This time around, I do recommend reading the article and then listening to my podcast episode related to it, but this is entirely up to you.
Click here to listen.
Mwah! :)
Click here to listen.
Mwah! :)
Dearest readers, we are back this week for another useful chat! Yes, as always, while I am not a financial advisor, I am an avid student of the markets and I focus on how it really works because, if you want to be successful at something and gain an edge, you need to first start with how it really works. Recently, the markets are down, things are getting crazy, crypto popped up on US strategic reserves announcement and soon those gains will fizzle out as well, and on and on we go. People do not know what to do. I am also wrapping my head around it. But, I wrap my head around everything that is going on in the markets based on the truth, or rather the principal operations, concepts and procedures based on which a market works. If I knew exactly how everything worked no matter what, I would be in a secure bunker in an undisclosed location, getting paid by crypto through a tornado service for my professional advice ahha. Instead, I am a truth seeker like many of you are as well.
That said, let me share some truths and facts with you as I heard, understood, processed and tested them.
Fact 1: 99 percent of us are not investors. You think that because you have a portfolio or a RRSP that you partially or fully self-direct, because you add to it or trade crypto etc, that this makes you an investor. I used to think the same thing. In the end, this is simply not the case. Investors are large institutions with people more intelligent than us who price in news, educated guesses and moves of competitor investment firms, and then their actions move the market out of sideways trading into an uptrend or a downtrend. What we call investing- contributing 100 or more per month into a RRSP and similar actions- this is us donating to large investment firms because they work with OPM and they charge us for it. Anything else you do like buying and selling crypto or stocks, that is trading. Buying into a bunch of stocks, then averaging up and down in this personally managed portfolio- that is you cosplaying as JP Morgan et al ( do not get upset, I clown on myself too). So, we have identified three things we do. We either give investment firms our money in installments and pay them for the privilege of investing for us, or we cosplay as one of the investment firms, or we trade. Out of the three, only two make sense. Guess which ones they are?
Fact 2: Growth is useless to us civilians; volatility plus compounding is EVERYTHING! Just like me, chances are you also fall into one of two categories of people. In the first category, you find people who did not recognize Amazon, NVIDIA, Bitcoin, Tesla, Meta, uBer as shares and crypto to buy EARLY. These same people feel sad about it, they think they learned how to recognize the next such crazy growth companies, but they are not making it happen because they confuse the study of hindsight as knowledge of foresight. Stock picking is extremely difficult, and holding stock after it double or triples and then dips, it is even more difficult than that. The second category of people got a little lucky with Bitcoin or some of these stocks, but they never got enough to retire and they never got lucky again with any other stock or crypto. The reason, again, is that luck does not equal skill or foresight. So, what do we need instead? Well, let us see here. How about a stock that pays dividends and also happens to fluctuate in a 20-35 percent range or so in 1-4 week cycles? How about them apples?! This is not useful to investors, or to boomers living off of their steady portfolios. This is not growth in the market. However, assuming something with 20 percent volatility in a 3 week cycle, and you catching 5 percent of it per cycle for a third of the year, breaking even a third of the year, and staying out a third of the year (the most miserable scenario, I know)- you are still looking at a compound gain of 31.6% percent per year! If you do not sit out one third of the year but do consistent gains during that time as well, you are now up to 71.6%! Sure, there are capital gains taxes but, at least here in Canada, they are based on your income tax bracket so it may not be too bad; also, going corporate is something you could do if this scenario existed for you out there. Now, combine that with your RRSP contributions and you have compounding short term gains that can amass to form a trading size good enough for an extra full-time level income, plus you have your retirement covered if all goes well. Sadly, it is not easy to find safe, range-bound stocks or ETF's out there that are propped up and also volatile with large swings. That does not mean there are zero out there.
