My Updated Crypto View

Occasionally I use this space for further elaboration on topics that recently garnered my attention. I spent the better part of this past week on one such beast thanks to Caleb over at Buy, Hold Long. He recently added a You Tube channel to his site and the topic on crypto diversification got my attention (as well as a few views). I can’t say my opinion was changed (it wasn’t) as a review of my original thesis reflects (by chance) I pegged the top of the crypto market (almost). His approach though had me reflecting on the similarities to DGI strategies.

The BHL analysis essentially takes the top 100 currencies by market cap to determine the most profitable investing approach. One of the two Crypto ETFs awaiting SEC approval uses a similar methodology, albeit with the top ten. Some of the questions I posed to BHL are indeed reflected in the Bitwise ETF Trust‘s S-1. For instance, an inflation adjusted formula is used and trade suspensions and hard forks are addressed. Private keys and cold storage (security) have been anticipated and rebalances are monthly. The biggest difference between BHL’s Top Ten and Bitwise is that BHL is equal weight and Bitwise is more market cap (with some constraints) weighted. Additionally, Bitwise will carry a 2-3% fee.

There are some intricacies needing to be fleshed out notably in the KYC and FASB/IFRS space which may result in crypto purists losing faith primarily due to the potential loss of any remaining anonymity. Yet some (like me) may come around thanks to the ease of negotiating multiple wallets, exchanges, and yes, diversity. Until then, I’ll keep my head in the sand waiting for the day US investors have a legitimate crypto ETF alternative.

My final concern with the BHL study (date bias) can not be proven in my cursory review, as my question also reflected date bias. I can state the broader model outperformed as it did in BHL’s although with lower gains. Second was the Top Ten. I do think BHL may be onto something and encourage you to take a look at his efforts!

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Selective Updates

Crypto Update

What a difference a year makes.  Last year I penned My Views on CryptoSince hitting its peak of $19,783 last December (17th) the drop has been breathtaking to say the least.  The -84% haircut (through today) makes even GE (-63% this past year) look like a great investment.  Though enthusiasts maintain the theory that a need exists for an alternative to fiat currency, the reality is that other than some emerging and frontier markets the real world has yet to embrace this concept.  The continuing requirement to classify many ICOs as securities may be a contributing factor to the malaise.  Yes, the wild west is being tamed.

I think it may go a little deeper though.  Consider this:

  • the majority of ICOs require Bitcoin to purchase
  • If the US market is limited until SEC compliance is obtained the supply/demand ratio is impacted
  • As the price drops, mining becomes unprofitable
  • With pricing pressure, the speculation component becomes riskier

In a nutshell, my belief is that the ICO aspect is artificially drawing down the cryptocurrency space but remain doubtful that the glory days will return anytime soon.


Yield On Cost Update

In September, I mused on the YOC metric.  A current, real-time example of a valid potential use is probably worthy of discussion.  The view presented by YOC is generally framed by initial yield and dividend growth compounded by the time held.  Over the past two years I’ve had a stagnant YOC for two primary reasons:

  1. Some of my longer term holdings were lost via mergers for cash, and
  2. My current focus on M&A action – which tends to initially be more of a short-term view – for a third of my portfolio.

My portfolio’s average YOC today sits at 3.54%.  When compared against treasuries (with their increasing yields) my view is the risk premium associated with equities, coupled with the tax benefits with treasuries are beginning to converge.  My cross-over point is about a 1% differential and when attained, I’ll reenter the bond market following a 10-15 year absence.  Catfish Wizard recently wrote on his particular strategy.


‘Tis The Season Update

The annual addition to the trust has been completed with the first foreign issue.  With Friday’s market swoon, Royal Dutch Shell (B shares) was added to this portfolio.  The other change during the year was the loss of WGL via merger for cash in July.  This cash was redeployed in August into Atmos Energy (ATO).  Incidentally the acquirer, AltaGas (ALA.TO,ATGFF) was subsequently forced to cut their dividend by 56%).  Kind of like taking the money and running on that one!


There it is – akin to a Greatest Hits release.  In all seriousness though, I think it’s fair to share some of the thoughts that play a role in the direction my actions take me.

Until next week …

My Views on Crypto

There have been many times where my opinion of cryptocurrency and blockchain have been sought.  My thoughts have always been – and continue to be – that blockchain holds promise while Bitcoin and most of the other cryptocurrency contenders have little merit.  Point of fact being I did add to my blockchain centric investments last month while refusing to play in the pure cryptocurrency sandbox.  With the current euphoria I decided this week to at least frame my position a little while noting I could be either wrong, premature or both.

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Overheard in Texas

Though not as juicy as THE conversation between attorneys in DC a few weeks ago, the opportunity to eavesdrop landed in my lap a couple of weeks ago.  Sitting across from me at my local Starbucks were three individuals.  Although not aware at the time, (or I would have paid closer attention sooner), I fast realized one was a locally based money manager, the second an aide of some sort (perhaps a lobbyist) and the third a Republican Congressman (not from my district – but the next one east of here).  They were engaged in a spirited discussion when some topics arose that got my attention (and my phone set to take some notes).

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