Investing in 2018 – Minimax Regret

This iguana versus snakes video from Planet Earth blew my mind. I have watched it 20 times.

Ok now to my idea for the day:

I loved Ben Hunt’s piece at Epsilon Theory titled ‘The Three Body Problem‘. It is long and winding, but if you have invested or traded the last 10 years, a lot will ring true.

My fave nugget was this:

I think we should adopt a classic game theory strategy for dealing with uncertain systems — minimax regret. The idea is simple, but the implications profound: instead of seeking to maximize returns, we seek to minimize our maximum regret. Keep in mind that our maximum regret may not be ruinous loss! I know plenty of people whose maximum regret is not keeping up with the Joneses. In fact, from a business model perspective, that’s more common than not. Or if you’ve bought into Bitcoin north of $15,000 per coin, I think you know what I’m talking about, too. The point being that we need to be painfully honest with ourselves about our sources of regret and target our investments accordingly. If we can be this honest with ourselves, it’s a VERY powerful strategy.

So Excited for 2018…

At the risk of jinxing 2018, I am really excited.

Anything seems possible if you are in the creative/content business (as long as you do not want to get rich off it).

If you have an entrepreneurial spirit, the mentoring at your fingertips is astounding.

If you are an investor or trader…you have the rigged and regulated stock market or the wild west of crypto.

I have a ton of ideas and content in my head, but for some reason all I feel like doing today is sharing some great content that I have consumed the last few days.

To begin, I am in Netflix beast mode. The two trips to Israel allowed me to consume a ton of shows. Ellen and I have been binge watched Godless, Peaky Blinders, The Crown, and comedians Russell Howard (insane energy) and Todd Barry. All worth the time.

This comeback story being staged by Chinese phone maker Xiomi is a great read.

This podcast with Chris Dixon on the future of tech is a MUST listen. Chris has been ahead of the curve too often to ignore the freebie. All the Investor Field Guide podcasts are worth a listen.

This ‘Year of Stocktwits ‘ is a fantastic review of how smart crowds can be when it comes to investing and the importance of community and networks.

Dan Ramsden who runs strategy for Stocktwits had this great piece out on ‘Interpreting The Networks‘. Read it once a month. The conclusion (does not change the fact that you will enjoy the meat of the piece):

Tipping points and freedom

As any analysis written around this time must eventually arrive at Bitcoin, one way to read all of the foregoing is as a setting of the stage, a preface to the worldwide explosion in cryptocurrency.

If these are to be seen as a financial asset class in the traditional sense, then the value spike of the recent past resembles a bubble. If these, however, are more correctly interpreted as distributed digital networks that happen to be linked to trading mechanisms, then what shows as a bubble to the price chart reader may actually be a network tipping point.

Money and markets are themselves big network systems. They’ve been here a long time and grown even with repeated changes and disturbance. They want to be inclusive and widely accessible. Like all networks, in the last analysis, the markets want to be free.

Finally – big technology and healthcare is game on Garth! You will enjoy this read, even if it seems too early to get excited.

On the dark side, the trolls have had a great year. This New York Times piece about digital nazi’s beating a digital nazi hunter is absurd and sad.

I have to believe that 2017 was peak troll. Twitter can’t continue to be so clueless. Facebook sadly can and will, but that deal with the devil is more complicated for all of us.

Looking Back at The Year in Technology and Venture Capital

Like Fred Wilson, I like to use this time of the year to review my work.

This stuff is fun for me but it is also a great mental exercise to go through. It forces me to reflect, think, and focus on what is/was most important.

There is so much that blogging does for my brain. I am not sure how I would do my work without it. The daily routine of writing something for public consumption is a discipline that brings clarity in a confusing time. The bigger posts that come every now and then, and the year end ones, are particularly valuable to write.

I caught a lot of good trends this year in Bitcoin, Ethereum, financial stocks and large cap technology. It was hard not to with this strong tape. But I also missed big opportunities and made my share of investing mistakes.

For example:

Every time I sold any Bitcoin and Ethereum I should have bought it.

I did not invest enough time, energy and money in tokens and ICO’s. The returns were astronomical for those that did the work and followed the right crowd.

I ditched my $LULU way too early and held my UnderArmor too long.

Although I have no position in Best Buy, I thought it would disappear into retail hell and went on record on the streams a few times to say so. Best Buy is closing the year at all-time highs. Best Buy will not be typed with these fingers in 2018. I break with thee, I break with thee, I break with the…

As for the rest of technology and Venture Capital, my friend Semil has a fantastic post which you can read here. This riff was great:

We are in the middle of a fast-paced global, unregulated, hard-to-trace, multiparty crowdfunding game driven by both optimistic speculation and ebullient house money booked during an unprecedented bull market run. At some point, the music will stop — lawsuits could arise in situations like Tezos, which raised an ungodly sum of money through a crowdsale and is now mired in controversy over how those funds are being managed, and regulatory bodies like the SEC and others could step-up activities to protect retail consumers and also better track ledgers for tax collections on gains. Overall, even when the music stops for a bit, there’s no denying that the effect of crypto as a new architecture for designing, building, and incentivizing online behaviors is a major breakthrough and one that will change how many tech startups are built and financed in the future

It is time to get ready for 2018 and I have some more ideas to share starting tomorrow.

