Tuesday, July 25, 2017

Do Not"Invest"In Bitcoin! [Or:How to Safely Profit With Bitcoin Etc.]

Financial Safety Services Disclaimer

 Fig 1: Bitcoin's performance record - 2010- 17 Image Source
            [Click on image to enlarge].

Do Not"Invest"In Bitcoin![Or:How To Safely Profit With Bitcoin and Other Crypto-Currencies].


Bitcoin and other similar alternative, "internet currencies", or "crypto-currencies", have made remarkable gains since its/their appearance on the market a few years ago, which means that many people will now be tempted to "invest" in these relatively new market phenomena in the hopes of making large profits [nothing wrong with that :-) ]. Many "early bird" adopters have already  made large profits [mostly "on paper", I'm guessing], and  some of these persons now spend considerable time and effort in exhorting others to buy Bitcoin, " now, before its too late", so that they too can enjoy  similarly large profits.

What is Bitcoin? - here is a short , basic introduction for "newbies". 
 Also see this site, specially created for Bitcoin "newbies". [p.s. I count myself in the "newbie"category].

   Fig.2 : Gold bullion prices 2012-17, log. scale
          [Click on image to enlarge]

A Bitcoin Reality Check Fact For You : 

Fact: The Financial/Economic Future Always Remains Unknown and Unknowable!

.............which means that nobody, not you, me, your favorite investment advisor, fund manager, economist [of any "stripe"] or banker, or anyone else,  can definitively know where Bitcoin is headed from here. The same applies to  any other "investment", be it stocks, bonds, precious metals, real estate, or whatever. 

Therefor, in light of that stark reality, I would humbly suggest that if you seriously want to try to  profit from Bitcoin etc., that  instead of "investing" in it, that you only "speculate" in it, or in any of the other 100's [ if not 1000's] of new digital "crypto-currencies", assuming you realistically have the spare cash to risk[see below]. 

"Investing, Or Speculating"? - What's The Diff.?
What's the difference between "investing" in Bitcoin etc. and "speculating" in it? -you might well ask.

The difference is actually very important, and can mean the difference between losing most of everything you've managed to save for the future to date  [e.g. precious long term savings/retirement money] if everything goes wrong, and, on the other hand, only losing  a little "gambling", or betting/speculation money ["play" money if you like] if everything went wrong, while  your precious long term savings  remain safe and unaffected.  

                 Fig.3:Standard & Poors 500 Stock Index 2012-17,log. scale.
                                         [click on image to enlarge]

                  Fig.4: NASDAQ Composite Stock Index, 2012-17, log. scale
                                          [Click on image to enlarge]

How To Safely Speculate In Bitcoin and Other "Crypto Currencies":

Step [1]: Divide your savings into two distinct, separate categories:

i] Money/savings you cannot afford to lose under any circumstance [e.g. saving for retirement money]. This money should be kept in a balanced long term savings plan that you believe to be safe, maybe similar to this one

ii] Money you can realistically afford to lose [ play money, gambling/betting money]. 

N.B. If you have no money you can afford to lose then you have no money to speculate/gamble/bet with, which  means that you have no business making dangerous bets on Bitcoin, or on anything else [gold, or stocks, or bonds, or whatever] with any part of the money you cannot afford to lose .

Accumulating Money You Can Afford To Lose [If You Don't Have Any Right Now]

If you have no money you could afford to risk losing that you can  speculate with,  and if you still wish to speculate on Bitcoin or whatever at some time in the near future, you'll first have to accumulate/save  enough extra savings over and above your estimated long term savings needs; extra savings which you would not miss if your Bitcoin bet did not make a profit, as your gambling losses would still be safely insulated from all of your long term savings and would therefor not damage them in any way.

Do  You Already  Have Money You Could Afford To Lose on a Bitcoin Bet?

Even though we are talking about money you can afford to lose, do you really want to lose all of it on a bad bet on Bitcoin [ or whatever]?  Of course not. On the other hand, if you don't really care if you lose it all, then by all means, "go ahead, make my day", as the saying goes :) , and just barrel on into Bitcoin, blind, right now. [I sincerely wish you good luck].

Bitcoin Reality Check [2]:

Assuming that you'd rather make money on your bet[s] than lose it all in "one fell swoop", then there are many factors that you will need to take into consideration before placing your bet, in order to maximize profits and at the same time protect yourself against undue losses.

"Off the top of my head", I know of at least a  dozen facts about speculating and speculations that you need to be fully aware of if you wish to be a successful speculator and do not just want to just rely on blind "lady luck" and "barrel on" in there.

Here are three [A,B & C]  that might be worth considering:

A]: Speculation Is Largely an Intuitive "Art"- Not a "Science": 

Successful speculation is intuitive, to a far greater degree than most successful speculators are even willing to admit.  

