2 Assets To Combat Rate Hikes
The FED has raised rates by 0.5%, as announced last week.
We already advanced it last Sunday, and we were not wrong at all:
Asymmetric Finance Letter 1st May
This event comes just a week before the FED is going to raise rates for the second time this year.
As announced by the FED, this second rate hike could be as much as 0.5%. This would be a rally in the markets in the short term but would end up implying that the policies were totally unsustainable in the long term.
The FED has raised interest rates by 0.5%. This is a shout to the market that it wants to stop inflation no matter what, and the market paid for it with a Wednesday full of unprecedented hikes.
Their only interest is to gain as much time as possible, even if the long-term consequences are much more devastating for the economy.
Like the one on Wednesday, rallies in the markets always occur during bear markets, and you know that if you miss the 20 best performing days of the last ten years, you will have negative returns in your portfolio. Hence the expression: better more time in the markets than market timing.
Two of the charts that best explain this occurrence are the following:
After the year 2000, the Nasdaq had several rises of more than 10% until it fell 78%.
In 1929, something similar happened with the Dow Jones. It had many rallies above 10% while falling 89%.
However, the markets reacted in the opposite direction on Thursday, falling by +3%.
When a fall occurs, the average investor generally takes his money out and buys with +20% gains thinking that the market has recovered, and his portfolio falls again. This loop repeats itself many times while he keeps losing money.
In the case of this week, all of Twitter had positive messages on Wednesday, while on Thursday, they kept selling and saying that we were approaching the worst recession in history.
Our portfolio has a certain allocation, and we sell/buy based on these types of events, but unlike the average investor, in the opposite direction. This has allowed us to benefit from any scenario. Without going any further, Wednesday's rallies caused our share in both UPRO and crypto to rise by +5% on average.
On the other hand, our hedge share rose sharply on Thursday. Interestingly, on both days, our portfolio was in positive territory.
How to take advantage of this 🎢 ?
We will take the opportunity to buy very OTM CALLs and PUTs if they get cheap to prepare for any scenario. Likewise, we may initiate more Covered CALLs to be able to cover further market declines.
The market is short-sighted, and we should benefit from it. Without going any further, the FED announced just a few months ago that there was no inflation, and today it is taking unprecedented measures: hikes of 0.5 bp and more hikes are expected in June and July.
Today's central banks are the biggest Ponzi scheme in history. Anyone with a modicum of long-term vision realizes this. Inflation + taxes are abusive in 100% of countries.
Hence, we have a lot of confidence in assets like gold and crypto. These can seem super speculative in the short term. Most people cannot ride out the volatility, but most may regret not buying more in a few years simply because they did not ride out the volatility.
Continuing with the following chart, we see that BTC shows weakness before each halving (moment when half of the daily BTC starts to be created). If we believe this chart works, in the worst-case scenario, it would mean reaching 01/01/2024 in the blue zone, which would be $40k, approximately the price as of today. Seeing that one year after halving, it could rise to the orange zone, as it has done in the previous three halvings. We would have that it could reach a price of $300k by 2025.
In the case of reaching the red zone, we would be talking about +$500k.
It certainly seems sensible to do DCA this next year and a half. Contribute without seeing the market. With a bit of long-term vision, we will appreciate it.
Another day we will tell you why BTC is the most asymmetric asset in the world, and that is why we are also actively working on this project, where we tell VERY profitable strategies to take this long-term view.
One of the most exciting strategies we talked about, without a doubt in the other project, is the triple halving of ETH. Looking at the chart above, do you know what that could mean?
Now our portfolio 👇🏼