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Do As I Say (And As I Do) in Cryptocurrency Investing

Do As I Say (And As I Do) in Cryptocurrency Investing
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Friday, 05 April 2019 11:39 AM Current | Bio | Archive

Politics annoys me. I know, I know. Hot take right there. Packer, you’ve done it again.

But there’s one key reason why: I just can’t stand the hypocrisy of it all.

Republicans run for office—and win—in part on fiscal conservatism. But what makes for a compelling reason to pull a lever for someone in a voting booth is conspicuously absent in Washington.

While tax cuts, or really any government measure that lets people keep more of their own money, is a solid goal, it isn’t necessarily so when government spending doesn’t change. That just blows out the deficit at a time when it should be reined in.

The Democrats are worse—because they’re becoming more honest about wanting more of your money to pay for even more government programs. But there’s no plan to do that responsibly. Eventually, just to pay for the $22 trillion in official debt we have now, we’ll get less government services but at a price of higher taxes and lower economic growth.

Facts are stubborn things. And the longer we wait to fix these problems in a meaningful way simply leaves us weaker and less prepared for the next crisis when it happens. But point these facts out, and you’re often the one singled out as being the problem.

There’s just too much of that paternal “do as I say, not as I do” vibe coming from Washington. It’s insulting.

But as much as politics annoys me, finance can be even worse.

That’s even true, sadly, in my niche of the world. That’s because there’s an industry built around financial newsletter writers like myself, typically dubbed “gurus.”

The problem is that most of these gurus are just folks who couldn’t cut it on Wall Street or on a hedge fund. They have enough skills to sound sharp, but they’re not truly independently wealthy.

Most don’t make the trades they recommend to their loyal subscribers!

That’s why I even dub some of these pikers “anti-experts” and follow them specifically so I know what not to do.

So let’s talk about one of my longer-running themes of the past few years: following the cryptocurrency market.

In 2017, I spent a few blogs warning about how it was making a parabolic move—a sure sign of a bubble. And some other behavior that was indicating that people were piling in without thinking about it.

I even called the crackup within a few weeks of it happening!

Low and behold, cryptocurrency prices fell hard, unwinding by about 80 percent from their peak. Pity the mortal fools who held on for dear life or “HODL’d” their way through that bear market!

Much like tech stocks in 2000 or real estate prices in 2008, parabolic moves upward tend to unwind—and it’s good to take at least some profits along the way.

Now, however, signs of life are emerging. Bitcoin, the gold standard for this new asset class, surged 20 percent on Tuesday and another 5 percent on Wednesday. It gave some of that gain back on Thursday, but not by much. The token has now gone from about $3,500 to around $5,000 in the past few weeks alone.

That’s a good sign that interest is returning to the space—or never really left. The selling pressure seems to be lifting. These are all signs of a likely gain ahead, albeit a slow one.

But that’s something astute readers already know. That’s because I’ve found the space interesting for a few months, as it got into the “hey, it’s stopped falling” phase. That usually proceeds a rise, particularly after a hard drop.

While I don’t know where things will go from here in the long run, there’s a lot of promising technology and opportunities out of cryptocurrencies and the tech behind them.

Best of all, cryptocurrencies were designed to be a new currency—one limited in nature like gold, and not backed by debt like today’s fiat currencies. That political hypocrisy I hate? This is a potential way to opt-out.

But remember, anything that’s worth doing is worth doing well. To play the crypto space, it’s good to have a game plan and stick to it. Maybe the HODL strategy is one you like. In that case, making regular buys every month and building a portfolio that way is how to go.

Personally, I prefer a lopsided strategy that will give me exposure to large potential gains, but will limit loss.

That’s why I’ve targeted about 2 percent of my investment capital to this emerging asset class. If we get another five-fold gain in the space, all things being equal it’ll be closer to 10 percent. At that point I’d probably think about taking some profits off the table and into whatever is undervalued then.

If the whole thing ends up not working out, I can make up those losses with part of my income from stock dividends, covered call writing, real estate, or even my day job.

If you’re more aggressive, or you can devote enough time to really delve deeply into the space, a larger allocation makes sense. But don’t expect another move like early 2017 quite yet. We still have a ways to go there. But the fact that prices have stopped falling, are starting to show signs of life to the upside again, are a sign that there’s still a profit to be made there.

As in prior posts on the subject, I’m not investing in any niche tokens/cryptos quite yet. I’m still sticking with a lot of the big names and spreading myself around there. I own some ethereum, litecoin, and ripple. I didn’t own any bitcoin in 2017 on the way up, but finally own some this time around. If you’re new to the space, start there. If you’re already interested in the space, keep doing your thing.

Time will tell how things work out, but if you’ve done as I’ve both said and done so far, you’ve avoided a big danger in the space. Now it’s time to move cautiously towards buying in the cryptocurrency space again.

Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.

© 2019 Newsmax Finance. All rights reserved.

   
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But remember, anything that’s worth doing is worth doing well. To play the crypto space, it’s good to have a game plan and stick to it.
investor, politics, cryptocurrency
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2019-39-05
Friday, 05 April 2019 11:39 AM
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