Wednesday, March 20, 2019

Long EUR/USD While Retail Traders Continue Going Short

Quick post today as I have to run out the front door and shake my main money maker, my pest control business.

This is Forex stuff. Part of the reason I'm involved in this market is my aforementioned money maker; thanks to automated orders, Forex can work for me while I'm working something else (or not working at all...).

Anyway, here's my EUR/USD action since March 11th:

This is actually several trades, all entered at the same time, but with different take-profit orders set. I do this to accomplish two things: 1) gradually deleverage my positions and book profits along the way, and 2) take the ultra-arbitrary, discretionary "guess work" out of taking profits (no "analysis paralysis" for me!). The only time I manually exit a position is when the retail trader open position contrarian trend I've been on begins to reverse.

Anyway, as you can see here, retail trader open shorts on EUR/USD were in the majority a few days ago:

 ...and as of this morning, they're even more so:

Meanwhile, EUR/USD continues to climb, as it has since I initiated these trades nine days ago when I noticed retail traders getting shorter.

And that's why I do what I do.

Monday, March 18, 2019

The Next Crypto Boom Cometh: IBM Quietly Building Infrastructure

Back in late 2001 and into the early part of 2002, I entered into a brief career in financial services as a newly minted stockbroker and investment advisor. I got the series 6, 7, and 66 SEC licenses, all on my first try, and then it was sink or swim on commission.

I sank.

I don't come from a wealthy, well-connected family, which is how nearly all of my peers in the incoming group of advisors at my firm got their legs under them, by selling to their rich aunts and uncles.

I was making nothing, I had a negative net worth, all I had was some cash set aside for major SHTF events and some cash flow from a rental property I had picked up while I was in the U.S. Army Infantry about five years prior.

Those times sucked.

Mostly though, that's not what I remember about those times.

What I remember is Amazon stock under $10/share.

Right about the time I was licensed and could have done my own buying and selling in my own accounts, I could have started scooping up shares of the mega online retailer for a song.

"A song" in terms of today's price per share, that is. Every $10 invested into Amazon back then is worth $1712 as I write this, a gain of 17,120%.

$1000 put into it back then? That's a really nice house in the area I live in now.

$5000? Cashed out and plugged into my dividend income portfolio, I'd be comfortably retired on passive income.

So why didn't I do it? I should have put every $10 I could have spared into Amazon shares and held on. But there's two reasons that I did not: 1) no one knows the future, and 2) people can know the past, and at the time, the past was that Amazon shares had been a lot higher than they were then during the late 90's tech bubble, and were at the time down in the dumps with every other online project. The quick assessment was that they were just eGarbage, too.

The thing was though, Amazon had something the vast majority of eGarbage projects did not: something! They were actually doing something. They actually had a service, they actually had inventory, something that could carry forward and be built on. They were part of the boom, and so they were part of the bust. But after the dust had settled, they were still doing.

Now look at them.

The reason I bring up this long tale of my experience with not being an Amazon shareholder is that I see similarities to what has happened over the last decade in the crypto space, and with Bitcoin (the original, BTC) in particular: introduction, boom, bust, and now...

...stuff like this: IBM Quietly Enters Crypto Custody Market With Tech Design for Banks

The boom in crypto leading up to December of 2017 largely occurred on the same assumptions that drove eGarbage company shares to ridiculous valuations in the late 90's: if it had an "e" at the front of its name, it was totally going to the moon, man! It wasn't at all a question of fundamentals, there was no concern for valuations, everything "e" was just the next big thing and was as sure to make you rich as the sun is to rise again tomorrow.

Crypto in general went through the same thing, I believe - BTC in particular - the "e" sure thing this time around being "crypto whatever" and the price itself; "the price is higher today; surely the price will be higher tomorrow! It just will, man! It's got 'crypto' and 'mining' in its name!" The same thing was being said on the other side of the coin, by the bears (the people actually active in the crypto space) and the haters (the people who don't actually have any skin in the game, they just love to pose as "the smartest guy in the room" and offer lots of free, unsolicited investment advice; you can usually identify them when they turn out to be bitter at your success): "the price is higher today; surely the price will be lower tomorrow!"