Fact 3: Leveraged ETF's of indexes are an interesting trading product. Again, gentlemen, I am not a financial advisor- just a truth seeker- but these leveraged ETF's of different indexes seem interesting to me. Take SQQQ and TQQQ. SQQQ stands for ProShares UltraPro Short QQQ and, to put it simply, it goes up roughly 3 times the actual percentage the NASDAQ 100 Index goes down. TQQQ goes up 3 times the percentage that the NASDAQ 100 Index goes up. Now, I have not tried this yet but have manually tested it. Suppose you look at linear regression channel as an approach. you take either of these ETF's, and you have the following thesis. The NASDAQ 100 is not a penny stock, or a commodity, or a precious metal. It is real, it is an index, and by its nature it is diversified. As such, it is sorta propped up- which means it goes through calculated and controlled uptrends or downtrends. Also, unlike penny stocks, it does not surge 1,000 percent on bogus good news, then fizzle back down to under a dollar per share ahha until it is interesting again maybe in a year. It is always in play, always interesting, always traded, always supported by options trading activity as well. So, you still have no guarantees, but maybe you have a sense of safety. With that sense of safety, maybe you get brave enough to enter either ETF at a correct time frame when the price dips two standard deviations below the center line. Then, maybe you keep averaging down until the price gets to the middle line again, or it pierces the upper standard deviation line, or it pierces it and then you want until it retraces back down to the upper line. I dunno, I'm not you- I'm just spittin' lyrics here ahha! :P All I can say is that, while I do have balls, I would not have the balls to keep buying the dip according to a linear regression channel on any single stock, crypto coin or commodity. Excuse my language, but you could get fucked over buying the dip and the price would never recover to a point where you could sell for break even or profit. Let us face it. If you are stuck in an office for a 9-5, you could also miss a spike that is a chance for you to get out, and then you are even more fucked than you thought you could be. Again sorry, but using strong language is the only way to communicate this effectively so that it sticks! One thing that makes losses even worse is that you either do not cut your losses on time, or you use too big of a size do to greed and then it makes you nervous AF. Actually, this whole thing about markets and trading psychology, boy oh boy that should be a long, separate blog post! :P
There you have it, dearest readers. Three facts I did not like hearing because I was way more brainwashed then I am right now, but nevertheless they three facts/ideas I have learned to respect over time. There is so much more to explore, so much more to talk about, but this might be good enough for now.
Wishing you a great weekend! Get some rest, have some fun, do some manual backtesting with SQQQ and TQQQ! :P
Mwah! :)
That said, let me share some truths and facts with you as I heard, understood, processed and tested them.
Fact 1: 99 percent of us are not investors. You think that because you have a portfolio or a RRSP that you partially or fully self-direct, because you add to it or trade crypto etc, that this makes you an investor. I used to think the same thing. In the end, this is simply not the case. Investors are large institutions with people more intelligent than us who price in news, educated guesses and moves of competitor investment firms, and then their actions move the market out of sideways trading into an uptrend or a downtrend. What we call investing- contributing 100 or more per month into a RRSP and similar actions- this is us donating to large investment firms because they work with OPM and they charge us for it. Anything else you do like buying and selling crypto or stocks, that is trading. Buying into a bunch of stocks, then averaging up and down in this personally managed portfolio- that is you cosplaying as JP Morgan et al ( do not get upset, I clown on myself too). So, we have identified three things we do. We either give investment firms our money in installments and pay them for the privilege of investing for us, or we cosplay as one of the investment firms, or we trade. Out of the three, only two make sense. Guess which ones they are?
