Let if Fall to Zero, I Say

Markets are correcting. 

The correction seems to be gathering momentum. 

Long-term portfolios lose out on net worth. 

Trading portfolios get their stops hit. 

It’s not pretty. 

Should one be worried?

Why?

Have we not taken worry out of the equation?

Sure. 

We have. 

We’re not worried. 

In fact, we want the correction to linger. 

Why?

So we can buy more. 

How long can you keep buying?

Till eternity.

How’s that possible?

Very simple. Do you have savings?

Yes.

Lovely. Do your savings grow?

Yes, month upon month, they do. I make sure of this by spending less than I earn. 

Even lovlier. Now take a very small potion of your total savings, and put it in the market. 

How small?

Small enough, such that if you were to put in that same small quantum on all off the approximately 220 days of the year that the markets are open, even then, your savings would keep growing at a representable rate. 

Ok. I see where you’re going with this. 

Absolutely. Now, suddenly, your whole perspective changes. You want your next quantum to go in. Thus, you want the correction to linger. 

What if the markets go up?

One keeps going in with the same quantum till one is getting margin of safety. No margin of safety anymore means no more entry. 

I see. That’s where your confidence is coming from.

Not entirely. You see, by the grace of God, I have made sure that my family’s bread and butter is secure before putting even a penny into the markets. 

Oh. Well done!

Then, whatever is going in, is surplus. 

Right. 

The rate of entry, i.e. the size of each quantum is minuscule enough to not pinch me upon the onset of a lingering correction. 

Great. 

Please note, that one gets one’s margin of safety on perhaps 20 – 30 days of the 220 days that the markets are open in the year, on average.

Really?!

Yes. 

That means that your savings keep growing at almost their normal rate of growth, because you’re rarely deducting from them as far as your long-term entries are concerned.

Mostly. However, what if a correction lingers for 2 years or more? Even at a time like that, you’ve got the ammo. 

Ammo, yeah, ammo is paramount. Don’t you feel like spending your savings?

I spend wisely. I don’t blow them away. I make sure, like you, that I’m saving more than I’m spending, month upon month upon month. However, I do spend.

Ok, now I’ve understood how you are so confident. 

I’ve not told you about my due diligence yet.

Oh, sorry for jumping the gun.

Due diligence is my most powerful weapon. I delve into a stock. I rip it bare. I get into the nitty-gritty (I wanted to say “underpants” originally) of the management, and let all skeletons in the closet loose. If there’s something crooked, it will emerge. The internet is my oyster. Nowadays, any and everything is available online. Mostly, a stock fails my parameters within the first 15 minutes of research. If a stock  survives perhaps three full on days of head-on research, that stock could be a likely candidate for long-term investment. Then, one looks for an appropriate entry point, which might or might not be there. If not, one waits for it. One could wait even a year. Markets require patience. 

Wow. Can I now say that I understand where your confidence is coming from?

Yes you can. 🙂

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Ashes to Ashes, Bitcoin to Bust

Hey,

Sure, Bitcoin and all…

…everyone is humming the word.

Those who didn’t know of its existence a very short while ago, are all gung-ho about it.

Some experts are talking of a million dollars. They’re expecting it to touch a cool million per Bitcoin.

Other slightly conservative ones are talking about half a million.

Last month, someone thought it was chocolate candy that looked like a gold coin. This month, he’s just bought his first Bicoin. I think he paid the equivalent of almost USD 4000 for it.

Citizens are moving black money across borders with it.

It’s original signature exchange in Japan failed in early 2014.

An act of sabotage, perhaps?

Governments want it down.

The US will probably do everything in its capacity to stop Bitcoin from becoming the go-to currency of the future world instead of the USD.

Rumour has it that China has already imposed sanctions against it.

Well, well, well, what do we have here?

There’s a huge push and pull going on.

Who is pushing?

Launderers and terrorists, for starters. That’s where the bulk buying pressure is coming from. They don’t care about paying an extra buck to launder, or to buy weapons with. They’re applying real pressure, and the price has appropriately shot up.

Who is pulling?

Governments. Sanctions spoil the rise. A collapsed exchange enforces the law of gravity.

Where is this going?

Well, sure, who knows, but there’s a few things that one can say or even ask.

Has anyone seen Bitcoin?

What are its credentials?

Where did it come from?

Facts and not ghost-stories would be good here. Does anyone know the facts for sure?

Can one trust something whose whole exchange has once failed?

Now, with the Chinese move, God know what might happen?

Is the machine or device on which Bitcoin is stored not a target?

Where is the peace of mind? Can one sleep soundly with Bitcoin stored on one’s computer?

Bottomline is, there’s lots of ammunition in place to cause some massive landslides here.

Given that, there’s massive room for laundering and terrorism. The world’s launderers and terrorists aren’t done yet. Pressure will keep coming back in the current world situation.

It’s an ideal trading situation that has developed, both for the longs and the shorts.

Fine, trade Bitcoin. Make money. Good for you. I personally don’t trade it. Am happy trading stocks and currency instead, Those are my areas of expertise, and I don’t operate outside the areas of my expertise. However, if you’re making a killing trading Bitcoin, I’m really happy for you.

Just don’t do one thing.

Don’t get married to it.

Meaning, don’t pick it up at these 0% margin of safety prices, never then to let it go.

There’s so much ammunition that can bring it down, that one’s investment could even get wiped out during a swift crash, especially if it has been picked up on margin.

So, careful, people, careful.

Yeah, people, while investing in Bitcoin, tread cautiously. Wait for margin of safety to develop before picking up. Secure your device. Turn it off when you sleep. Back it up, if your backup can’t be hacked.

And…

…don’t bet the farm.