March 20th, 2020

Things seem to have calmed down a bit in the past couple of days, at least in the market. The global death rate for the novel coronavirus continues to grow exponentially daily, which seems kind of shallow to have such a focus on the markets.

I’ve been further compounding the perception that the only thing I can control is not the outcome of the event, but my reaction to it. So, this is why I’m so focused on the markets.

I may have some more meaningful thoughts about the virus on another day, but today I’ll let the medical professionals focus on covid-19, and I’ll keep to my office/home.

The markets have stabilized in the past couple of days, and Bitcoin has gone up a little bit. Currently, I am sitting on a 24.57% reduction in net worth since all time highs just one month ago.

I am still not tempted to sell anything at all. Iron hands. It does seem like the giant losses I took in the crypto market in 2017 and 2018 have helped prepare me for this black swan event.

So far, the most difficult decisions I’ve faced are that I’m sitting on dry powder that I will eventually put to work in the market. This market timing approach feels like the exact antithesis of what I should be doing, which is lump-sum investing any spare capital, and dollar-cost averaging every month. Or at least, that’s what I’ve been doing for the past five years.

I will continue to sit on cash and keep dollar-cost averaging with each paycheck.

Another signal is becoming more and more aware for me, buy when I’m scared. When I woke up on March 16th, Bitcoin was at $4,600. My initial reaction was an aversion to losses in my current holdings. What I should’ve done was bought more. I was on the fence but didn’t pull the trigger.

Note for crypto trading: sell when you feel like you’re going to be rich, and buy when you feel like you’re going to zero.

Someone smarter (or dumber) than me.

The country is finishing its first week of relative quarantine measures. Here in Colorado, restaurants, bars, and ski resorts have been shut down. Retail stores and banks are announcing temporary store closures.

The massive lines and abnormal amount of shoppers at grocery stores are beginning to subside, but there is a visible reduction in the supply of food on shelves. Two days ago, eggs were completely sold out – the day before that, chicken. My roommate said he couldn’t find canned beans until the second grocery store.

I wonder if the makings of a depression are in order. Mnuchin said the Feds think up to 20% of the country could be unemployed. The conservatives are putting together a universal basic income plan.. I still think things will get worse before they get better.

Until then, I’m extremely lucky to have a remote job that it is an industry that just survived one of its most volatile bear markets. I hope it is resilient through this global crisis.

March 17th, 2020

Yesterday was a bloodbath. My net worth dropped by nearly 9% and is down 25% from February 19th (market all time highs). It’s funny, in February I had a sense that something was awry in the markets, but couldn’t have fathomed what we’ve seen so far.

Overall, this isn’t as painful as I thought it would be; I’m actually quite numb to the whole experience. I’m quite amazed at how my risk tolerance isn’t really phased by the recent market downturns. It seems two years in the cryptocurrencty bear market have really hardened me after the drastic market losses and scams I’ve suffered.

While I’m not predicting anything, I am anticipating we’ll see further drops as quarterly earnings reports come back negative, supply chains continue to halt, Main Street is forced to close, and large portions of low income individuals lose their jobs.

In such times of uncertainty, the market will likely react emotionally; likely in a downward trajectory.

Thinking of this, I’m doing my best to mentally prepare for what that looks like. It’s not out of the realm of possibilities to see up to a 50% decline in total net worth. I’m no investing genius, so I try to look towards those who are for nuggets of wisdom.

In 2009, Munger was asked about how worried he was that stocks had fallen by 50%. He responded:

Zero. This is the third time that Warren and I have seen our holdings in Berkshire Hathaway go down, top tick to bottom tick, by 50%.

I think it’s in the nature of long term shareholding of the normal vicissitudes, in worldly outcomes, and in markets that the long-term holder has his quoted value of his stocks go down by say 50%.

In fact, you can argue that if you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder, and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations

Personally, living through a such a historic moment isn’t as panic inducing at I’d thought. While it’s not overwhelming, the biggest emotion I’ve been feeling is the urge to throw all of my money into the market. I’ve thus far silenced this voice in favor of dollar-cost averaging lump sums as I get them.

I’m also not nearly savvy enough to have known to go all into cash, nor am I savvy enough to time the bottom of this historic drop (after drop, after drop). But, I’ve got some dry powder that I should just put into the market. And, in the coming months I will put it in the market, but I’m doing an experiment based off past results.

In September 2017, Equifax was hacked and its stock dropped drastically.

• September 1st, 2017: $141.59
• September 15th, 2017: $92.98

Trying to be a contrarian, I saw a good purchase opportunity, but I bought in very quickly, when the stock had dropped to ~$125. I later sold at a loss to convert to another asset.

The lesson I learned was: be patient.

Eventually, I’m going to put my dry powder to work. But for now, I’m going to breath, be patient, and follow the markets until I’m ready to make a long-term, contrarian purchase.

March 16th, 2020

In 2016 I read a book called “The Great Depression: A Diary: Benjamin Roth,” which was a first-hand experience of one lawyer’s perspective of the markets during the Great Depression. At many points in the book, Roth (of no relation to the tax-advantaged investing account here in the States) mentioned numerous times throughout the multi-year ordeal that he saw ample buying opportunities. He didn’t have the capital.

I’m going to journal during these tumultuous financial and epidemiological times spurred by the exponential growing coronavirus.

