I am not sure about you guys, but I am not really the man of new year’s resolutions.
However, when it comes to investing, there is one habit, or, more like a tradition that I stick to at the beginning of every year, and 2021 is no different.
I sit down and read again the single most important book ever written about investing, the ‘Intelligent Investor‘ from Benjamin Graham.
If you have read it already, you know what I am talking about, and if not, I am sure you have an excuse.
But anyway, stop browsing news about $BTC and read it.
Now. You can thank me later. Yes, I know… Many people think that “what on earth could a book that was first issued in 1949 could do anything for today’s investors?” Even though the ways of speculations… hhm.. investing today changed a lot, the core principles of sound investment remain intact.
The thing is, human behavior is pretty much the same as it was decades or even centuries ago (just think of the tulip mania). The emotions like fear and greed drove the markets in the past just as they drive them today.
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I know that many of us, including me, like to think about ourselves as we are some sort of “investigators” (living tissue over a metal endoskeleton) with no emotions at all, but even the best of us gets time after time carried away by unsustainable optimism.
After all, that’s perfectly fine since we are humans and not T1000s.
If we were, well, that would be awesome.
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Anyway, the point I am trying to make is that Graham’s book is a great way to remind ourselves about the very basic principles of how the markets (and in a greater sense, money) work, and personally, it helped me a lot to take a step back and look at the bigger picture.
So, What Is This ‘Bigger Cryptocurrency Picture’ Look Like, Right At The Beginning of 2021?
Let me try to sum it up. We live in an increasingly unpredictable world, where things that were previously unimaginable somehow became everyday stuff, where the sitting president of the Divided States of America can spread lies and bullshit for months (years) that ultimately leads to a brainless mob storming the Capitol, just to kick off the year.
Then we have a virus that has put tens of millions of people out of work and wiped out entire industries, and although we have a vaccine it faces a) supply and distribution issues b) uncertainty about whether it is effective against new virus mutations, and c) an awful lot of people who rejects to be vaccinated.
Meanwhile, in the stock market, money is pumped into bankrupt companies and highly speculative assets like cryptos, and people seem to be falling into the same trap yet again to believe that “the only direction the market can go is up.”
It is fair to be bullish about stocks because, frankly, an incredible amount of fresh money is being poured into equities these days. Central banks print free money like there is no tomorrow, driving up equity prices by putting an emotional safety net under investors. A swarm of recreational investors keeps pumping their disposable money into stocks, ready to buy every dip.
And lastly, thanks to the shit-low interest rates, (smart) money steadily leaves fixed-income for equity in the hope of higher gains. Don’t get me, wrong guys, I am not saying this is a bad thing, Not at all, in fact, riding those waves made me 200%+ last year so this isn’t a complaint; hell no.
Neither do I try scaring anyone; there are enough people out there saying, “Oh, uh, a market crash is coming!” Of course, it is coming, booms and busts are inevitable, but whether it comes in 3 months or 5 years, well, nobody knows that. Instead, what I am saying is that as the global situation changes, so will the sentiment on the market, as it has always been before.
Right now, it is a candy shop full of overpriced sweets and seemingly no price is too high for today’s investors. I understand that those are “growth stocks”, and all the other excuses people bring up to buy at a huge premium.
However, for those who still have both feet on the ground, understanding VALUE knows that such an approach is very dangerous.
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