B]: Successful,Professional Speculators Actually Lose Bets More Often Than They Win Them: 

......however, their winning bets are large enough in the long run to more than offset their many losses by a considerable amount.  This is often accomplished via the use of strategies similar to the ones I hint at at the end of this post, plus others. 

C]:There Will Always Be Other Opportunities:

There will always be other opportunities to speculate coming up in the future - so do not feel pressured into "having to" speculate in Bitcoin and related. Don't listen to people who try to influence/pressure  you  via "once in a lifetime opportunity"  type arguments for Bitcoin, nor for anything else.

So, Do You Seriously Want To Safely Make Money In Bitcoin? 

Although there can be no absolute guarantees in speculating, in order to try to maximize your chances of safely making some serious moolah by speculations in Bitcoin  etc. instead of losing some/all of that moolah, you will probably need far more specific facts/information about the art of speculation than I have chosen to give away for free, here.[ Hint, hint]

 For example: how to establish reasonable risk/reward ratios; where/how to set "stop-losses" and "trailing stop-losses; establishing a risk/reward ratio,how to buy into a rising [or falling] trend; what to do if a better [non-Bitcoin] opportunity  presents itself in the future, etc. etc.

Because, after all, even works of art such as financial speculations need some clearly defined borders/parameters, in order to maximize the chances for significant profits, while at the same time minimizing the risks of losing significant sums that would hurt the speculator. 

Blind Luck Anyone?

Failing all that, I wish you [blind] good luck with all your blind speculations in Bitcoin, or whatever. [Maybe you naturally have "the feel":-) ] .

Regards, onebornfree. Financial Safety Services.

Related post:"Got Money You Can Afford To Lose?"

All questions/comments: onebornfreeatyahoodotcom

                          Financial Safety Services Disclaimer

                              Addendum: Additional Financial Graphs:

     Fig. 5: Federal Reserve Monetary Base totals, 2012-17. Log scale.
                               [Click on image to enlarge]

                      Fig. 6: Federal Reserve M1 totals, 2012-17. Log scale.
                                       [Click on image to enlarge]

             Fig. 7: Federal Reserve M2 totals, 2012-17. Log scale.
                              [Click on image to enlarge]

        Fig. 8: Federal Reserve MZM totals, 2012-17. Log scale.
                          [Click on image to enlarge]

     Fig. 9: Exchange rates, $ US vs. the Euro 2012-17. Log scale.
                         [Click on image to enlarge]

    Fig. 10: Interest rates: US 3 month T-Bill 2012-17. Log scale.
                             [Click on image to enlarge]

    Fig. 11: Interest rates: US 30 year T-bond 2012-17. Log scale.
                    [Click on image to enlarge]


Wednesday, May 31, 2017

How Long Can the Fed Keep the Boom Going?

How Long Can the Fed Keep the Boom Going?

"The US bond market trades at a quite high valuation. For instance, the 10-year US Treasury bond presents a price earnings (PE) ratio of 43. In other words: It takes 43 years for the investor to recoup the bond’s purchase price through coupon payments; the bond market’s PE ratio even went up to 68 in June 2012 and July 2016, respectively.

At the same time, the PE ratio of the stock market is at 23, significantly higher than its long-term average of close to 17 for the period from 1973 to 2017. That said, the 10-year Treasury bond has become more hazardous compared to stocks. This is exactly what the PE ratio tells us: The higher (lower) the PE ratio, the higher (lower) the investor’s risk.................."

"..........Given current bond and stock market valuations, investors seem to be fairly confident that the Fed will succeed in keeping the boom going, that the central bank will not overdo it in terms of raising interest rates. And yes, perhaps central bankers have learned a great deal in recent years, having become true maestros in holding up the make believe world of fiat money.

The investor should be aware of the damages caused by fiat money — for instance, boom and bust. At the same time, he should not run for the exit prematurely: The fiat money system might be held up for longer than some may fear and others might hope............"[ my emphasis]

Original article in full here.

Financial Safety Services commentary:

What is next: Recession? Inflation? Deflation? Stock market boom? 

Fact: nobody knows.

Wondering, worrying about what the Fed, the president, congress etc. etc. may, or may not do, [ or about what it/they have already done], or where "the market" will be 6 months, a year or more from today, is an unnecessary waste of your precious time!

Danger Sign

However, if you are personally worried about what might be coming next, then that is a sure sign that you are dangerously overexposed in [either] stocks, bonds, cash, gold, real estate, or whatever.

2 hard -learned lessons of investment/speculation reality:

[1]: nobody, but nobody can reliably, consistently predict future economic conditions.

[2]: It's wholly unnecessary for the individual to
have to try to predict future economic conditions, or to utilize the services of someone who claims to be able to do that, in order to secure one's precious savings against inflation, deflation, recession etc..

See: "Got Money You Can Afford To Lose?"

Regards, onebornfree