I will briefly interupt my hiatus to mention a couple things, first this great article by Livermore http://www.philosophicaleconomics.com/2017/09/pmbtdo/ He comes to similar conclusions as I did on my rants against Jeremy Grantham. Except I would go further than him, he attacks the 'studies' and 'empirical evidence' by citing lack of sample sizes (which is a great point). But I would go further, I would demand MORE evidence from normal for 'studies'/backtests/methods that go AGAINST convexity and certaintly less so that the ones that go long convexity. So, a study/thesis that says people ought to sell stocks and go to cash need to EXTREMELY rigorous, one that tells people to get out of cash and buy stocks, doesn't need as much rigor. Why? Because convexity can 'fix' problems in a strategy. You dont have to be right very often to justify your decision, you are getting better than even odds, its the other side of the trade that needs all the proof and hard evidence. Jeremy Grantham needed a lot more than a stupid profit margin chart before he told the world to sell US stocks. Similarly, even a flimsy thesis can be justified when buying stuff like bitcoin. If you are right, you make a lot, if you are wrong, you lose a little. You dont need a lot of proof to get in a payoff like this and be right in doing so Speaking of bitcoin, I no longer think analogizing this with tech stocks is prudent. Its reckless to compare it like that. By looking at the price history of bitcoin, it clearly dawned on me that this scales completely differently. Both in price as well as in time. The better analogy is to call bitcoin a "bubble on fast forward". I think we are in a 'melt up' stage where they are and can go exponentially up, but that move up is a sell and those that dont take profits will get hurt. I had to mention that because I dont want people that read this journal to get hurt, so I would keep that in mind Now back to my cave
Went to defense mode on cryptos. Shorted some on margin on Kraken, also shorted MGTI (a worthless stock that is pumping itself with bitcoin). If the market implodes, I will be fully protected. This sure looks very toppy. I have to post this for ethical reasons. Just a headsup
Daal, thought you might find this of interest. http://www.barrons.com/articles/the-coming-renaissance-of-macro-investing-1507957012
Bitcoin is getting quite close to its top and when that market does turn, its likely to plunge at least 70% from its peak, probably more. I say that even though I'm long some, along with some small coins and alt coins. But I have been banking some profits and rebalancing my positions down. The arrival of BTC futures might very well be the catalyst that will implode this market. "sell the news" as they say. This is the most obvious bubble of all time, anyone who doesn't think its a bubble that is out of control needs to have their head examined. The sentiment extreme (every news show and media talking about it, heck, even Sitcoms now) along with the price extreme (the price rise has been more extreme than pretty much any bubble in history) and the fact that the product (that is, bitcoin as a money transfer vehicle) is still a joke (the number of US retailers accepting bitcoin went DOWN in 2017 vs 2016 according to Morgan Stanley), transactions havent taken off. You got to pay $2-$5 to transfer money and wait 30 minutes to clear. Which makes it worthless for small purchases. This is a very unproven product. I believe we are at a point where we might see a large surge to the upside that ends in a crash (kinda like Silver in 2011), or we might just implode naturally. I believe the large gains that can come from the mania phase makes it worth it for me to stick around but I will be ready to dump it all when this turns. Furthermore I got a number of hedges in place (I'm currently short XNET and I'm short GBTC against BTC, that is, a spread trade). I plan to put in other hedges in as well (mostly in the blockchain stocks that break their uptrends and start to fade, I will short them). This way, if I wake up and BTC is down $3,000 (a very serious possibility), I got these hedges in and my loss will be limited BTC is an extremely dangerous market right now for non-pros, people are going to learn their lessons the hard way. I have never seen so many smart people get sucked in into this nonsense. I guess thats why this bubble got so big, it has a very good story. BTC has had three 85% drops after their past massive surges, I have little doubt there will be another one soon. What happens after the 85% drop is a different question, but its a questions to be dealt with in the future, not now when emotions are high and people can't think rationally. If BTC implodes 90% and then bases out and starts to come back up, sure, I will be a buyer but I don't have to hold through a huge decline to do so. If one day it will go to $100k (which I seriously doubt) it will probably have to go through a big correction first anyway In reality, LTC is probably a much better product than BTC but even that one will probably implode before it has any chance of rising. Market fundamentals have not changed, price and sentiment extremes tend to be horrible buys, I don't think this will be much different either. Be careful, this is a trader's market, not one to have any strong positions, one way or the other
Whatever BTC does, it will TREND, so a trader that reacts to that will do better than some idiot who thinks the only way is their way (I plan to sell all and short it when this turns). I'm seeing so many people that will lose their shirts soon when this turns. They are so happy with their profits, but if they dont bank them, they wont keep them. As I mentioned, BTC has had 3 85% corrections in the past. There was one where it went from $1100 to $400 in like 2 weeks. This market is dangerous, when everybody in on the same side of the boat, sentiment is super bullish and the asset is mainstream, that risk is much higher than normal. That's what good trading principles would indicate, I don't think the have been suspended just because hopeful bulls (infected by sheer greed) think so. Things should get nasty over the next month or two
As you can tell I'm not a true believer, I will probably sell out sooner than when the top comes. Its hard to nail tops, it tends to be easier to react to the price. So after I sell out, there might be still one final wave that can be exponential. Maybe even a $5K rise in BTC in one day, and then complete destruction. I don't know. That's why even though I'm bearish I'm still long, I see the benefit of trying to ride this final wave, it can produce great gains relative to the risk (which is why bubbles are completetly rational for short-term players). So I will do my best to stay in during this mania phase but it will be very hard to nail that top, the people that will be long all the way to the top, tend to be those that will then ride it down 80% because they think BTC is the future