The last couple of weeks, I have received a lot of questions from people in my direct environment, if this is the time to invest in stocks, bonds, cryptos and/or real estate.
And although I love to help others, it is difficult to say what others should do as I am not up to date on their risk tolerance, investment horizon and what keeps them up at night.
So I decided to explain it from my point of view, and how I manage my Total Portfolio. I have 17 charts that show most of the trouble is below the surface (scroll down).
Before we do that, let’s take a look at the current portfolio and how it performed throughout 2017.
During 2017, I almost doubled my Assets under Management (excluding new inflows) mainly due to the outstanding performance of the Crypto A Class (Bitcoin, Ethereum, Dash, Ripple, ZCash, Monero). The B-class (coins outside the market cap top 20) also added value but not as much as the A-class.
My investment in Global Stocks (60% in a stock fund linked to my mortgage, can’t sell before 2030, monthly add on, other 40% was in index trackers) contributed a bit more than 6% to the total portfolio.
The other investment strategies did not contribute in a way that it’s necessary to discuss it into detail. I will get back to these ideas when I discuss my outlook for the next 15 years.
There are several investment themes, that I will try to play over the next decade. The image below is my plan for the next 15 years.
On the left side, you’ll see the different asset strategies that I’m investing in and the % mentioned in the rows reflect my projected asset allocation.
BUY Global Stocks
I decreased the exposure to Global Stocks during 2017 as I’m not positive for the next two years (2018-2019). In my view, the market could correct 25%-35% to form a Higher Low after which the climb to DOW 40k can continue. So short term (next 12-24 months), I’m bearish on stocks for the next 12-24 months. Since I can not sell the stocks in my mortgage fund, I will actively try to hedge this exposure for the short term (2018-2019) –> See “HEDGE Global Stocks 2018-2019“.
Long term (next 10 years) I’m very bullish on US and EU stocks and based on my analysis I expect stocks to double into 2030.
One of the biggest bubbles I have ever seen, is the bond market –> record low interest rates. In the 1980’s, interest rates were at levels of 10%-12% (so was inflation), and currently, long term interest rates (10Y – 30Y) are between 2% and 4%. At some point, interest rates will start to normalize, and when that happens, rates could easily double from current levels –> bond market -50% over the period 2020-2033. What I do is very simple: I have a small investment in inverse bond funds, that increase in value when interest rates go up/price of the bond goes down. During 2018 and 2019, I will add monthly to this investment strategy till I have reached the desired weight of 15%-20% of total assets. These are the funds that I invest in:
Cryptos Class A and B
I was heavily overweight cryptos during the year and that bet paid off. As you can see in the table “Outlook” I took some money off the table during Q4 2017 and I will keep taking profit on the current positions in portfolio up to the point where I have a max of 5% invested in cryptos. Short term, next 1-3 months, I do see some more upside potential (Bitcoin to 10k-13k < Q1 2018 is finished) but for the next 6-12 months, I’m bearish and a drop of 75% for Bitcoin would not surprise me. That’s the reason I will keep trimming down my exposure to cryptos.
Participate in ICO’s
I use a small part of my funds, to invest in interesting ICO’s that have a solid business model and a respectable management team. I read a lot of whitepapers and when I see an interesting business model, then I will invest a small amount ($25-$100) of my funds in that ICO and put it on the shelf. I see this a fun way to acquire some lottery tickets.
Buy Gold and Silver coins
I have 10% of my assets invested in Gold and Silver coins, for two reasons: 1. diversification and 2. a safe haven when things do get messy…This strategy is simply buy and hold.
HEDGE Global Stocks 2018-2019
I use my trading account at eToro to hedge against the short term risk of the stock market. In 2017, this hedge strategy is down almost 15%, and since I have invested roughly 7% of my assets in this strategy, it contributed a negative of 1.1% to the portfolio. If the market does correct as I expect, then this hedge will pay off and will add value to my total portfolio.
BUY PUT Spreads AEX
Besides my hedge at eToro, I also invest in Put Spreads on the Dutch stock market (AEX). This is, combined with the CFD hedge at eToro, my way to protect my capital if things do turn south at the start of 2018.
My wife and I expect to move to a new house before the end of 2019. We currently have a small house, that is perfect for letting out. So my idea is to keep my current house and when we move to the new one, we’ll rent out our current house. The rent will be used to pay off the mortgage and after 10 years, the house should be completely free and it can really add value to our pension plans.
