A TEMPORARILY GROWING GLOBAL ECONOMY, AN INEVITABLE WAR WITH NORTH KOREA & A BITCOIN BUBBLE

Highlights from the interview I watched this morning with two of the world’s best macro-economic and finance minds working today: Keith McCollough of Hedgeye and Jim Rickards.

1. There will be no rate hike in December contrary to consensus.
2. Disinflation will continue. The natural state of the world is deflation.
3. Stocks will continue to go up through the end of the year. The next 3 months are smooth sailing from the perspective of systemic financial risk.
4. 2018 presents a lot of risks geopolitically, and EPS profit slowdown YoY.
5. A War with North Korea is extremely likely. Either we’re going to attack NK preemptively in the next 6 months depending on their second strike Nuclear capabilities, or NK is going to invade South Korea within the next 18 months as a re-animation of the Korean War and NK’s desire for Korean Unification. The allies of the South Korea, which includes the US will then have to step in.
6. Bitcoin is in a bubble. Most of the non-speculative transactions taking place are black market: money laundering, arms dealing, drug dealing. “It’s a Ponzi scheme with nobody in charge.” You can make money in a Bubble you just have to get out in time. The Bitcoin Bulls understand technology but they don’t understand the history of markets and currency. Will you make money during the bubble or be like the masses of retail clients left holding the bag in the Dot Com Crash? (Disclosure — I’ve made significant returns speculating on Bitcoin but I plan to sell when particular catalysts are closer on the horizon).
7. China will experience a major economic slowdown in 2018/2019. They were in a holding pattern until Xi Jinping consolidated power, which just occurred. A China slowdown will have far reaching negative effects on the global economy.

My question for my friends:

Do you understand what’s coming? Are you prepared? Financially, Physically, Emotionally, Mentally, Spiritually?

HOW I MADE $10,000 TODAY IN THE OPTIONS MARKET IN 1 TRADING DAY — INVESTING, PSYCHOLOGY AND THE SUPERPOWERS OF MEDITATION

Two days ago I wrote a post about my concern about how retail investors are investing in cryptocurrency and recommended the option market as an alternative for those looking for a very aggressive risk/reward return profile. (https://www.facebook.com/maxhmarmer/posts/10211728883231644)

I mentioned NVDA LEAPS as a historical play that 10x’d the gains of Ethereum over a similar time frame.

Little did I know how prescient a call that would be.

As an example of the crazy returns one can get in the option market, yesterday I spotted the combination of a technical + fundamental set up I loved in NVDA and made one of my most highly concentrated option bets I’ve made to date.

I make concentrated bets like this extremely rarely. for what it’s worth—I’ve executed a concentrated trade like this maybe only 2-3 times since I started trading.

The trade was that I bought 15 call options at the 170 ‘at the money’ strike price with a 1 month October expiration for about $11,000.

Today NVDA was catalyzed by a fortuitous analyst upgrade with high price target and the stock rocketed up over 6%, making me over $10,000 within 24 hours.

However, the fact that the analyst upgrade happened today to light the powder keg on Nvidia was mostly luck, or perhaps an intuitive gift. My expectations were more along the lines of a 2-3% gain over the next couple of trading sessions. But the market game is probabilistic and all about tilting the odds in your favor. A landed missile from North Korea in Japan last night could have catalyzed the market in the other direction.

I can explain more about the technical + fundamental analysis that led to pulling the trigger on this big bet for those interested.

Before going further, I must say, these option trading strategies are not for the faint of heart. But neither is trading highly volatile cryptocurrencies.

Many option trades go to zero. And I’ve had days where I’ve been down over $10,000 too.

Despite this volatility I’m currently nearly 5x’ing the nasdaq, up about 40% while the nasdaq is up about 8% since late April.

At the same time I’m prepared to lose it all. I put significant intention into maintaining non-attachment to my results and mentally preparing myself for enduring considerable negative returns which paradoxically often improves my performance.

Even this NVDA trade went the wrong way on me soon after I made it. I was up $1k an hour after making it but by the end of the day I was down $2k. But I rode it out and didn’t panic and woke up to the returns from the analyst’s gift this morning.

Some more context on my strategy:

In June, I transitioned to a near pure long/short option portfolio because I became confident in my abilities to read the market, I’m young and thus can take a hyper-aggressive risk/reward profile, and I’m investing under a year’s worth of income — so should something go catastrophically wrong, it would not be too hard to make it back. For others, I often recommend some subset of their investable assets being in a high growth option portfolio.)

Investing is a psychological game as much as it is a strategic and tactical game. My proficiency as a meditator is an amazing asset.

Ray Dalio, who is considered the most successful hedge fund manager of all time has been practicing Transcendental Meditation for more than 40 years. He said,

“When I look back at my life, I am happy to have had what most people would consider a successful life, not only in terms of business, but in my relationships and in lots of ways. More than anything else, I attribute it to meditation—partially because of the creativity, partly because of the centeredness. TM has given me an ability to put things in perspective, which has helped a lot. I think meditation has been the single biggest influence on my life.”

There are more great insights from this article on Ray Dalio about how meditation can give you super powers ( https://finance.yahoo.com/news/ray-dalio-featured-in-dr-normal-rosenthal-book-super-mind-152727852.html)

Screenshots attached from my options portfolio(s) in two different brokerages.

I expect to be writing more about finance, economics, crypto and tech trends in the coming weeks and months as it aligns with some bigger picture life-mission projects currently manifesting in my world.

Over and out.

CONCERNS ABOUT THE CURRENT CRYPTOCURRENCY RETAIL INVESTING CLIMATE

Bitcoin is the most crowded trade in the world right now according to large fund managers.

That means should sentiment change or risks/headwinds increase there could be a lack of liquidity as people head for the exits and a precipitous price drop.

Matters are made worse by the lack of an options market and the ability to hedge.

For what it’s worth, I think the way many people in my network are thinking about investing in cryptocurrency is flawed and dangerous.

Investing in cryptocurrency is part alternative asset class, part angel investing in emerging early stage technology.

I’m particularly concerned for people who don’t understand the concepts and principles of Asset Allocation and Diversification.

And I’m concerned for people who are invested in cryptocurrency but have no investable assets in the stock market.

I think cryptocurrencies should make anywhere from 1-10% of a portfolio. Potentially 25% if you’re hyper bullish and an active trader.

And if you have FOMO that you missed out on huge returns like Ethereum’s 2178% YTD return according to coinbase, know that:

a) past performance is not predictive of future performance
b) spike ups in price are often followed by long consolidation periods before the next leg up
c) It’s possible to get 20x returns with other investment vehicles as options in the stock market. A long term option (LEAP) far out of the money, on NVDIA purchased in early 2016 has over a 21,000% return, 10x Ethereum this year.

Transparency on my personal approach:

Personally, I am very long blockchain technology but not sure about which technology will ultimately win, thus active trading and agility matters.

‘Buy and hold’ is increasingly deadbeat advice in a world of accelerating change.

I currently have about 7.5% of investable assets in Bitcoin, Ethereum and a small basket of speculative cryptos on Poloneix.

I’ve studied tech trends and macro economics for a decade. About 2 years ago I committed to understanding how to translate this knowledge to financial markets by understanding fundamental and technical analysis across various cycle times and in April I started trading a dynamic long/short options portfolio and I have outperformed the nasdaq by nearly 3x over that time, admittedly by taking a lot of risk with very high beta.