A Winning Asymmetric Portfolio for the Next 100 Years
What is Asymmetric Finance?
With inflation at a 40-year high, an unprecedented excess of liquidity in the markets, wars in the world, a loss of purchasing power never seen before, etc., we can say that we are facing an economic environment that is not at all pleasant. We can say that we are facing a not entirely pleasant economic environment.
Central banks are losing all credibility, from "inflation is transitory" to "we will not raise rates until 2023". Inflation is currently close to 8%, and at least 7 rate hikes are expected between 2022 and 2023.
This inflation has caused the individual investor to lose purchasing power and find it difficult to fill the shopping cart, fill the car tank, or even pay the electricity bill. Inflation is a silent thief, and the worst thing is that very few people are aware of it. Without going any further, with an inflation rate of 8% (currently), our dollars in the bank go from being worth 1 to 0.5 in approximately 10 years.
Since the end of the 20th century, the Fed has stabilized this inflation at around 2%, a figure it believes can sustainably grow the economy. However, with the advent of Covid and the unprecedented injection of liquidity, this number has skyrocketed.
And if you think these levels are worrying, you can start doing something. Maybe it is an excellent time to buy a house, gold, or Bitcoins...
Asymmetric Finance's mission
The economy is eminently cyclical. We have been in a bullish period since 2008, where the S&P500 has done +540%, and it seems clear that sooner rather than later, we will have to pay for all the excesses that have been carried out.
From Asymmetric Finance, we want to give the individual investor the tools to make a portfolio as antifragile as possible. A portfolio that benefits from a bullish scenario, as we did last year (2021 +30% APY), but that benefits even more from possible market inefficiencies.
To this end, we have a part of our portfolio invested in very OTM options that will allow us to benefit extremely well when we put an end to this cycle, or even sporadically for a few months (Covid-19).
This portfolio has a distribution between high-risk assets (Options and crypto) and low risk (cash, gold, silver, bonds, etc.), and we never leveraged our portfolio.
This allows us to be exposed to any market situation and, what is better, to have liquidity when people need it most.
What happens during recessionary times is always the same, and human beings seem to make the same mistake again. Central banks provide liquidity, people leverage up, suddenly liquidity is cut off, and interest rates are raised. This forces investors to sell their leveraged positions at a loss, and this process, plus the fear of the markets, feeds back.
At that point, we can cash in and buy at a discount.
We have often talked about how it is not black and white. Cryptocurrencies are gray. They bring us many advantages, and we must know how to take advantage of them.
What is becoming increasingly clear is that there is no need for central banks or commercial figures. Internet and blockchain allow us to be a bank with much greater security and even avoid the mistakes made by central banks, such as inflation and loss of purchasing power.
The world changes, and we must change too. Decentralized finance or DeFi offers many possibilities, including getting +20% per year with the dollars you have in the bank. For this, we collaborate with Godfather Investor, where this type of strategies are put in more detail.
From our point of view, we believe that they will be as disruptive as the Internet was in 2000, but as we are not certain of this, we are only presenting part of our portfolio.
What the experts are doing
Investors with more experience in the markets are already positioning themselves for inflation and this new wave of technology that is coming:
Warren Buffett (Berkshire Hataway): Buffett’s Cash Pile Tops Record With $149.2 Billion On Hand
Ray Dalio (Bridgewater): Allocating up to 2% of your portfolio to bitcoin is reasonable
Spitznagel (Universa): How A Goat Farmer Built A Doomsday Machine That Just Booked A 4,144% Return.
Cathie Wood: Ark Invest Predicts Bitcoin Could Exceed $1M by 2030
Regardless of the future of the markets, we believe it is necessary to have a diversified portfolio that can benefit from any scenario.
Bull or bear market?
Nassim Taleb has been asked this question many times.
HF Manager: “What do you think the market will do?”
Nassim Taleb: "There is a 70% chance that it will grow".
HF Manager: “But, then why are you betting on the downside.”
Nassim Taleb: “Because in case it goes down, the falls will be much bigger than the rise.”
HF Manager: 🤯
Asymmetric Finance: “We are going to benefit from any scenario...”