Fact 2: Growth is useless to us civilians; volatility plus compounding is EVERYTHING! Just like me, chances are you also fall into one of two categories of people. In the first category, you find people who did not recognize Amazon, NVIDIA, Bitcoin, Tesla, Meta, uBer as shares and crypto to buy EARLY. These same people feel sad about it, they think they learned how to recognize the next such crazy growth companies, but they are not making it happen because they confuse the study of hindsight as knowledge of foresight. Stock picking is extremely difficult, and holding stock after it double or triples and then dips, it is even more difficult than that. The second category of people got a little lucky with Bitcoin or some of these stocks, but they never got enough to retire and they never got lucky again with any other stock or crypto. The reason, again, is that luck does not equal skill or foresight. So, what do we need instead? Well, let us see here. How about a stock that pays dividends and also happens to fluctuate in a 20-35 percent range or so in 1-4 week cycles? How about them apples?! This is not useful to investors, or to boomers living off of their steady portfolios. This is not growth in the market. However, assuming something with 20 percent volatility in a 3 week cycle, and you catching 5 percent of it per cycle for a third of the year, breaking even a third of the year, and staying out a third of the year (the most miserable scenario, I know)- you are still looking at a compound gain of 31.6% percent per year! If you do not sit out one third of the year but do consistent gains during that time as well, you are now up to 71.6%! Sure, there are capital gains taxes but, at least here in Canada, they are based on your income tax bracket so it may not be too bad; also, going corporate is something you could do if this scenario existed for you out there. Now, combine that with your RRSP contributions and you have compounding short term gains that can amass to form a trading size good enough for an extra full-time level income, plus you have your retirement covered if all goes well. Sadly, it is not easy to find safe, range-bound stocks or ETF's out there that are propped up and also volatile with large swings. That does not mean there are zero out there.
Fact 3: Leveraged ETF's of indexes are an interesting trading product. Again, gentlemen, I am not a financial advisor- just a truth seeker- but these leveraged ETF's of different indexes seem interesting to me. Take SQQQ and TQQQ. SQQQ stands for ProShares UltraPro Short QQQ and, to put it simply, it goes up roughly 3 times the actual percentage the NASDAQ 100 Index goes down. TQQQ goes up 3 times the percentage that the NASDAQ 100 Index goes up. Now, I have not tried this yet but have manually tested it. Suppose you look at linear regression channel as an approach. you take either of these ETF's, and you have the following thesis. The NASDAQ 100 is not a penny stock, or a commodity, or a precious metal. It is real, it is an index, and by its nature it is diversified. As such, it is sorta propped up- which means it goes through calculated and controlled uptrends or downtrends. Also, unlike penny stocks, it does not surge 1,000 percent on bogus good news, then fizzle back down to under a dollar per share ahha until it is interesting again maybe in a year. It is always in play, always interesting, always traded, always supported by options trading activity as well. So, you still have no guarantees, but maybe you have a sense of safety. With that sense of safety, maybe you get brave enough to enter either ETF at a correct time frame when the price dips two standard deviations below the center line. Then, maybe you keep averaging down until the price gets to the middle line again, or it pierces the upper standard deviation line, or it pierces it and then you want until it retraces back down to the upper line. I dunno, I'm not you- I'm just spittin' lyrics here ahha! :P All I can say is that, while I do have balls, I would not have the balls to keep buying the dip according to a linear regression channel on any single stock, crypto coin or commodity. Excuse my language, but you could get fucked over buying the dip and the price would never recover to a point where you could sell for break even or profit. Let us face it. If you are stuck in an office for a 9-5, you could also miss a spike that is a chance for you to get out, and then you are even more fucked than you thought you could be. Again sorry, but using strong language is the only way to communicate this effectively so that it sticks! One thing that makes losses even worse is that you either do not cut your losses on time, or you use too big of a size do to greed and then it makes you nervous AF. Actually, this whole thing about markets and trading psychology, boy oh boy that should be a long, separate blog post! :P
There you have it, dearest readers. Three facts I did not like hearing because I was way more brainwashed then I am right now, but nevertheless they three facts/ideas I have learned to respect over time. There is so much more to explore, so much more to talk about, but this might be good enough for now.
Wishing you a great weekend! Get some rest, have some fun, do some manual backtesting with SQQQ and TQQQ! :P
Mwah! :)