portfolio objective – $2 180 000 (or $87 000 pa) 81.0% 109.4% Credit card purchases – $71 000 pa 98.8% 133.5% Total expenses – $89 000 pa 79.2% 106.9% Summary The current coronavirus conditions are affecting all aspects of the journey to financial independence - changing spending habits, leading to volatility in equity markets and sequencing risks, and perhaps dramatically altering the expected pattern of portfolio distributions. Although history can provide some guidance, there is simply no definitive way to know whether any or all of these changes will be fundamental and permanent alterations, or simply data points on a post-natural disaster path to a different post-pandemic set of conditions. There is the temptation to fit past crises imperfectly into the modern picture, as this Of Dollars and Data post illustrates well. Taking a longer 100 year view, this piece 'The Allegory of the Hawk and Serpent' is a reminder that our entire set of received truths about constructing a portfolio to survive for the long-term can be a product of a sample size of one - actual past history - and subject to recency bias. This month has felt like one of quiet routines, muted events compared to the past few months, and waiting to understand more fully the shape of the new. Nonetheless, with each new investment, or week of lower expenditure than implied in my FI target, the nature of the journey is incrementally changing - beneath the surface. Small milestones are being passed - such as over 40 per cent of my equity holdings being outside of the the Vanguard retail funds. Or these these retail funds - which once formed over 95 per cent of the portfolio - now making up less than half. With a significant part of the financial independence journey being about repeated small actions producing outsized results with time, the issue of maintaining good routines while exploring beneficial changes is real. Adding to the complexity is that embarking on the financial journey itself is likely to change who one is. This idea, of the difficulty or impossibility of knowing the preferences of a future self, is explored in a fascinating way in this Econtalk podcast episode with a philosophical thought experiment about vampires. It poses the question: perhaps we can never know ourselves at the destination? And yet, who would rationally choose ruin over any change? The post, links and full charts can be seen here.
Alright guys, Ive been working on this for a while and a post on here by a guy describing his portfolio here was the final kick in the ass for me to put this together. I started writing this to summarize what Im doing for my friends who are beginners, and also for me to make some sense of it for myself Hopefully parts of it are useful to you, and also ideally you guys can point out errors or have a suggestion or two. I'm posting this here as opposed to investing or canadianinvestor (blech) because they're just gonna tell me to buy an index fund. This first section is a preamble describing the Canadian tax situation and why Im doing things the way that I am. Feel free to skip it if you dont care about that. Also, there might be mistake regarding what the laws are here so dont take my word for it and verify it for yourself please. So here in Canada we have two types of registered accounts (theres actually more but whatver). There is the TFSA "Tax Free Savings Account", and RRSP "Registered Retirement Savings Account" For the sake of simplicity, from the time you turn 18 you are allowed to deposit 5k (it changes year to year based on inflation etc)in each of them. That "room" accumulates retroactively, so if you haventdone anything and are starting today and you are 30 you have around 60k you can put in each of them. The prevailing wisdom is that you should max out the TFSA first and you'll see why in a minute. TFSA is post tax deposits, with no capital gains or other taxes applied to selling your securities, dividends or anything else. You can withdraw your gains at any time, and the amount that you withdraw is added to the "room" you have for the next year. So lets say I maxed out my TFSA contributions and I take out 20k today, on January of next year I can put back in 20k plus the 5 or whatever they allow for that year. You can see how powerful this is. Theres a few limitations on what is eligable to be held in the TFSA such as bitcoin/bitcoin ETFs, overseas stocks that arent listed on NYSE, TSX, london and a few others. You can Buy to Open and Sell to Close call and put options as well as write Covered Calls. The RRSP is pre-tax deposits and is a tax deferred scheme. You deposit to lower your income tax burden (and hopefully drop below a bracket) but once you retire you will be taxed on anything you pull out. Withdrawing early has huge penalties and isnt recommended. You are however allowed to borrow against it for a down payment as a first time home buyer. The strategy with these is that a youngperson entering the workforce is likely to be in a fairly low tax bracket and (hopefully) earns more money as they get older and more skilled so the RRSP has more value the greater your pre-taxincome is. You can also do this Self Directed. Its not relevant to this strategy but I included it for the sake of context. Non registered accounts ( or any other situation, such as selling commercial real estate etc) is subject to a capital gains tax. In so far as I understand it, you add all your gains and losses up at the end of the year. If its a positive number, you cut that number IN HALF and add it to your regular pre-tax income. So if I made 60k from the dayjob and 20k on my margin account that adds up to 70k that I get taxed on. if its a loss, you carry that forward into the next year. Theres no distinction between long term and short term. Also physical PMs are treated differently and I'll fill that part in later once I have the details down. The reason why all that babble is important is that my broker Questrade, which isnt as good as IB (the only real other option up here as far as Im aware) has one amazing feature that no other broker has: "Margin Power" If you have a TFSA and a Margin account with them, you can link them together and have your securities in the TFSA collateralise your Margin account. Essentially, when it comes to the Maintenance Excess of the Margin Account QT doesnt care if its in the TFSA *or* the Margin! You can see how powerful this is. ------------------------------------------------------------------------------------------------------------------------------------------------ So as you can tell by the title, a lot of this is heavily inspired by Chris Cole's paper "The Allegory of the Hawk and the Serpent". You can read it here: https://www.artemiscm.com/welcome#research Between it, his interviews and my mediocre options skills at the time my mind was blown. Unfortunately I didnt know how to do the Long Volatility part until after the crash in March but I've since then had nothing but time to scour the internet and learn as much as I could. The way I interpret this isnt necessarily "what you should have right now", but what abstracted model they were able to backtest that gave them the best performance over the 90 years. Also, a lot of my portfolio I already had before I started trying to build this. As such my allocations dont match the proportions he gave. Not saying my allocations are