Learning? How About Earning? – Part 1

Here's a question that is surely at the top of every investor’s mind:

“Where should I put my money right now?”

Before I dive in, you must keep in mind that I do not recommend putting all of your savings into the stock market (or cryptos), EVER. This is not an intelligent wealth management strategy. I will detail my thoughts better in a future post, but I personally adhere to a 1-5 approach. For every $5 of post-tax, post-expense savings I accumulate, I put $1 to work for me in the markets. Of this 1/5, I also employ a "fun money" allocation, where I dedicate this money to higher risk/ higher reward speculative plays.

That is not to say you ought to follow suit, but just to give you reference.

One more thing: the number one question you should always ask is “Where should I AVOID having any money invested right now?”

Better to shore up your defense before adding to your offense. Let’s get to it…

For beginners/novices, I feel comfortable recommending that you sit on your cash savings for the time being. My reasoning is that even though you may be tempted to think that time is your enemy, and you need to get into the market now because it keeps going up, I invite you to truly reflect on why you think this is so. Is it because your friends/family/acquantances say so? Is Jim Cramer touting the "next Amazon" on MSNBC? Is it just this gut feeling you have?? These are often useful contrarian indicators.

Whatever your reasoning, I cannot recommend enough that you remove yourself from the emotion, from the hype, and from the temptation of getting your money into something "before it's too late"! Believe me, I know it is tempting but I firmly believe that of all things in life to truly research and take responsibility for, managing your own money is at the very top of the list along with health and happiness. They are all connected, no?

For more advanced traders, I am quite sure you are aware of the market's current standing and are looking to allocate more of your portfolio towards cash, dry powder, liquidity, whatever you call it.

Now, before I continue let me just say that I am not one of the "Chicken Little" types where I think that we are all inevitably screwed and the market is going to tank tomorrow. That, I am not. However, I do like to maintain a considerable amount of skepticism and more often than not, I will take the uncrowded side of any trade over the crowded side. That way, when the teeter-totter of life swings back towards the opposite end I can make multiples of what I would have taking the crowded side of the trade.

Back to the whole making money thing....

From a historical perspective, the world is buried in debt. Central banks, national governments, states, municipalities, corporations, credit card holders, college student loan holders, auto leasers (the list practically never ends) are all carrying the heaviest debt loads in history.

Check this out. To understand exactly what these numbers mean, simply divide your country's outstanding debt by its current population. That is the amount that each man, woman, and child owes in debt (including YOU). This is all due to central banks attempting to inflate away our economic woes. It's called Quantitative Easing, and it's some scary scheisse, to say the least. I could go on an on about this, and I plan to in future posts, but truth is this is an infinitely deep rabbit hole; so queue up your Googling skills and have at it!

Operating on a much smaller, more recent time frame we now have what is called the Trump Bump.

Essentially, markets are ahead of themselves and the best case scenario for our economy is already priced in. The US markets are already priced as if massive tax cuts, health care reform, and a gargantuan infrastructure stimulus are a reality. Well, as we are all well aware, this is far from the truth.

So what happens when this best case scenario is not realized?

Simple. A correction.

The correction will come, and this may be a quality opportunity to buy up stock and try to ride the Melt Up. The melt up is the last leg of a bull market, and most consider this leg to be the most substantial, meaning the largest gains.

Now, I will leave this up to interpretation. I agree with the thesis that the final leg of a bull market is the strongest, however, I do not lightly forget our addiction to unsustainable debt loads. So, while I could see this bull market continuing for several more years it pays to be aware of what is looming on the horizon, and having some hedge investments and alternative assets in your portfolio for insurance.

Personally, I remain skeptically bullish overall.

Here is a model portfolio I would construct to reflect this skeptical bullishness.

Bullish holdings

Biotech (various), Cybersecurity ($HACK), and Chinese Tech Companies ($KWEB) along with US Tech ($ROM). These stocks will likely catch wind in the sails in the event of a massive melt up bull market with unbridled enthusiasm. Odds are that if/when your Uber driver is telling you he is buying into market, these stocks will be outperforming.

Bearish holdings

Precious metals, Cryptocurrency (more on this later) and Put Options on heavily-indebted companies (auto and retail are good places to begin searching here). These holdings will rise in value when the markets experience a downturn. They also serve as insurance to Black Swan geopolitical events (i.e. war, protest, Brexit, etc.). Black Swan insurance is a lot like fire insurance, you want it just in case.

This is something you have to decide on how to play for yourself. I just write in hopes of exposing you to information you may not otherwise have known, and hopefully to open up a dialogue with you guys in the comments. Whether you are a complete newbie, a novice, or a sophisticated investor I hope that I can highlight some areas of interest for you and get you to engage.

DISCLAIMER : This content is for informational, educational and research purposes only. This post is not to be taken as personalized investment advice.

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