June 27, 2020
The current environment across so many sectors reflects uncertainty and quick moves in and out of asset classes. Investors are chasing returns, some succeeding and others getting caught in the back wash. This is a dangerous market.
I have done well by being patient and very selective in the equity market, avoiding the chase and turbulence, waiting for better market set-ups. In the crypto market there are very new and significant moves under the flatness of the leaders Bitcoin and Ether.
This past week saw more weakness than strength in equities. The parabolic curve of the Covid-Virus infections spreading across the U.S. is unsettling the economic promise of getting back to normal. The sugar high of FED intervention is waning it would appear, and the instability of U.S. leadership is leaving us rudderless. The 700 point DJIA decline on Friday has created a weekend of uncertainty, and with no positive news on Saturday or Sunday, the market could be in for a very bad Monday. The over-valuation of equities on an historic basis coupled with the randomness of leadership in a crisis environment leaves us set-up for more quick turns and mis-directions. I will remain steadfast in my view that “hiding” in Gold miners and equity dedicated cash is the best position to be in. I do have a small short position on the S&P 500 as I look to Sunday night’s/Monday’s opening.
Crypto is very unsettled as well. Strong abnormal price movements are taking place in the DeFi sector, along with rates on various tokens at extremely high levels given short-term demand for buying tokens on margin. Rates as high as 23% are being offered, and price moves of 2X and 3X are happening in this sector. As I write this, there is a general pullback occurring with some of the more volatile increases being sold to lock-in gains. This is occurring while we have price weakness in Bitcoin and Ether, both trading near recent lows of $9,000 for BTC and $225 for Ether. Something strange is going on, and I am hard pressed to put my finger on it.
I will write more over the weekend under the 187 Portfolio and the Radar Fund tabs, trying to explain my actions in this unusual environment. Presently, my returns on equity Y-T-D approximates 20%. My Y-T-D return on Crypto approximates 93%. Very strong results, but in this environment they could be gone in a flash. I have been here before and I know how quickly things may change. Be careful out there!