Starting from this week I’m using a more descriptive title for the weekly wrap.
Macro and Markets
This week we had a preview of the “post August moon-shoot” that my model has been predicting. The Nasdaq established a new closing high. Gold was no slouch either with the spot reaching $1334.5 on Friday. Gold’s move mirrored the dollar’s fall through its 200 week moving average. Near term we’re likely to see a top in gold and rebound in the dollar but I’m leaning to the rebound being short-lived which is more consistent with my views on gold and equities.
If the dollar should fall definitively below its 200 week average, it will likely be the start of a multi-year decline and will have serious repercussions on the pricing of all financial assets.
The relentless upward thrust seemed to have been finally repelled by the psychologically significant barrier at BTC/$5000, LTC/$100 and prices might have started an intermediate decline. I have long given up making any short term predictions or at least trade with them. I sold some LTC this past week (well below the high). My LTC and ETH are at 75% of my peak holding, and plan to sell enough bitcoin to get to the same point by the end of this year. I have withdrawn 84% of my initial deposit and still hold coins with a market value 4.5 times that for an IRR of 3900%.
One thing obvious from looking at Coinmarketcap.com is that the premium at the Asian exchanges have all but vanished. It was only two month ago that prices in Korean Won routinely had a 20% premium. To me that’s the surest indication that the big-money arbitragers have arrived. There has been no shortage of reports of hedge funds getting into this space. This latest example happen to also contain useful data: I’ve surmised that bitcoin is not correlated to other assets by observing its price behavior, but it’s nice to see a piece of data.
So we’re knee-deep with institutions, but probably still a ways from massive public involvement, or the premium on $GBTC wouldn’t be nearly as high. There is renewed talk of a bitcoin ETF which could usher in the final mass speculation phase of this bubble and I would give it no more than a year after that to reach the final top. My current plan is to sell at least 5% every 6 months, but also to hold no more than 20% after the bubble pops.
I’m running out of options for tax-loss-harvesting this year. This week I harvested losses in Altria ($MO) due to an FDA announcement a while back. To maintain sector exposure my main options were Philip Morris ($PM) and British American Tobacco ($BTI). $PM had higher PE but a stronger balance sheet so it was a toss-up fundamentally. In the end I went with $PM due to its pure international exposure as opposed to $BTI with its Reynolds acquisition — the irony is that I used to own Reynolds before $MO. Just another example of the trajectory of USD making its way into all investment decisions.
- Overcoming Your Demons by Morgan Housel: Moving
- Portfolios in Wonderland & The Weird Portfolio by Corey Hoffstein: Not so weird to me
None of the above is investment advice, the standard disclaimer applies.