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January 11, 2018 | The Binge

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

More updates. Yikes.

This week the failed, crashed, moribund and prehistoric picture company, Kodak, got into the cryptocurrency business. The announcement of its ‘Kodakcoin’ was enough to wet moister shorts and double the value of K’s flaccid stock. Yes, more evidence there’s a new fool born every minute as this analog company joined others making sports bras and iced tea who have jumped into blockchain and created millions in equities in minutes.

Suddenly even Ripple looks old. Bitcoin? That’s like, so 2016 or something. Bore. Ring.

In case you missed it, Bitcoin has lost 35% of its value in the last couple of months, and those people who mortgaged their condos to buy it near the $20,000 mark are now too ashamed to talk about it. They were hosed, reamed and had. This pathetic paleo blog told you pre-holiday not to buy Bitcoin. Now you know why. Risk in extremis. Just another speculative bubble.

The latest whack comes from South Korea, where Bitcoin mania struck bigtime late in 2017. The country’s on the verge of wisely banning crypto exchanges after SK become host to some of the most active trading in the world. Digital currency fever swept the streets and Koreans became, per capita, the biggest Bitcoiners on the planet.

As Warren Buffet becomes the latest crusty billionaire to warn that this will all end in tears, count on governments, politicians and central banks to increasingly reign in what has the potential to steal billions from hapless, idiot investors. Is blockchain technology cool? Of course. Will unregulated digital currencies replace fiat month issued by and backed by governments? Not in this lifetime.

Get used to it. Sell now. If you can. The exits will soon clog.

In Dow We Trust
The main US stock index set 70 net record highs in 2017. Unbelievable. It advanced 5,000 points in 12 months for a gain of 25%. The last thousand-point sprint was unprecedented in investment history. Now, over the eight trading days of 2018, it has jumped 3.5%. Yeah, another record high.

Ditto the S&P 500, which is a broader and more reliable index. The advance in the last 12 months has been 24%, and the gain so far in 2018 is also 3.5%. Both US markets have trounced Bay Street, where the gain so far this year is a lousy half-percentage point, despite oil pumping higher.

Is this scary, or more to come? By historic measures – the profits companies make compared to the price their stocks command – markets are overvalued in the order or 15% or 20%. That means a correction could eat that much in short order. Investors who don’t have balanced portfolios, with a fixed-income component (a variety of stocks and preferreds) to reduce the volatility, could be taken for quite a ride. But probably a short one. There’s just too much upward momentum right now to go running away from equities.

North America has turned into a jobs machine. Corporate earnings are sustained and robust. Global growth is surging towards the 4% mark and taking commodities with it. Rocket Man wants to go to the Olympics instead of nuking LA. Trump is actually surviving ‘Fire and Fury.’ And investors are pricing in a lot more gains because of the American corporate tax slash. Said one Wall Streeter on Thursday: “What’s been driving the markets is that equities and investors have continued to price in the potential gains from tax reform… There’s still room for earnings forecasts to move upward.”

In short, don’t be afraid to invest. But do it correctly, in the full expectation there’ll be 10% or 15% corrections lasting weeks or months. That takes balance. And diversification. Buying individual stocks is a far bigger gamble than buying the whole market with an ETF. That’s especially true for the weed sector. If you’ve ridden this thing up, it’s time to get off. Like Bitcoin, there’s a huge speculative element here.

Be neither fearful nor greedy.

Human nature leads people to hang onto rising assets, convinced they’ll rise further. Maybe forever. Instead of systematically reducing exposure as prices rise – by selling off positions and harvesting the gain – they cling to the whole wad and risk seeing precipitous declines.

Conversely, investors bail out of falling assets, convinced they’ll go to zero. But selling into a declining market usually means realizing unnecessary losses – since history shows the dips are temporary. The correct strategy: acquire when things are cheap and people freaking. Bail when stuff goes up, and rebalance – spending the profits on the losers.

Two rules: Never confuse gambling with investing, nor seek advice from some pathetic blog.

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January 11th, 2018

Posted In: The Greater Fool

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