better, just showing where they are at this time. I'm going to describe how I do Long Volatility at the end rather than the beginning since the way *I* do it wont make sense until you see the rest of the portflio. Physical PMs 22% I'm not sure wether he intended this to be straight up physical gold or include miners and royalty streaming companies so I will just keep this as physical. I consider Silver to be a non-expiring call option on gold, so that can live here too. I am actually *very* overweight silver and my strategy is to convert a large portion of it to gold (mostly my bars) to gold as the ratio tightens up. If youre into crypto, you can arguably say that has a place in this section. If an ETF makes sense for part of your portfolio, I suggest the Sprott ones such as PHYS. Sprott is an honest business and they actually have the metal they say they have. If you have enough, you can redeem your shares from the Royal Canadian Mint. The only downside is that they dont have an options chain, so you cant sell covered calls etc. Simple enough I suppose. One thing to bear in mind, there is a double edged sword with this class of assets. They're out of the system, theyre nobody's business but your own and theres no counter party. That unfortunately means that you cant lever against it for margin or sell covered calls etc. You can still buy puts though (more on that later) Commodity Trend (CTA) 10% https://youtu.be/tac8sWPZW0w Patrick Ceresna gave a good presentation on what this strategy is. Until I watched this video I just thought it meant "buy commodities". A real CTA does this with futures also so aside from the way he showed, there are two other ETFs that are worth looking at. COM - This is an explicit trend following ETF that follows a LONG/FLAT strategy instead of LONG/SHORT on a pile of commodity futures. So if they get a "sell" signal for oil or soybeans they sell what they have and go to cash. COMT- Holds an assortment of different month futures in different commodities, as well as a *lot* of various related shares in producers. Its almost a one stop shop commodities portfolio. Pays a respectable dividend in December If you want to break the "rules" of CTA, and include equities theres a few others that are also worth looking at KOL- This is a coal ETF. The problems with it are that a lot of the holdings dont have much to do with coal. One of them is a tractor company. A lot of the companies are Chinese so theres a bit of a red flag. Obviously Thermal Coal, the kind used for heating and powerplants isnt in vogue and wont be moving forward...but coking coal is used for steel manufacturing and that ain't going anywhere. The dividend is huge, pays out in December. A very very small position might be worth the risk. Uranium- I'm in URA because thats the only way for me to get exposure to Kazatoprom (#1 producer), which is 20% of the holdings. The other 20% is Cameco (#2 producer)and then its random stuff. Other than that I have shares in Denison which seems like its a good business with some interesting projects underway. I'm still studying the uranium space so I dont really have much to say about it of any value. RSX- Russia large caps. If you dont want to pick between the myriad of undervalued, high dividend paying commodity companies that Russia has then just grab this. It only pays in December but it has a liquid options chain so you can do Covered Calls in the meantime if you want. NTR- Nutrien, canadian company that was formed when two others merged. They are now the worlds largest potash producer. Pretty good dividend. They have some financial difficulties and the stocks been in a downtrend forever. I feel its a good candidate to watch or sell some puts on. I'm trying to come up with a way to play agriculture since this new phase we're going to be entering is likely to cause huge food shortages. EURN and NAT- I got in fairly early on the Tanker hype before it was even hype as a way to short oil but I got greedy and lost a lot of my gains. I pared down my position and I'm staying for the dividend. If you get an oil sell signal, this might be a way to play that still. Fixed Income/Bonds 10% Now, I am not a bond expert but unless youre doing some wacky spreads with futures or whatever... I dont see much reason to buy government debt any more. If you are, youre basically betting that they take rates negative. Raoul Pal of Real Vision is pretty firm in his conviction that this will happen. I know better than to argue with him but I dont see risk/reward as being of much value. HOWEVER, I found two interesting ETFs that seem to bring something to this portfolio IVOL- This is run by Nancy Davis, and is comprised of TIPS bonds which are nominally inflation protected (doubt its real inflation but whatever) overlayed with some OTC options that are designed to pay off big if the Fed loses control of the long end of the yield curve, which is what might happen during a real inflation situation. Pays out a decent yield monthly TAIL- This is a simpler portfolio of 10yr treasuries with ladder of puts on the SPX. Pays quarterly. Equities 58% (shared with options/volatility below) This is where it gets interesting, obviously most of this is in mining shares but before I get to those I found some interesting stuff that I'm intending to build up as I pare down my miners when the time comes to start doing that. VIRT- I cant remember where I saw this, but people were talking about this as a volatility play. Its not perfect, but look at the chart compared to SPY. Its a HFT/market making operation, the wackier things get the more pennies they can scalp. A 4% dividend isnt shabby either. FUND- This is an interesting closed end fund run by Whitney George, one of the principals at Sprott. He took it with him when he joined the company. Ive read his reports and interviews and I really like his approach to value and investing. He's kind of like if Warren Buffett was a gold bug. Theres 120 holdings in there, mostly small caps and very diverse...chicken factories, ball bearings all kinds of boring ass shit that nobody knows exists. Whats crucial is that most of it "needs to exist". Between him, his family and other people at Sprott they control 40% or so of the shares, so they definitely have skin in the game. Generous dividend. ZIG- This is a "deep value" strategy fund, run by Tobias Carlisle. He has a fairly simple valuation formula called the Acquirer's Multiple that when he backtested it, is supposed to perform very well. He did an interview with Chris Cole on real Vision where he discusses how Value and Deep Value havent done well recently, but over the last 100 years have proven to be very viable strategies. If we feel that theres a new cycle brewing, then this strategy may work again moving forward. I want to pause and point out something here, Chris Cole, Nassim Taleb and the guys at Mutiny Fund spend a lot of effort explaining that building a portfolio is a lot like putting together a good basketall team. They need to work together, and pick up each others slack A lot of the ETFs I'm listing here are in many ways portfolios in and of themselves and are *actively managed*. I specifically chose them because they follow a methodology that I respect but I can't do myself because I dont have the skill, temperament or access to. The next one is a hidden gem and ties into this. I'm not sure how much