It’s just before the market opens on Monday, March 16th, 2020, and we’re expecting yet another red day. Potentially even circuit breakers are pausing trading for 15 minutes; within a moment of the market’s opening.

I’m expecting another 5% drop in my traditional investments today, and potentially another very red week. (PS, markets just opened, and VTI began 10.9% down!)

Last night, the Feds announced a series of measures that the futures markets didn’t take too kindly. Many are saying, “the Fed has no more ammunition” about the tools they’ve got to handle this crisis. At this point, I perceive they can only further devalue the dollar by printing more money. Here are the Feds plans (as of 3/15/2020):

• US interest rate is now in a range of 0 to 0.25 percent
• Banks required to hold 0% in reserve (down from 10%)
• Buying $500 billion in treasuries
• Buying $200 billion in mortgage-backed securities

Maybe in another journal article, I’ll go into the repackaged collateral debt swaps that crippled the US markets in 2007, and how they’ve made a resurgence in 2020. There may be a connection with the $200 billion in mortgage-backed securities the Fed is purchasing.

Yesterday, I bought more Bitcoin at $5,300 and woke up to a $4,600 price. I still feel like I’m catching the falling blade, but I also don’t want to miss buying Bitcoin at these prices. I’ll likely continue buying more on the way down and allocating some extra capital.

Despite all this madness, I’m very happy to have an investment plan that I’ve been following religiously for the past five years. It’s quite simple: dollar-cost average. Every payday, I put as much money as I’m allowed by the IRS into tax-advantaged accounts. Currently, I’m invested in the Total US Stock Market Index (VTSAX), Total International Stock Market (VGTSX), and Vanguard Real Estate Index Fund (VGSLX).

The only thing I’ve been fighting is the urge to plow more money into the markets, which is something I didn’t expect when establishing my plan five years ago. I’d always anticipated I’d be afraid of losing capital, but my experience has been the opposite.

If this downturn is anything like the Great Depression, then I’ll likely have ample opportunity’s to buy.

I grew up in Miami and have seen many people panic. This mentality is something I’ve carried through this coronavirus scare. I might have been a bit callous in understanding the exponential threat this disease offers (even though I’ve been social distancing, and avoiding crowds)

This is one of the first articles that helped me better understand the nuances of the public health crisis that might loom: https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca

Final thought: Hardcore Bitcoiner’s are talking about potential bank runs. I think it’s a bit overblown, but only time will tell.

Also, yesterday I got into it with an ETH maximalist and was blocked by a Bitcoin maximalist. Irrationality and emotions are beginning to take over.

March 10th, 2020

“Over the short run, however, the fundamentals are often overwhelmed by the deafening noise of speculation.”

Jack Bogle

This past quarter has been a tumultuous one for the domestic and international markets. Currently, on Twitter, there is so much talk about the Coronavirus, as well as its impacts on global markets. With the threat of global pandemics and financial meltdowns, everyone tries to consume as much information as possible to arm themselves with knowledge for safety.

However, emotions take over, and sometimes opinions are regarded as facts. Many people take hard stances on differing views, which has created an environment of contradiction. In this environment, it can be easy to make irrational, short-term decisions. Especially as investors are battered with headlines and opinions like:

• The REPO market is going to implode the US economy.
• The US has been on its biggest bull market ever, and it has to end soon.
• Bitcoin is going to be $xxx,000.
• Bitcoin is going to be worth $x00.
• Treasury yields are lowering at an alarming rate.
• The Chinese supply chain is going to disrupt the entire global economy.
• The Fed cuts 50 basis points in response to Coronavirus.
• The Fed rate cut did not effect the US market.
• Russia dropped the price of oil to squeeze out US producers.
• Bonds are the only safe place to be.
• “This is what 2008 felt like.”

This noise is propagated and repeated by many as they witness their investments take a turn downward. For those who have their assets invested in US and international markets, their portfolios have plunged this quarter. With so much uncertainty across all the markets and various financial sectors, investors might be seeking (maybe desperately so) “safe” places to allocate their funds and investments.

When you don’t know what to do, do nothing.

Mark Cuban

At the time of writing this, I’m down approximately 9% from the end of January. However, from my portfolio’s peak in February – from a combined uptrend in the cryptocurrency and equity markets – I’ve witnessed an 18% loss.

It’s a bit frustrating to look at these paper losses and wish I could’ve danced in an out. However, something that has helped a bit – so far – has been sticking to a plan I formulated years ago.

In 2015 I developed a firm investment philosophy, which dictates contributing as much as possible to tax-advantaged accounts (i.e., 401k, IRA, etc.) and maintaining a 20+ year horizon. I engrained this habit, during a general uptrend in the international and domestic stock markets. It was easy then.

In today’s volatile market, it is this philosophy that is helping to minimize the sting from watching the Total US Stock Market Index dropped 5% in a day and nearly 8% the following day.

Dollar-cost averaging has removed anxiety about investing in these markets. One puts in ‘x’ amount each month, no matter what, then doesn’t think about it anymore.

In 20 years, I’m betting the US will have grown its equities markets, Bitcoin will become a larger asset class than it is today, and the countries from around the world will continue to produce great companies.

It’s this long-term perspective that is helping downturns in the equities market, cryptocurrency bear markets, and general volatility taste less bitter.

I hope it continues to do so if the markets become even more implosive.