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. submitted by
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.
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
(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)
RIO- Rio2 on the tsx, not rio tinto
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
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
Litecoin hasn't had any movement in over a year and now it has gone from $4 to $39 and now to $24. Remember Litecoin has a good distribution of holders because of it's old age. This increases the number of sellers in the market today because they are likely cashing out their gains after holding for so long. Keep in mind the addition of Litecoin to Coinbase will increase the number of new buyers in the market. This is a normal occurrence in the beginning of a new bull cycle. Price gains will come with profit taking adding to price liquidity and stability. We just had 6 straight weeks of price gains of almost 1000%. It is allowed to take a breather. During these times you will have market manipulation, FUD throwing, fear and panic selling, price drops and decreased volume trading. HODL FAST. We're only in the first stage of the price movement. There's more to come. So for anyone that bought Litecoin as an investment, walk away from the computer. Don't look at your charts. Don't log in to your accounts. It will be Ok. Litecoin is re-establishing itself as the silver to bitcoin's gold. The Bull will Rage On. If you look at the Monthly chart, there is a massive green candle with profound volume. This is a bull flag waving at you to buy and hodl. It's going to be a great year for LTC and your hodling strategies will pay off. submitted by
This post will consist of an explanation as to why I invested into XRP as my first crypto( I have vested in one more) and what our mutual goals should be. submitted by
ME To begin I'll summarize my background first so maybe we can have some common ground. My first investment was in 2007/2008, I purchased gold and silver bullion. I had done sufficient research to give me the confidence to make that investmentment based on the economic climate. I saw growing sentiment around the community, the constant berating, manipulation of those assets, the power of Asia to lift an asset, and the ultimate end of a bull run. This was very profitable for me as I tripled my investment, but it was long term. Since then I've kept out of the market other than having retirement plans.
BITCOIN I chose not to invest in Bitcoin even as I was aware of it from early discussions around it in 2009/2010. I didn't believe it would be a lasting store of value the same way as gold/silver. I won't discuss this further to keep this in line with XRP, but I do appreciate what opportunities were built by those in the Bitcoin community.
XRP As recent news had been indicating growing demand for alt crypto's I thought it had been long enough that I hadn't looked into Bitcoin why not do some light reading. This turned into obsessive researching of the technical aspects of blockchain, understanding PoW/PoS/PoC, 51% attack, the Bizantine generals problem, forks, and much more. I highly recommend learning about alt Cryptos by familiarizing yourself with the technical issues surrounding the technologies. I learned a big lesson with investing in an asset for store of value such as gold(Bitcoin). It is a bet against the economy, and insurance against your government's failing policies. There are other uses for Bitcoin, but it doesn't have a strong use case. Again I will not go further with Bitcoin, I just wanted to highlight the pessimistic attitude required for store of value to be an investment vehicle. After examining the top 20 and bottom 20 pool of Cryptos, I came to realize the high potential for success of XRP. Ripple as an organization has a strong team of cryptographers, experienced leadership/management, elite financial backing, corporate professionalism, and possibly the best use case for Cryptos to date. They partnered with institutions that will only leave them in a position to network with the best and brightest. They are helping to dismantle the negative view of blockchain technology. Bitcoin has a reputation that umbrellas the entire sphere of Cryptos and has forced a need to see it's demise or a clear distinction between it and others.
XRP OR RIPPLE The big fear of XRP being abandoned is both redundant and unlikely. Ripple is integrating it's technology and showing a clear use case for the benefits of it's technology. This is by providing software at low or no cost to use, but in order for that software to communicate efficiently they need a common asset to make those transfers. That asset exists and there is already value built in. What would be the incentive of neglecting a 9 billion dollar market that has been built prior to having this tech go online for these banks. Programs have been put in place to control the growth of XRP and add stability/confidence. With the recent news of 300million with volume rebates, how could the conclusion be that XRP will not coincide with Ripples growth?
SWELL It's a networking event to familiarize those not involved in blockchain, people are not in tune the same way these small communities are. If anyone in my circle knows about Bitcoin, it is far and few between. Not one person knows any details on it's function or purpose. If anyone has educated them on some details it was likely to be me. Educating leads to investments and growth, which is the purpose of this conference. Shake hands, learn something new, and show that you can attract important people to an obscure event in the eyes of the general public. In this case I suggest to buy the dip.
PRICE DURING SWELL Crypto exchanges have attracted well funded and experienced traders who can time markets well. Place that against novice investors who think they can time dips and welcome to the recent shakedown. Money has been lost by would be day/swing traders against professionals. This has been profitable for those with the ability to read the psychology of traders in the market and reading chart action. If you are holding just by more and hold your position. Outside of that we have one more day for a possible announcement, we've had so many this month alone. Hopefully that will make some people happy, but if your in this long term you should be satisfied with all the other news we've had.
FUTURE AND PRICE We can't predict nor guarantee how high or low the future value will be. We can assume calculating various possibilities and some might be more accurate than others on their marks. What the future holds for this company is growth, they are pioneering the use case scenario for other blockchain tech. Look at who they are surrounding themselves with, while this is in its infancy. We have the benefit of investing in a way that you couldn't do with a regular institution. Before I made my first investments I was keenly aware of Google and the like. However I was very young and uninterested in investing, most teenagers aren't. This is an opportunity to be the person you wish you were 10, 20, or 30 years ago. I don't really know what's in Ripples future, I don't expect them to monopolize the industry. There will be competition and if they can weather the changes and be first they can hold a greater market share. It ok to have competition to better their organization and create a healthy market. We just have to be behind the best team and right now that is Ripple/XRP.
Sorry if this was long and just a waste of time. I hope it helps a few people who may have been worried or gets someone to be curious.
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