The Old Man’s Views
The year starts well, but only some people seem happy
This week, we were able to bank some profits and reduce our exposure, thanks to the 50% rally in BTC. Of course, I didn't buy at the low or sell at the high but taking a nice chunk out of this move was very satisfying.
I am not carrying out too much short-term trading, as I moved a bit of capital into some of trademakers investments, but the 50% rally in BTC was too good to ignore, so I banked half of my position.
What surprised me was the lack of enthusiasm or cheering on my social media feeds. A 50% increase in value is not something to be sniffed at.
Perhaps I am wrong. The lack of noise could be a result of ChatGPT, it could be that many other commentators were asking an app to write their reports, and the machine missed the move or didn't know how to justify it!
I will state this now for my readers. You will never read a report from me that AI has written. I don't care how clever it is. Especially now Meta has bought it!
I read this week that a young engineer has come up with a way of tagging these ChatGPT written reports, so we will know if the opinion is personal or written by a machine; I hope this is adopted.
I also read that many IT people are losing their jobs. That unfortunate situation proves that no one is immune from the current downturn in our economies.
As stated in my last report, I expect to see unemployment increase this year as companies cut back on expenditures to try and survive. I am sure we will see numerous companies closing down when funding collapses.
Some of these companies will be publicly listed, so whilst equity markets remain firm, I do not expect the strength the last much longer.
Consumer spending or a lack of consumer spending must hit the markets over the coming months. While we are all trying to be calm and positive, revenues will inevitably decline, and future funding will be harder to find.
I don't involve myself in Bonds, so I am no expert. Still, I am dubious of advisers who tell me to buy bonds to hedge against the coming economic decline, especially corporate bonds, as counter-party risk might be higher than some claim.
Being old school, I prefer to own Gold, which is holding quite well now.
Lack of consumption will be the story this year, as will a decline in property prices.
I mentioned last year that I had increased my real estate holdings and bought some agricultural-producing land, which will give me a return, one way or the other. But I am not too optimistic about commercial or residential real estate, as demand is bound to dwindle.
Here, real estate has the same problems as cryptocurrencies, there are a lot of people interested in it, but new buyers are hard to find. Moreover, it is not about value; it's about affordability.
In a depressed economy, it doesn't matter how valuable someone claims their property; if people can't afford it, they can't.
Moreover, I know all about the Bank of Mum and Dad at my age. And can see that liquidity drying up soon, as Mum and Dad are also concerned about inflation and increasing tax burdens, so they will need to be more cautious than before.
Overall, there is still a lot of uncertainty ahead. Indeed, for many, it will be a painful year for most.
With uncertainty comes opportunity, and speculators will have ample opportunity this year to increase their portfolios and make handsome gains.
For less seasoned investors and speculators, how well they do will depend on how prepared they are to change their way of trading and how willing they are to increase their knowledge.
There are a few things new traders need to learn.
Buying and holding only sometimes works out. The concept of HODL is thrown about too readily for my liking. You are in effect missing out on numerous other profitable opportunities.
In the 1920s, investors pumped enormous sums into the new technologies of Radio and Railways. Many of these share certificates are worthless, and some are framed and hung on the walls of stockbroker offices to remind them that the risks are real.
If you are not going to HODL, you must use some risk management in your investing. Having always worked with leveraged trading, I have only entered a position with a known level at which I would cut my losses.
There is nothing wrong with making a loss on a speculative trade; everyone does it, some more often than they are happy to admit. But it is wrong to run a loss and allow it to multiply. If you are wrong, close your position and look for a better opportunity.
Finally, make sure you understand the value of managing risk and cutting your losses. In that case, you can move away from the "buy-only" mentality and enter the markets from the short side, doubling the opportunities the markets offer. The idea of going short is alien to some new traders, but this year, when we need to be flexible and proactive, it might be a valuable lesson to learn.
I don’t swing trade, but I am equally happy to sell something I consider overpriced as I am to buy something under-priced, as I apply the same risk management parameters to all my strategies.
Until next time...