more upside there is in this one but man was I surprised. SII- Sprott Inc. I *never* see people listing this stock in their PMs portfolios. A newsletter I'm subscribed to described this stock as the safest way to play junior miners. Their industry presence, intellectual capital and connections means that they get *the best* private placement deals in the best opportunities. I cant compete with a staff like theirs and I'm not going to try. I bought this at 2.50, and I liked the dividend. Since then they did a reverse split to get on the NYSE and like the day after the stock soared. When it comes to mining ETFS I like GOAU and SILJ the best. None of their major holdings are dead weight companies that are only there because of market cap. I dont want Barrick in my portfolio etc. SGDJ is a neat version of GDXJ. Aside from that my individual miners/royalty companies are (no particular order) MMX SAND PAAS PGM AUM AG MUX RIO- Rio2 on the tsx, not rio tinto KTN KL Options/Volatility: varies So this is where we get to the part about options, Volatility and how I do it. I started out in the options space with The Wheel strategy and the Tastytrade approach of selling premium. The spreads and puts I sell, are on shares listed above, in fact some of those I dont hold anymore. Theres tons of stuff on this in thetagang and options so I wont go into a whole bunch (and you shouldnt be learning the mechanics from me anyway) but theres one thing I want to go over before it gets wild. If I sell a Cash Secured Put, from a risk management perspective its identical to just buying 100 shares of the underlying security. You are equally "Short Vol" as well, it just that with options its a little more explicit with the Greeks and everything. But if I use my margin that I was talking about earlier, then I can still collect the premium and the interest doesnt kick in unless Im actually assigned the shares. But if I sell too many puts on KL or AG, and something happens where the miners get cut down (and lets be real, they all move together) my margin goes down and then I get assigned and kaboom...my account gets blown up So what I need to do, is balance out the huge Short Vol situation in my portfolio, be net Long Vol and directly hedge my positions. Since the overwhelming majority of my equities are all tied to bullion this is actually a very easy thing to do. Backspreads https://youtu.be/pvX5_rkm5x0 https://youtu.be/-jTvWOGVsK8 https://youtu.be/muYjjm934iY So I set this up so the vast majority of my margin is tied up in these 1-2 or even 1-3 ratio put spreads that *I actually put on for a small credit*, and roll them every once in a while. I run them on SLV, and GDX. I keep enough room on my margin so I can withstand a 10% drawdown before it sets off the long end of the spreads and then I can ride it out until it turns around and we keep the PM bull market going. Theres another cool spread I've been using, which is a modified Jade Lizard; if already hold shares, I'll sell a put, sell a covered call, and use some of the premium to buy a longer dated call. Ive been running this on AG mostly. I have a few more spreads I can show you but Im tired now so it'll have to wait for later. As I said multiple times, I do intend to trim these miners later but now isnt the time for that IMO. I'm also monitoring this almost full time since I have an injury and have nothing better to do until I heal :p
LOEx Market Research Report on July 21: The index has gone to the end of the triangle wedge, should watch more and less action to reduce the operation
[Today's Hot Tips] 1.[The first L2 extension solution of ETC, Connext Status Channel, has been activated on the main network] On July 21, ETC Cooperative officially announced that the first Layer 2 protocol extension solution of ETC, Connext State Channels, has been deployed on the ETC mainnet. The Connext State Channel will allow the ETC mainnet to integrate multiple second-layer solutions, absorb a large number of transactions, and achieve the scalability of the blockchain. 2. [Announcement of the first batch of innovative applications in Shanghai Fintech Innovation Supervision Pilot, including technologies such as blockchain] According to the Securities Times, e Company, on July 21, the Shanghai Fintech Innovation Supervision Pilot Working Group publicized the first batch of 8 innovative applications in Shanghai on the basis of a wide range of projects. The first batch of innovative applications actively explore the cross-enabling of multiple cutting-edge technologies such as AI, blockchain, big data, and multi-party secure computing, and use FinTech to solve the pain points of information and trust asymmetry faced by small, medium and micro enterprises in financing, and create new models and methods for inclusive finance. 3. [Developer of Ethereum Testnet: Ethereum 2.0 Beacon Chain will be released in November] According to Paradigm on July 20, the developer of the Ethereum multi-client testnet, Afri Schoedon, stated in an interview that the Ethereum 2.0 Beacon Chain will be released in November unless we find a serious error in the client or protocol. Afri Schoedon said that its estimated launch time is somewhere between Vitalik Buterin and Justin Drake (the Ethereum Foundation researcher). He believes that there is no need to postpone Ethereum 2.0 to 2021 unless key issues are found. In general, it is likely to be launched at the end of 2020. [Today's market analysis] Bitcoin (BTC)BTC rose slightly in the early morning, reached 9200 USDT in a short time, and then fell slightly to 9170 USDT. At present, BTC continues to fluctuate in a narrow range around 9170 USDT. Mainstream coins basically followed the trend of the broader market, rising slightly in the early morning and then falling back significantly. BTC is currently reported 9177.1 USDT on LOEx Global, an increase of 0.04% in 24h. https://preview.redd.it/xz6s3i75b6c51.png?width=554&format=png&auto=webp&s=fa03d4ee39ee1ad20e962d0a4266564484fe4e60 The volatility of Bitcoin throughout July was too boring, and the stage was on the Altcoin side. The market will never only rise and not fall. When the tide recedes and the enthusiasm is gone, will the Altcoin and the big pie resonate and fall? Looking at the K-line chart above, the wedge-shaped sharp corners are getting more and more extreme, and they will soon face a change. High and sideways, maybe the main force will quickly hit the market, but it is also a fishtail market; otherwise, the risk is even greater. Here we can completely jump out and wait until the market is clear before making a trading plan. The gentleman does not stand under the dangerous wall. The currency market index has reached the end of the triangular wedge, it is better to be cautious in the short term. Operation suggestions: Support level: the first support level is 9100 points, the second support level is 9000 integers; Resistance level: the first resistance level is 9200 points, the second resistance level is 9400 points. LOEx is registered in Seychelles. It is a global one-stop digital asset service platform with business distribution nodes in 20 regions around the world. It has been exempted from Seychelles and Singapore Monetary Authority (MAS) digital currency trading services. Provide services and secure encrypted digital currency trading environment for 2 million community members in 24 hours.
