Weekly Paid Newsletter 03/06/2022
Best Market Timing Ever
We are terribly bad at market timing for those who don't know us. You probably are too, but you've been lucky a couple of times, and you think you are the best “market timer” in the world.
Markets are predictable 1-2 years ahead. Depending on central bank decisions, you can get alpha versus the market.
It is not surprising that during the whole of 2020, the markets went up +100% when there has been the largest central bank effort in history, well above that during the world wars.
The situation has changed, and central banks are starting to pull back.
A few weeks ago, we shared a step-by-step strategy to achieve 45% per annum with one of DeFi's major projects.
For those who don't know what DeFi is all about, it is a concept in which finance will be decentralized in a few years. We will remove the unnecessary intermediation of banks that only keep balances of your transactions but do not keep your money, and we will go to a world in which the internet itself is the owner of our money.
For this to happen, we need an equivalent to FIAT money since cryptocurrencies themselves are very volatile, and it is not normal that today a bottle of milk costs X, and tomorrow its price will be 2X.
Nassim Taleb has always said that Bitcoin is not a currency because of its volatility.
To solve this problem, stablecoins were created. Virtual currencies that are backed by real money in a bank. But here, we have the centralized problem of banks mentioned before.
Some of the main strategies have been discussed here, and some others with which we have obtained incredible yields are published here.
However, it is possible to create these coins algorithmically, and Terra (Luna) was born to do so. Terra "burns" coins from its main token in exchange for maintaining stability in its stablecoins (the main one is UST).
This way, Luna increases its price, as there are fewer Lunas in circulation, and UST maintains its relationship with the dollar.
We currently use in our private portfolio a straightforward strategy to be able to earn a 20% return with tremendously low risk in one of these assets.
On the other hand, when publishing this strategy based on Luna, it was trading at 44.9. As of today, one month later (03/02/2022), it is trading at 91.9. A return of 104%.
The project has not changed, and the cons remain the same:
Most of the Tokens fall in very few hands.
What would happen if UST's market cap were higher than LUNA's?
Those two are the main unknowns of this project. However, all the good things have made today the seventh coin by market cap worldwide and have a market share of 1.77%.
We would not be surprised if it becomes the main currency in South Korea in a short period of time.
We will be brief in this section, but Powell has practically announced that he will raise rates in mid-March.
Critical situations => Critical measures.
We have already announced this an infinite number of times. The only option to control this inflation is by raising rates, and this will have direct repercussions for all citizens.
On the other hand, something strange happened this week. During Monday and Tuesday's sessions, the indices weakened, while cryptocurrencies acted as a safe haven.
This may be a one-off event. But what is certain is that the moment the markets bottom and start to move higher, the first type of stocks to do so will be growth stocks.
The market weakness has helped us to take advantage of our positions, and we now have our portfolio in positive YTD (+5.81%).
Also, this week we have found a bargain in the markets, this bargain can help us defend against all the volatility in the markets.
Another day we will talk to you privately about the benefits of rebalancing and how important it is to systematically extract returns, and how to optimize the process.
Now our portfolio in detail.