Now, let’s take a look at some interesting charts.
S&P500, DJI, DAX, VIX and Bitcoin
CHARTS and IDEAS
Bitcoin Chart 1
Let’s start with Bitcoin. I have 2 charts to share. The first chart is the chart where the current pattern of Bitcoin resembles the pattern we saw before with Gold. So far, the patterns line up and therefore, if the patterns keep on rhyming, Bitcoin could reach $10.000 before the year is over. So as long as Bitcoin trades above $6900, Buy the dip should still work.
Bitcoin Chart 2
The second chart is the chart of Bitcoin, also a parabolic pattern. Based on this projection, I expect the $10k-$13k to be worked off before the Q1 2018 is over. Once that target is worked off, I expect a 75% drop of Bitcoin during 2018, click here to see why.
US Stock Markets
Whenever I analyze the US markets, I use Cycles/Time analysis, Pattern Recognition, Trend Analysis, Elliott Wave and the RSI to determine what the strategy should be.
The following charts show the possibility that the US markets are close to a change in trend.
Chart 3 – Nikkei225 1986-1990 vs S&P500 2009-2017
This is a chart that I posted some time ago and it shows that history is on its way to form the future again. On the left side, you’ll see the Nikkei225 over the period 1986-1990. The right side is the S&P500 over the period 2009-today.
Now, if we zoom in on the chart above, then we see the short term time frames are also following the same pattern as we saw before with the Nikkei225.
Chart 4 – Nikkei225 1986-1990 vs S&P500 2009-2017
Chart 4 – DJI 1987 vs DJI 2009-2017
Now, let’s do the same exercise again and see how the short term aligns.
Chart 5 – DJI 1987 vs DJI 2009-2017
This pattern is close to finishing. Once the DJI closes below the black line @ 23.400, things could escalate quickly.
Chart 6 – SPX Weekly Chart
A lot of things in life are based on cycles, time and math. In this example, I want to share the following:
The length of wave 5 equals the difference between the length of wave 3 – length of wave 1.
Time is running out….
Chart 7 – DJI Weekly Elliott Wave
This chart shows a repetitive pattern that I see a lot: 1,2 – 1,2 – 3 – 4 – 5.
Currently, the DJI is working on the 5th wave up. Almost there….
Chart 8 – SPX Long Term Cycles
Keep an eye on NOV 27-DEC 4/5 and the 1st week of January 2018 for a possible change in trend.
Chart 9 – SPX Short Term Cycles
For the short term, there’s a lot of energy for NOV 21, NOV 27, DEC 4/5 and the 1st week of JAN.
Chart 10 – Russell 2000 Index – Weekly Chart
An abcde pattern combined with a megaphone pattern for this 5th wave up indicates we’re close to a high.
Target prices are -25% and -50% over the period 2018-2019.
Chart 11 – S&P500- Daily Chart – Parabolic Pattern
The S&P500 broke the parabolic pattern (Oepsss…) and now it’s working on the retest. If that fails to break back above the green line, then things could escalate quickly….
Chart 12 – DJI – Weekly Chart – Long Term Outlook
This chart shows my outlook for the next 15 years: hedge and buy the dip for DOW 40k.
Chart 13 – DJI – Weekly Chart – Outlook 2033
Same pattern, same outcome?
Chart 14 – S&P500 – EW Target Wave 5 up 2670?
This chart shows the possibility that the S&P500 needs to work off 2670 before the drop starts. The target 2670 is derived from the assumption that wave 5 equals wave 1 in %.
Chart 15 – Bubbles and Parabolic Patterns in progress
Maybe due to the excessive money printing by Central Banks, that basically all assets show a parabolic pattern. Parabolic patterns never end well…In the meantime, enjoy them while they last.
Chart 16 – DAX – Weekly and Daily Charts
This chart shows the DAX Weekly and Daily time frame, signaling the 5th wave up could be finished and an ABC corrective wave is next.
Chart 17 – VIX Monthly Chart
The Monthly Chart of the VIX is showing a similar pattern that we saw 3x before. 4th time is the charm, right?
Not satisfied yet?
You want more?
Then this post “Who will buy this market when this happens?” might be an interesting read.
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