According to Analyst Ethereum could face a short crash
Bitcoin's little brother Ethereum has been surprisingly stable in recent weeks. In the opinion of a crypto expert, however, this could soon be over. Since the price slump in March caused by the corona panic, Ethereum has so far recovered well. Although the cryptocurrency is still far from the 52-week high that it reached in July 2019, the cyber device is still on the up. In the past few weeks, internet money has shown surprisingly little volatility and only fluctuated within very narrow ranges.
Chart technique indicates Ethereum price decline
However, crypto expert Edward Morra recently warned on Twitter that the sideways movement could soon be over. Morra uses an Ethereum chart to explain this, which he believes shows the formation of a "Chuvashov fork". According to him, the Ethereum price could drop to around $ 175 if this fork broke and the Ethereum price fell below the $ 220 mark. That would correspond to a slump of around 30 percent compared to the current price. For this reason, the Ethereum expert advises put options to minimize the risk. This is also recommended as these are currently very cheap.
Active Ethereum wallets at two-year high
But even if the Ethereum course could go downhill in the short term, the acceptance of cyberdevise seems to continue to increase. As data from the blockchain analysis portal Glassnode, which are available from BTC Echo, show, the number of active Etherum wallets has only recently reached its highest level in two years. It is also interesting to see that the number of active Ethereum addresses correlates less and less with the price of an Ethereum. Glassnode data show that the number of active wallets has increased significantly since the beginning of the year, whereas the Ethereum price remained within narrow ranges.
More scalability is urgently needed
However, as BTC Echo points out, the upcoming Hard Fork Ethereum from the proof-of-work process to the proof-of-stake process could prove to be vital for the cyber device. This is the only way to achieve the necessary scalability that would help Ethereum to remain relevant to the "decentralized financial system" (DeFi). After all, there are already other cryptocurrencies that would rely on a mechanism without a miner from the start and would already be efficient enough to be used on the DeFi platform. Cardano is a prime example of such a cyber device. Cardano has only recently seen a rapid upturn and is currently in seventh place in terms of market capitalization among e-currencies. The future of Ethereum also depends on the extent to which the cryptocurrency continues to develop in order to keep up with the progress in the crypto market.
New Lands, or New Eyes? | Monthly FIRE Portfolio Update - April 2020
The real voyage of discovery consists not in seeking new landscapes, but in having new eyes. - Marcel Proust, Remembrance of Things Past This is my forty-first portfolio update. I complete this update monthly to check my progress against my goal. Portfolio goal My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars). This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent. Portfolio summary Vanguard Lifestrategy High Growth Fund – $697 582 Vanguard Lifestrategy Growth Fund – $40 709 Vanguard Lifestrategy Balanced Fund – $76 583 Vanguard Diversified Bonds Fund – $110 563 Vanguard Australian Shares ETF (VAS) – $174 864 Vanguard International Shares ETF (VGS) – $31 505 Betashares Australia 200 ETF (A200) – $215 805 Telstra shares (TLS) – $1 625 Insurance Australia Group shares (IAG) – $7 323 NIB Holdings shares (NHF) – $5 904 Gold ETF (GOLD.ASX) – $119 458 Secured physical gold – $19 269 Ratesetter (P2P lending) – $12 234 Bitcoin – $158 360 Raiz app (Aggressive portfolio) – $16 144 Spaceship Voyager app (Index portfolio) – $2 435 BrickX (P2P rental real estate) – $4 471 Total portfolio value: $1 694 834 (+$127 888 or 8.2%) Asset allocation Australian shares – 40.9% (4.1% under) Global shares – 21.7% Emerging markets shares – 2.2% International small companies – 3.0% Total international shares – 26.9% (3.1% under) Total shares – 67.8% (7.2% under) Total property securities – 0.3% (0.3% over) Australian bonds – 4.5% International bonds – 9.9% Total bonds – 14.4% (0.6% under) Gold – 8.2% Bitcoin – 9.3% Gold and alternatives – 17.5% (7.5% over) Presented visually, below is a high-level view of the current asset allocation of the portfolio. Comments This month featured a sharp recovery in the overall portfolio, reducing the size of the large losses experienced over the previous month. The portfolio increased by over $127 000, representing a growth of 8.2 per cent, which is the largest month-on-month growth on record. This now puts the portfolio value significantly above the levels of a year ago. [Chart] The expansion in the value of the portfolio has occurred due to an increase in Australian and global equities markets, as well as substantial increases the price of Bitcoin. This is effectively the mirror image of the simultaneous negative movements last month. From a nadir of initial pessimism in late March, markets have generally moved upwards as debate continues about the path of a likely economic recession and recovery from Coronavirus impacts over the coming year. [Chart] First quarter distributions from the Australian and Global Shares ETFs (A200, VAS and VGS) were received this month. These were too early to fully reflect the sharp economic activity impacts of the Coronavirus and lockdown period on company earnings. Despite this, they were significantly down on a cents per unit basis on the equivalent distributions last year. Totalling around $2700, these distributions formed part of new contributions to Vanguard's Australian shares ETF (VAS). The rapid falls in equity have many participants looking forward to a return to normalcy, or at least more open to the pleasing ideas that nerves have been held in a market fall comparable to 2000 or 2008-09, and that markets now represent clear value. As discussed last month, there should be caution and some humility about these questions, if some historical perspective is taken. As an example, the largest global equity market in the world - the United States - remains at valuation levels well above those experienced in previous market lows. Portfolio alternatives - tracking changes under the surface A striking feature of the past year or so has been the expansion of the non-traditional or 'alternatives' components of gold and Bitcoin as a proportion of the overall portfolio. Currently, when combined these alternative assets form a greater part of the portfolio than at any point over the past two years. The chart below shows that since January 2019 the gold and Bitcoin component of the portfolio has lifted from around its long term target level of 10 per