Price, price, price. It was (and in many cases still is) the ONLY thing anyone was talking about.

So up it went. Way up. And then down it went. Way down (though if you got in much earlier than the boom like I did, and stayed in like I have, you're still way up...). Now over a year has passed in these "doldrums," lots have declared it all over and joined the permabears and haters just waiting for it all to go to zero. It kind of smells like the piles of eGarbage that were around in the early 2000's.

Just as Amazon was not actually part of the eGarbage back then, just surrounded by it, I believe that BTC is in a similar place now. The eGarbage of this building revolution is all of the so-called "alt coins" that are out there, which just like the eGarbage projects of the late 90's, are just a bunch of copycat also-ran get-rich-quick attempts that serve no purpose except to try and grab a piece of the major cryptos' marketshare.

My evidence for this? The article I linked to above about IBM is one example, and typical of how I see what's happening in this space now: supporting infrastructure is being created for Bitcoin all the time; other cryptos, not so much, and alt coins, never, and it's all happening despite the price bust.

What IBM is doing in particular is huge. Creating custody infrastructure for regulated financial institutions means that the last barriers to institutional money entering the crypto space are falling. And, this wouldn't be going on if there wasn't a demand for such things.

So for this and a host of other reasons, none of which are the price of Bitcoin, I think we're on the verge of the next boom. The exotic is moving toward becoming ordinary, just like how buying anything you can think of online was exotic in the mid to late 90's, and now Amazon boxes on the front step are incredibly ordinary...

I don't know when it will start, and I don't know how far it will go. I don't have a buy recommendation, I don't know when one should sell. That's because I don't know the future and I don't pretend that I do (unlike many). I just know how I'm approaching it this time around.

Like all of you though, I can remember the past, and things appear to be lining up to make Bitcoin and a handful of other cryptos readily accessible to a majority of the world and make them reasonable exchange options for every-day use. It reminds me a lot of seeing Amazon at less then $10, in plain view amid steaming piles of eGarbage...

So, I'm adding to my positions now. Like everything else I do, I'll get out of them not at a particular price or following a particular event in the space, but at a time when it would serve my particular financial aim, which is to achieve 100% funding of my annual household budget with passive income.

If and when that happens.

Like it could be right now, had I scooped up $10 shares of Amazon seventeen years ago...

Saturday, March 16, 2019

Forget The 4% Withdrawal Rule, Go For 4% Income

It seems like every retirement article out there reads like this one: "You need at least $1 million! No, wait! Now you need $2 MILLION!!!!1"

Next week it'll be $4 million.

Since the bulk of articles on this topic parrot this thinking, that the only way to live on your accumulated assets in retirement is to draw down 4% of them each year, it's really no wonder that there's a constant "nest egg arms race" in this way of thinking.

That probably also explains a lot of the pessimism out there surrounding this topic, and why people long for the "good old days" of defined benefit pensions.

Try this instead:

Total up your current retirement and non-retirement assets.

Multiply that by .04.

Now multiply that number by 1.10 and hit "equals" as many times as you have years between now and retirement.

What's this? It's the current income you could generate on several solid dividend paying stocks that are out there, and the subsequent 10% multiplier shows you how that income would grow (on average) with dividend hikes in the future, assuming you didn't add anything more to your principal.

That's income generated by your assets, cash flow. That's what you can spend without drawing down what you've accumulated, and it grows over time.

Don't get freaked out by these bullshit retirement articles, they're all stuck in a broken paradigm (and in many cases, probably purposefully so, for political agitprop). Shift your focus from net worth to cash flow, it changes the whole game.

Friday, March 15, 2019

The Bachelor's Degree Could Not Be Reached For Comment

I came across this piece on Yahoo Finance this morning.

I read it twice.

Not once do they mention the millennial student debt poster girl's bachelor of arts degree field.

She's $90k in debt over it.

Anyone want to guess what her degree is in? lol

Read it here: Millennials are so buried in debt they can't buy into American Dream of owning a home

Further reading:

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