Back at it!
Here I am, back at it after another long pause. I left you in the middle of a bull run (this is when markets go up!) for crypto, stock, real estate, and gold. Honestly the only non-performing asset category were bonds, but I had and still have 0 exposure there. A few things changed in the meantime, with the threat of a market crash in 2022. So I thought it was time to share my views on the current market in an update.
If we take a look at the market now… this is a period of great uncertainty, with the usual suspects you must have heard in the news over and over again: high inflation, high interest rates, Ukraine, China-USA, Taiwan, etc. So let me break it down for you, I will share:
- an update on my current portfolio (how it performed until 2021 and where I am now)
- my thoughts on the market and
- some actionable things that deserve attention if you, like me, are committed to being an active investor even in these uncertain times.
My Portfolio (ME.INC)
I call my portfolio ME.INC. That means ME as in myself and INC, as in incorporated, as if I were a stock-listed company (under the ticket ME.INC). A great business coach of mine taught me this mindset. That is to consider yourself and live your life as if you were a corporation, with profit statements, balance sheet, assets, liquidity, investors, etc. Bottom line: take yourself seriously and run your life as a Fortune 500 company!
After a great run in 2020-2021, performing around 90% across all investments, November 2021 was the time for me to sell my entire crypto portfolio (except for a small position in BTC and ETH). What motivated me to sell my crypto portfolio was the insane speculation that pushed almost every other kid on the block to buy. The last drop was a commercial that I saw on television advertising crypto as a safe investment to make quick money – when I saw that, I knew it was time to sell.
I think that too much of what I call “washing machine” money has gone into both the stock and crypto market in the 2020-2021 period. “Washing machine” money is money that people ACTUALLY need. Instead of saving it, they dump it on shares and coin they do not understand in the hope of making a quick buck. At one point, everyone needs a new washing machine. And just like that money flows out of a market bubble…
November 2021 was not the highest point ever. But that doesn’t matter. When you are active in the markets, what matters is what you REALIZE and REINVEST. Not what the potential return might have been. Nobody can predict the future.
This is what my portfolio looks like right now, across different asset classes. I track it every month as if I was a stock-listed company.
My crypto position has increased in the last month mostly driven by a STRONGER dollar! Not because the market is actually doing better 😉
Thoughts on Market
My expectation is that a MARKET CRASH will be happening in the coming 6, 12, 24 months. I think we are already in a technical recession, given that the US (as leading economy) has shrank for two consecutive quarters in 2022!
– 1,6% in Q1 2022
– 0,9% in Q2 2022
But a market crash is different. This is a SUDDEN decline in stock and asset prices. Statistically, every time the Federal Reserve raises interest rates for two consecutive quarters (which they have in 2022!), there is a 60% chance of a market crash within the next 18 months.
How long it will actually take depends on monetary policies and what central banks will do with interest rates. Another big factor in today’s market is how countries will handle the energy crisis. Why are these two things important? Interest rates and energy prices determine the average family’s fixed monthly expenses. This will influence what they are able to save and invest which in turn determines asset prices.
The market crash is a GREAT time to buy assets at a much better price. History shows that after a market crash always come a period of expansion. In this growth period you have an opportunity to sell those assets. You move opposite to the predominant market sentiment.
To get an idea of the discount you can get on your assets, let us look back at the top 3 crises in history:
#3 – Real Estate Crash – Oct 9, 2007 – Mar 9, 2009 (17 months) – 54,1%
#2 – New Deal Program – Mar 6 1937, Mar 31, 1938 (12,8 months) – 54,4%
#1 – The Great Depression – Sep 3, 1929 – Jul 9, 1932 (34 months) – 89,2%
After that, always comes a period of expansion that lasts until the cycle reverses again. To give you an idea, after the Real Estate Crash in 2007-2009, we have had an expansion cycle of 12 years until 2021 where the S&P 500 (the collection of the top 500 companies in the world) grew 600%!
What You Should Keep in Mind
Obviously, playing this game is a lot easier said than done. Here’s a few principles that can help you navigate the cycle:
- Stay liquid and underleveraged (as in don’t borrow to buy cr*# you don’t need or borrow ONLY to buy assets & make sure you can afford the monthly payment easily – a good measure here is to make sure the total monthly payments are under 30% of your NET income)
- Always invest money you don’t need (even if you don’t play the game, and you invest in index funds, you are not forced to sell to make end meets and realize losses on your portfolio)
- If you are in the game of buying single companies, buy companies you have enough confidence they can survive the crash and come out stronger (this means you actually need to study them closely to have any amount of confidence they will survive!)
- Don’t do it alone and join like-minded people that can help you understand the markets and motivate to keep consistency
Hope this gave you some clarity! I will see you in my next blog or email for the next portfolio update (if you are signed up to the newsletter, otherwise you can sign up here), until then – stay smart!
MNV
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Disclosure
These are unqualified opinions, and this newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor, and do your own research.
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