cent, to now make up over 17 per cent of the portfolio. In the space of the last four months alone, it has lifted from 13 per cent. [Chart] With no purchases of either gold or Bitcoin over the period, the growth in the chart is the result of two reinforcing factors: A substantial fall in the value of the equity portfolio - reaching nearly $200 000 since the recent February market peak has naturally and mathematically led to a commensurate increase the proportion of other assets. Increases in the value of gold and Bitcoin - have also played a role with a total appreciation of around $150 000 across the two assets over the past 16 months. In fact, the value gold holdings alone have increased by over 40 per cent since January last year. Further appreciation of either gold or Bitcoin prices, particularly if any further falls in equity markets occur, could easily place the portfolio in the same position as experienced in January 2018. At that time these alternative assets made up 1 in every 5 dollars of the portfolio, an unusual, and in that case temporary phenomenon. This represents a different portfolio and risk exposure than that envisaged in my portfolio investment plan. Yet, equally it is critical to recall what the circumstances would likely be for this to arise. Simultaneously high gold and Bitcoin prices are more likely to occur in a situation of severe capital market dislocation, or falling confidence. On the other hand, should confidence and equity market growth be restored, both of these portfolio components could fall back to lower levels. It is difficult to tell which state of the world will eventuate, a key reason for diversification across asset types. United States government debt is already at record levels - equivalent in real terms to levels last seen when it emerged out of the Second World War - despite no similar national effort having being undertaken. Future inflation can potentially partly manage this burden, however, the last sustained episode of persistently high inflation rates during the decade of the 1970s spelt negative real returns. Where investors expect future inflation or financially 'repressive' policies of inflation exceeding interest rates, the economic growth required to 'grow out' of debt can be affected. At this point, my inclination is to address this circumstance gradually through time by re-balancing of distributions and new contributions, rather than to realise capital gains by selling assets at one, or several, points in time. Chasing down the lines - falling average spending in lockdown Since the implementation of lockdown restrictions, average credit card expenditure has fallen by nearly 30 per cent. This has taken credit card expenditure to lower than any similar period in the past six years. Partly as a result of this - as the chart below shows - a new development is occurring. The previously fairly steady card expenses line (red) is now starting to bend down towards, or 'chase', the rolling average distributions line (in blue). [Chart] The declining distributions line is a result of some previous high distributions gradually falling outside of the data 'window' for the rolling three-year comparison of distributions and expenditure. This intriguing picture will probably change before a cross-over occurs, as lockdown restrictions ease, and as the data feeding into the three year average slowly changes over time. Progress Progress against the objective, and the additional measures I have reached is set out below. Measure Portfolio All Assets Portfolio objective – $2 180 000 (or $87 000 pa) 77.7% 104.6% Credit card purchases – $71 000 pa 94.8% 127.6% Total expenses – $89 000 pa 76.0% 102.3% Summary Last month market volatility theoretically took progress down to below most of my financial independence benchmarks on an 'All Assets' (i.e. portfolio and superannuation assets) basis. This position has reversed this month. As markets have recovered and with additional spare time in the lockdown period, I have continued to seek out and think about different perspectives on the history and future of markets. Yet it must be recognised that there is a natural limit to the utility of these ponderings. The shape of the future is always uncertain, and in this world, confident comparisons and analogies with past events can be perilous. Comparisons with past periods of financial market crises miss the centrality of government action as a causal influence on the path of virus affected economies and markets. A virus and recovery is not the same as a global financial crisis originating in housing finance markets addressed through monetary and fiscal stimulus. Most developed country governments have quickly applied the same, if not larger versions of responses as applied in the global financial crisis, a distinguishing step that also makes analogies with the great depression era problematic. Similarly, a pandemic is not hitting and interacting with the shattered economic and health systems of the 1918-19 Spanish flu. Overlaying all of this is the imperfect and partially disconnected relationship between the economy today, and equity markets that discount and focus on the future. This makes all history's lessons more than usually caveated and conditional. One avenue for managing through these times is to focus on what does not change - the psychological difficulty of accepting alterations in financial circumstances and the capacity of markets movements to cruelly surprise us in both timing and direction. One of the best texts to read to get a sense of both of these in such times is Benjamin Roth's A Great Depression Diary. This tells of the day-by-day changes observed in everyday urban life and investment markets, from the point of view of an American small retail investor living through the times. This month also saw the exciting news that Pat the Shuffler and Strong Money Australia are combining efforts to produce a new podcast. Speaking of which, Big ERN's reflections on the current implications of sharemarket market movements for seekers of financial independence have been filled with insight and wisdom. This interesting piece (video) - the latest in a 'virus' market series - from New York University's Professor of Finance Aswath Damodaran on asset performances through the past few months - is a more technical and detailed discussion of how markets have re-priced businesses and profits. Finally, the recently released Hmmminar interview series provides a more heterodox set of speakers and ideas on current markets, presented by Grant Williams. Unlike predicting the future, seeking out different perspectives on it is perhaps the easiest it has ever been in history. While it is not always possible to change the course taken, it is possible to look at the same horizon with new eyes. The post, links and full charts can be seen here.
