Bear markets are never fun, but these are the wealth-building times. People who chase markets higher, such as happened at the end of last year, rarely have the opportunity to make huge gains compared to those who do their buying during a bear market.
Compare the stock market today to where it was in 2008 and into the low in 2009. It was a very scary time during that bear market.
Those who had chased the market higher into the 2007 high, when the Dow Jones peaked near 14,000, didn’t start making money again until it returned to that level in 2013 — six years later.
From 14,000 to today’s 26,000 the Dow has climbed nearly 86%, a nice return but not as nice as if you had bought the 2009 low.
If you were one of the brave ones who bought the Dow near the 6,500 low in March 2009 you’re sitting on gains of 300%, nearly four times as much.
In the long term, buying during times of FUD (fear, uncertainty, and doubt) beats buying when the crowd is going crazy with FOMO.
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It’s why Warren Buffet has been hugely successful over the long term. He recommends buying when there’s blood in the streets.
Occasionally, FOMO works out. Think of the run-up in the crypto market in November to December 2017. Bitcoin rallied 268%, from $5,400 to $19,900, but if you didn’t take your money out at the end of December you lost all your gains through this year.
If you were driven by FOMO at the time, it was important to recognize when the parabolic rally was in trouble and it was time to back away from the market.
If your intention is to be a hodler, which most of us are, even parabolic rallies are not necessarily a reason to jump out of the market. Few do well trying to time the market.
In a long-term bull market, like the one we’re in for cryptocurrencies, you simply ride the waves up and down while the rising tide lifts all boats higher and higher.
Each bull market in the crypto market produces a higher high and each bear market produces a higher low in the succeeding pullback. This is the very definition of a bull market.
When it comes to timing it’s far better to do your buying in a bear market, which is what I have been recommending since I started this newsletter in February.
From a newsletter perspective, of course, it was a lousy time to start. It’s always easier to get new subscribers when they’re excited about a rally and feeling the pull of FOMO.
Nevertheless, my goal with the Crypto Wealth Protocol has been to help you understand the bigger picture. This isn’t a get-rich-quick newsletter. It’s designed to help you create a generational wealth-building portfolio.
It’s designed to help people nearing retirement get themselves into a more secure position, especially since we don’t know how well the government is going to do in the future when the mounting debts must be repaid. Or how well our savings will fare in a highly inflationary environment.
Paying the bills seems to be a problem in many countries, especially as interest rates climb. The United States is adding more than $1 trillion each year to its deficit and now faces payments of $400 billion a year just on the interest.
It’s no wonder President Trump is trying to beat up on the Federal Reserve in an attempt to get them to back off higher rates.
The Federal Reserve, a private banking cartel, is trying to raise interest rates ahead of the next recession, which is right around the corner.
That is prompting our Tweeter-in-Chief to accuse them of trying to slow down the economy. I won’t get into the details of what the Fed is doing, but it’s the cause of increasingly large swings in the economy and stock market.
However bad the debt situation looks for the United States at the moment, emerging markets and several European Union (EU) countries are in much worse shape, including Brazil, Argentina, Turkey, and Italy.
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In recent weekly updates I’ve discussed some of the problems in these emerging markets and how countries such as Argentina, Turkey, and Iran are seeing spikes in Bitcoin trading volume.
The price of Bitcoin is generally very close in price in most of the exchanges around the world, but prices are spiking much higher in countries experiencing fiat currency debasement.
Three months ago, Iranians paid about 300 million rials for one Bitcoin; today they’re paying about 900 million rials. This has effectively tripled the value of Bitcoin for Iranians who bought it three months ago.
Many headlines equate this to mean BTC now sells for more than $21,000 in Iran, but that’s only if an Iranian tries to first convert rials to U.S. dollars and then buy BTC with those dollars.
However, the fact remains that for Iranians Bitcoin is three times more expensive today than it was in June because the rial is losing value. This is creating higher demand for BTC as a way to hedge against further devaluation.
In turn, devaluation is sparking concern about hyperinflation, following the footsteps of countries such as Zimbabwe and Argentina, with Turkey close behind.
Helped by the recent news that Iran’s government legalized cryptocurrency mining, many Iranians have been anxious to trade their rial into Bitcoin as a way to avoid the decline in value against the U.S. dollar and Bitcoin.
Speculation is of course aiding the price rise for Iranians, especially since it appears that Iran’s central bank, which controls foreign exchange and monetary policy, is writing supportive policy for the use of cryptocurrencies.
Abolhassan Firouzabadi, the secretary of Iran’s Supreme Council of Cyberspace, mentioned in a recent interview that Iran wants to increase its use of cryptocurrencies to help smooth trade with its partners as the U.S. renews sanctions against Tehran.
At the risk of sounding political about this, which I’m not, I do believe the United States has used the global banking system, which uses the U.S. dollar, to push its own agenda and to force other countries to comply with its laws and regulations.
The reason I mention all this is because I look for geopolitical events that will likely have an impact on my investments, namely cryptocurrencies.
That the United States is forcing global banks to adhere to U.S. laws and restrictions encourages other countries to adopt Bitcoin and other coins as a way to hedge against the dollar.
Many smaller countries are looking for a way to “stick it to the man.”
Exchange-traded funds (ETFs) will be great for pulling in large institutional investors, but until now cryptocurrencies have been a retail event, meaning we little people have been the driver of demand.
Regular people, not the big Wall Street firms, are behind crypto adoption and the fantastic price rise.
Now we’re starting to see the “little” countries, the emerging markets, adding to the demand for cryptocurrencies. Fiat currency debasement and overbearing governments are driving more individuals to adopt cryptocurrencies.
Small-cap winners galoreThe big stock market winners share one common attribute: Near the beginning of the ascent of their shares, the companies offer revolutionary products or services, are market leaders in their respective industries, or both. Some big stock market winners that possessed the attributes outlined above are Netflix (NFLX), which we recommended to investors in October 2002; Intuitive Surgical (ISRG), which we bought and recommended in July 2004; Baidu.com (BIDU), which we bought and recommended in August 2006; and MercadoLibre (MELI), which we recommended to investors in October 2010. Get up-to-date small-cap stock picks from David Frazier, editor of Small-Cap Profit Confidential.
Smarter cryptocurrency investmentsThe stock market crash of 2008 was the catalyst for his journey into alternatives. And interestingly, it was the impetus behind the creation of Bitcoin and the blockchain technology behind it. Keene Little wasn’t ready to risk his money yet but he was very curious, so he began charting Bitcoin’s technical patterns. What finally convinced him to dip a toe into digital currencies was seeing that they followed familiar price patterns that could be analyzed and successfully acted on. Now he shares those insights with subscribers to the Crypto Wealth Protocol.