Coinviva BTC/USD 30-min chart The Bitcoin continued to trade in range bound for the third week in a row. The BTC price dropped below the $9,000 support at one point, but it managed to rebound and reach $9,468 afterwards. The price has since stabilized and is moving sideway again, at around $9,300. The current support level remains at $9,000, while the resistance is at $9,500. There is no clear direction at the moment. If the volatility picks up, wait for the BTC price to break the support or resistance before determining the trade direction. Disclaimer: The above market commentary is based on technical analysis using historical pricing data, and is for reference only. It does not serve as investment or trading advice. Review of the week: Since 1 July, Bitcoin‘s price hasn’t gained or lost by much, with the cryptocurrency continuing to trade within a tight price band. While the Realized Volatility dipped to 3.2% on 10 July, the implied volatility remained firm at 3.5%. It can be observed that the IV had been moving sideways over a couple of weeks, with traders not expecting an immediate trend reversal in the Bitcoin market. According to one of the Managing Partners at Blockhead Capital, Matt David Kaye, the reason for this suppressed volatility may be the flood of yield-seeking funds with short volatility options in the market. These have been advertised as low-risk, yield generating vehicles to many investors in the market. As the price of Bitcoin consolidated, market makers were trying to hedge their risk by ever-adjusting their spot exposure. This resulted in the creation of a tighter spread and by extension, predictable price ranges for June as they bought back BTC at low prices and sold BTC when the price rose even a little. Thus, these short-volatility funds were gaining pennies, with Kaye adding that the risk was mispriced in the Bitcoin Options market. However, this also gives an excellent opportunity to accumulate volatility, as when the market breaks out, it could result in larger profits. The only way now for the price to pick up is to have the spot market volume note a boost too. BTC-USD Chart Disclaimer: The above market commentary is based on technical analysis using historical pricing data, and is for reference only. It does not serve as investment or trading advice. About Coinviva: Coinviva aims to create the best crypto financial services ecosystem for both institutional and individual investors. We provide reliable fiat funding options, excellent trading liquidity, bank security level custody and one-stop high liquidity provision on-site & off-site. Our founding management team all come from top tiered investment banking (e.g. JP Morgan, Morgan Stanley, Bank of America Merrill Lynch), with fully comprehensive financial institution operation experience. Homepage: https://coinviva.com/ Telegram: https://t.me/coinviva
Ethereum Classic, Dogecoin, Chainlink Price Analysis: 13 July
Bitcoin, the world’s largest and most-recognized cryptocurrency, continues to trade with low market volatility on the charts, with BTC, at the time of writing yet to breach its longstanding resistances. The crypto’s movements over the last 2 weeks or so have been very contrary to the expectations many had from the king coin, especially since […]
For Trading JUNE 19th Init. Claims +1.508 Million Market recovers from -270 Leading Econ. Ind. +2.8 Today’s market was an ugly open -270 followed by a recovery, another dip to -180 and a rally back to DJIA -39.51 (.15%). With the exception of the DJ Transports -31.46 (.34%), the other indexes were all higher, with NASDAQ +35.52 (.33%), S&P 500 +1.85 (.06%), and the Russell +.54 (.04%). Market internals were pretty even with NYSE 4:3 lower and NASDAQ even @ 1:1. Volume was slightly lower and DJIA were 18 down and 12 up with no major movers to report. The news of the day was somewhat mixed with Initial unemployment claims adding 1.508 million down 58,000 but still higher than expected, continuing claims topping 20,544,000. The Philadelphia Fed report was 27.5 v. -20 expected, and the biggest winner was the Index of leading indicators showing its first gain since January +2.8 v. 2.5 expected. Unfortunately, last months numbers were revised down from -4.4 to – 6.1. With all these conflicting numbers, no surprise that the market couldn’t make up its mind. We went back into CVS 6/26 65 calls on the decline with an average price of $1.15 and they finished $1.02 - .50 and the NEM 7/17 $60’s @ 1.55 that finished the [email protected] $1.36. I am looking for a decline to add to that position. Our “open forum” on Discord, which allows me to interact with subscribers and others to allow direct questions and chart opinions on just about any stock, continues to grow with more participants every day. It is informative and allows me to share insights as the market is open and moving. The link is: https://discord.gg/ATvC7YZ and I will be there and active from before the open and all day. It’s a great place to share ideas and gain some insights, and we’ve grown to almost 1900 members. I also did this video titled “How to survive being an options trader and not blow up your account,” over the long weekend. I think it’s very informative as a guide to stock selection and option choices. The link is https://youtu.be/Y7H9RpWfLlo Enjoy!! Tonight’s closing comment video https://youtu.be/uszMmRey4FM SECTORS: Kroger (KR) reported earnings, and while they beat all expectations for both earnings and revenues, the stock actually sold off a bit, hitting $30.65 but came back to close $31.81 – 1.00 (3.05%). I would note that this stock has been a great performer and has moved steadily higher from it’s low in 8/2019 of $20.50, stopping at $36.84 before the market break in March and falling back to $27.33, grinding higher to make it back to its current level. Definitely one to watch for further gains. Marathon Petroleum (MPC) was up in afterhours on the news that it has renewed its plan to either sell or spin-off its Speedway stores. The stock, which had climbed back up from the March lows just over $15 to make it back to $44 had closed $38.47 +1.34, has continued higher to $40.79 + 2.12 (5.5%). Airlines and cruise lines were lower early and spent the day going back and forth before closing mid-range and slightly higher. The only exception was Carnival (CCL) which reported numbers and while down as far as $17.80 managed to make it back to close $18.82 -.27 (1.3%). And, the HOMERUN OF THE DAY, was back to UONE. After its move from $1.54 to $40, back to $10.60 this morning, it rallied as high as $35.50 and finished $25.00 +12.99 (97%). All this in a week, and still no news releases except “trading halt for volatility, stock resumed.” FOOD SUPPLY CHAIN was LOWER with TSN + .04, FLO -.08, CPB -.36, CAG -.06, MDLZ+.29, KHC +.38, CALM unchanged, JJSF -1.16, SAFM -.18, HRL +.14, SJM -.46, PPC -.04, KR -.84, and PBJ $31.11 -.10 (.31%). BIOPHARMA was HIGHER with BIIB (see above) -19.71 (7%), ABBV +.49, REGN -5.75, ISRG +7.05, GILD+.32, MYL +.53, TEVA +.14, VRTX -.79, BHC +.40, INCY +1.08, ICPT -1.13, LABU +1.60, and IBB $133.00 +.18 (.14%). CANNABIS: was HIGHER with TLRY +.46, CGC +.38, CRON +.04, GWPH +5.48, ACB -.15, NBEV +.03, CURLF +.34, KERN -.81, and MJ $13.66 +.06 (.44%). DEFENSE: was LOWER with LMT -2.66, GD +2.71, TXT +.42, NOC -4.26, BWXT -1.32, TDY -4.60, RTX +.62, and ITA $172.83 -.20 (.12%). RETAIL was MIXED with M +.23, JWN -.38, KSS -.13, DDS +.03, WMT -.83, TGT -.52, TJX -.54, RL +.02, RL +.02, UAA +.01, LULU +.35, TPR -.24, CPRI -.02 and XRT $42.67 -.08 (.19%). FAANG and Big Cap: were HIGHER with GOOGL -16.54, AMZN +22.07, AAPL +.90, FB +1.12, NFLX +2.73, NVDA +.88, TSLA +17.21, BABA -.,55, BIDU +1.63, CMG +12.12, CAT +.27, DIS +1.20, and XLK $103.25 +.76 (.74%). FINANCIALS were HIGHER with GS -1.19, JPM +.02, BAC +.19, MS -.01, C +.40, PNC +.20, AIG +.26, TRV +1.24, AXP -1.31, V +.94 and XLF $29.34 +.22 (.91%). OIL, $3738.79 +.86. Oil was under pressure early in the day but managed to rally and close near the highs. I mentioned in tonight’s video that it appears that prices are trying to work higher towards $45.00. The stocks were higher with XLE $40.85 +1.16 (2.92%). GOLD $1731.10 -4.50. It was another day of a test of $1,750 followed by another test of $1,720 and a close in the middle of the range. The yellow metal is unchanged tonight. We bought back the 3rd and final lot of NEM @ $58.86. And, we also added a half position in NEM 7/17 60 calls @ $1.55, which closed $1.36. BITCOIN: closed $9,410 +85. After trading another short-range day, we finished mid-range and slightly higher. We added 350 shares of GBTC last Wednesday @ $10.02 to our position of 400 @ $8.06, bringing our average price to $8.97. GBTC closed $10.58 -.12 today. Tomorrow is another day. CAM
On March 15th, the Federal Reserve started the first round of its stimulus plan to stabilize the tumultuous economic conditions caused by the country-wide shut down due to COVID19. Significant was a $700 billion round of Quantitative Easing (QE) and the cutting of interest rates effectively to zero percent. The reaction of the stock market and most asset classes was to continue its downward trend that had started in late February. The Federal Reserve continued to make smaller policy changes during the next 8 days until March 23rd when it announced its “extensive new measures to support the economy”. In short, the Fed is expanding its QE program announced on March 15th and will be making additional expansions in the future as needed. This time Wall Street reacts positively, as March 23rd was the starting point of a historic bull run.
The Breaking of the 60/40 Model
The 60/40 model of portfolio allocation has been a traditional portfolio management strategy used for over 30 years. The strategy states to put 60% of your funds into stocks and the remaining 40% into high quality bonds. The philosophy behind this investment strategy is that by having your portfolio diversified this way, you won’t take a huge hit if your stocks go down because you’ll have returns from bonds to make up for it. This is a strategy generally used by people with low risk tolerances, or people who don’t want to constantly keep their eyes on the markets. Over the past few decades, the 60/40 model has demonstrated a good amount of success; however, there are many who believe the chances of this strategy continuing to function successfully into the future are very low. Both JP Morgan and Bank of America have released statements on the decline of the 60/40 portfolio. JP Morgan strategists have stated “In the zero-yield world, which we think will be with us for years, bonds offer neither much return nor protection against equity falls,” referencing the fact that the majority of government bonds are trading at yields below 1%. In a research note titled “The Death of 60/40” Bank of America strategists had this to say, “The challenge for investors today is that both of those benefits from bonds, diversification and risk reduction, seem to be weakening, and this is happening at a time when positioning in many fixed-income sectors is incredibly crowded, making bonds more vulnerable to sharp, sudden selloffs when active managers rebalance.” So, with diminishing trust and poor returns from bonds, many investors are looking for other assets to replace the 40% hole in their portfolios. Many are increasing their percentage allocated to stocks in addition to investing in Gold and other metals as a protection against inflation. Many investors are also looking to Bitcoin.
Asset Reallocation Flowing from Bonds to Stocks
The historical runup in stock prices, specifically for the tech heavy Nasdaq, started on March 23rd. With the NAS100 index up close to 60% (from $6,584 to $10,616) in less than 3 months. It's not showing any signs of slowing down. In the opinion of QuantifyCrypto, the major reason for this is the flow of capital that would normally be going into bonds is now going into stocks. Yes the Fed stimulus is positive, but can you say the market conditions are actually better for stocks when there is still uncertainty in the future? While some stocks are fundamentally better due to COVID19, this is not true for most stocks. The next chart shows the price movement of the NASDAQ 100 Index for 2020. NAS100 Daily Chart from Trading View
Asset Reallocation to Cryptocurrency – When?
When asked about the current demise of the 60/40 portfolio model, veteran investor Dan Tapiero stated there could be “nothing more bullish for gold and bitcoin,” and that we are in the midst of the “beginning of the end for [government] bonds as a functioning productive asset class. Traditional 60/40 portfolios will need to find a new defensive asset to replace a portion of the 40%.” It seems that other players in the world of finance are saying similar things, hedge fund manager Paul Tudor Jones told CNBC in May that Bitcoin is a “great speculation” and that he has one to two percent of his assets in Bitcoin. Historically, Bitcoin and other cryptocurrencies tend to have higher volatility than stocks. Three days before the Federal Reserve started making its announcements, Bitcoin went down over 50% in a single day. High volatility and a full price recovery continued in April and May, with Bitcoin closing on May 30th at ~$10,440. Until this point, there had been a high correlation between the NASDAQ 100 and Bitcoin as shown in the chart below. NAS100 Daily Chart with Bitcoin (blue line) added Since June 1st, Bitcoin has clearly lagged while stocks have continued their upward climb. While Crypto has been stagnant and down since May, the fundamental picture has never been better:
The Central Bank stimulus response is inflationary to Fiat currencies, this is positive for non-inflationary assets like gold and cryptocurrency.
The lack of new funds moving into bonds is flowing into stocks. When the stock market advance slows or starts to decline, the flow into other assets classes will start to increase.
The full deflationary impact of the Bitcoin halving still has not kicked in.
Corporate adoption and use cases for cryptocurrency is accelerating (Future article).
Before COVID occurred, 2020 was looking like a very strong year for Bitcoin and Altcoins. This price strength is likely to return.
As government bonds continue to trade with yields below 1%, it is safe to say that more and more people will be abandoning the traditional 60/40 strategy. While it’s too early to determine what the new percent strategy will become, with Bitcoin presenting a clear solution to the problems with bonds and the diminishing value of cash, portfolio managers may very well be using cryptocurrency to solve their diversification requirement.
The platform Quantify Crypto provides live cryptocurrency prices, technical analysis, news, heatmaps and more. Our flagship product is the trend algorithm, designed to be on the correct side of significant cryptocurrency price moves. We are a new site, please check us out and let us know what you like and do not like about the site. None of this is meant to be financial advice and I do not have any financial expertise. John Barry worked at the New York Stock Exchange for over 23 years, it was as a developer supporting computer systems, not as a stock trader. Alex Wason is an intern working for Quantify Crypto Full discloser: John Barry owns Bitcoin and has stock positions.
Bitcoin Realized Volatility Last Did This Right Before 2018 Sell-Off
Bitcoin (BTC) could be heading for a repeat of its late 2018 sell-off, data warns as realized volatility reaches almost three-year highs. Uploading fresh charts on July 6, on-chain analyst Skew drew concerning comparisons to Bitcoin in its 2018 bear market. Bitcoin 10-day realized volatility dips to 20% Analyzing realized volatility, Skew noted that the […]
Coinviva BTC-USD Daily Chart The volatility of Bitcoin movement remained low for the second week. Since the beginning of July, the Bitcoin price ranged between $8,918 and $9,298. The trend remained slightly bearish as the price failed to break above $10,000 last month, and the bars were hovering around the lower Keltner band. The current support is at $9,000. If the volatility starts to pick up this week and breaks below the support, a short signal is confirmed amid the current bearish trend. The next support level is at $8,500. Review of the week: CoinGecko, the cryptocurrency analytics firm, in its recent quarterly report for Q2 2020, charted the price change for before and after the 2016 and the 2020 halvings. In July 2016, Bitcoin was trading between $400 – $950. While in the 50 days prior, it rose by 11 percent, in the 50 days after the halving, the price dropped by 9 percent. Coming back to 2020, in the 50 days prior to the halving, the price rose by 50 percent, and in the 50 days after, by 5 percent. Given the late halving surplus in 2016, the prevailing economic conditions of 2020, and the massive increase in the market capitalization of Bitcoin in the ensuing four years, it concluded that the present price is “more bullish” than expected: “Despite having a market capitalization 15 times larger in 2020 than in 2016, Bitcoin showed a more bullish price movement during the 3rd Halving event.” https://preview.redd.it/pd26ci5en6951.png?width=912&format=png&auto=webp&s=0feabe20422b0aa13e8b8c6e80991ed63ddc5157 Disclaimer: The above market commentary is based on technical analysis using historical pricing data, and is for reference only. It does not serve as investment or trading advice. About Coinviva: Coinviva aims to create the best crypto financial services ecosystem for both institutional and individual investors. We provide reliable fiat funding options, excellent trading liquidity, bank security level custody and one-stop high liquidity provision on-site & off-site. Our founding management team all come from top tiered investment banking (e.g. JP Morgan, Morgan Stanley, Bank of America Merrill Lynch), with fully comprehensive financial institution operation experience. Homepage: https://coinviva.com/ Telegram: https://t.me/coinviva
Inverse Bitcoin Volatility Token has a current supply of 211.332 with ? in circulation. The last known price of Inverse Bitcoin Volatility Token is $7,446.03 USD and is up 2.24% over the last 24 hours. It is currently trading on 3 active market(s) with $4,374.32 traded over the last 24 hours. More information can be found at. Bitcoin breaks above a falling triangle resistance propelling the price towards $9,400. Volatility returns to the crypto market led by BTC/USD bullish action from $9,162 to $9,368 on the day. - Bitcoin-U.S. dollar prices are again near steady Wednesday morning, as the market continues to pause after hitting a 3.5-month high early last week. This recent “collapse in volatility” suggests a much bigger price move is just on the horizon. Bitcoin’s volatility over the past month has been very low. Usually, prolonged periods of calmness are a precursor to a huge swing in price. If you’ve been paying attention to Bitcoin’s chart against the US Dollar lately, you will have probably noticed how low BTC/USD trading volatility has been over the last three months. View live Bitcoin Historical Volatility Index chart to track latest price changes. Trade ideas, forecasts and market news are at your disposal as well.
BITCOIN TO 12,200 OR 6,500 ?!? HISTORIC VOLATILITY SHOWS 30% MOVE COMING!?! PAYPAL CONFIRMED!!!
Zhou told Cointelegraph:“When there is market volatility, volume spikes. However, when more users enter the market, open interest would naturally increase. ... In fact, Skew data shows Bitcoin ... CAUTION: BITCOIN LITECOIN and ETHEREUM volatility returning soon!!?? also taking a look at our XRP chart and seeing how its playing out!! Thanks for all the support!! Please LIKE, SUBSCRIBE, leave ... The historic volatility is showing us that we may see a huge move in the price of Bitcoin in the near future. I want to have a look at which levels I'm watching in the bitcoin chart and in which ... The chart, which showed Bitcoin could follow the path it took after 2015’s crash, implied that BTC would recover to $10,000 by June. And that it did, with Bitcoin spiking above $10,000 at the ... Uploading fresh charts on July 6, on-chain analyst Skew drew concerning comparisons to Bitcoin in its 2018 bear market. Analyzing realized volatility, Skew noted that the last time the metric hit ...