Predictions for 2018 – Supply, Supply, Supply!

There will be a LOT of market predictions offered up the next few days as we head into 2018.

I am reminded of one of my favorite Al Pacino/Scarface riffs as predictions heat up:

Be careful with your hard earned money.

I am optimistic about the markets, private and public as we head into 2018.

Technically, the market internals are strong.

Fundamentally, everyone is in the storytelling business right now. Try raising money for 25 percent IRR private equity returns in an environment where the S&P has no volatility and is up 20 percent on the year and Cryptocurrencies are up 1,000 percent with daily liquidity.

Fundamentally, the US government is in ‘let the hogs run’ mode.

Banks, telcom, and other financial hucksters are going to have a field day in 2018. Josh Brown sums up the perfect storm that awaits the sellers of financial products.

Though the whole crypto market is still smaller than the market capitalization of Facebook, the supply of deals and digital assets will explode further in 2018:

When the year began, the combined value of all investable cryptocurrencies was just $17.7 billion, with bitcoin making up the vast majority of this market cap. But as of Dec. 19, the combined market cap of the more than 1,360 cryptocurrencies hit as high as $642 billion. That’s a better than 3,500% increase in cryptocurrency market value in less than a year, which is a bigger increase than some investors will see throughout their lifetimes.

Take a read of what’s brewing up in ‘conservative’ Canada for a taste of what could get going here in the USA in 2018.

Everyone wants a shot at a lottery ticket in 2018 and the people always get what they want.

Happy Holidays

I had Chinese food last night. Christmas tradition.

Ellen and I will binge on some Netflix and maybe see a movie. I can’t believe how much new content is showing up in Netflix.

Max is with his buddies golfing in San Diego.

Rachel is in Jerusalem.

I hope everyone that celebrates Christmas gets the presents they want and has a great day with family and friends.

I Love Twitter

I woke up this morning at 5 am eastern to get a run in before my flight back from Toronto. It was snowing.

By 1-45 I was on the course with Max and my nephew Eli golfing in Phoenix. It was chilly, but NOT snowing. I am glad I took the early flight because I had my first eagle in a long time. Max had 5 birdies, a back side 33 (71 total). It was fun to watch him as we have not played together in months.

Now to the title of the post…

This week was a wild one in the markets.

The Nasdaq snuck past 7,000 quietly as the media focused on Bitcoin.

The Nasdaq is now the underdog it seems…the poor man’s Bitcoin.

One forgotten stock of the Nasdaq that has had a pretty good run of late is Twitter.

This week Elon Musk said he ‘loved Twitter’. On Twitter of course. I’m with Elon.

Twitter has come a long way from #RIP Twitter. Back in February 2016, it seemed obvious, and I blogged it,that #RIPTwitter could be the bottom. At the end of the post I wrote:

I hope this downturn makes Twitter a nicer corporation because I am confident there is a huge, profitable, 100 year business on the other side of this crash.

Last month, in my monthly ‘Peloton‘ newsletter I went on record with subscribers to buy. The stock is up 20 percent in a short period of time.

I won’t get into all the reasons I thought there was big upside, but the crypto craze is a boon for Twitter. I know this because I see the data on Stocktwits that Ian, the CEO, shares with me.

I don’t think I have used 280 character Twitter but the data says everyone loves it.

I still think the Company is off strategically in their revenue focus, but everything bad that could be done to the Company seemed to be done and priced in after #RIPTwitter.

Merry Christmas everyone.

Storytelling

I have had a long week on the road. Phoenix to Toronto to Tel Aviv to Toronto and finally today back home to Phoenix. I am looking forward to a week of family time.

My friend Andy posted this great shot of Jeff Bezos at his desk in the very early days of Amazon (1999). The picture is fitting with this great long read up today from Morgan Housel titled ‘The Greatest Story Ever Told‘. It’s about 20 minutes to read, but has something for everyone to take away.

As an investor, I have found my stride as a trend follower constantly building my network and peloton to live just a little bit in the future.

After reading Morgan’s piece I have a greater appreciation for how my part in trend following may be more as a storyteller. I will likely come back to this in greater detail in another post.

Have a great Saturday.

It’s Tough Not to Be a Pig

I was hanging with my nephew Brandon this afternoon in Toronto. Brandon is 24, is working in software software sales, loves avocados and has crypto fever.

Brandon does not read investing books, has never owned a stock, but has quadrupled his savings in FIVE months in a diversified portfolio of cryptocurrencies.

I am not sure that is smart, but he caught crypto fever from me and I do not have a cure. Only the markets do.

In short, here is how Brandon got to where he did in five months:

1. He set up a wallet in minutes, by searching Google for best reviews and than watched YouTube videos on how to set up a secure drive to get his crypto off line on ledger.

2. He started with Bitcoin and Ethereum (on my advice) and profits quickly came which is how any investing fever begins.

3. He group chats with his other young friends (who also have crypto fever) and checks Stocktwits for news and sentiment.

4. He texts me a lot.

Talk about circumventing Wall Street.

At one point today I was rambling on about pigs getting fat and hogs getting slaughtered and he looked at me and said ‘Uncle Howie, it’s hard not to be a pig’.

Indeed.

The next generation of investors and traders are now hooked.

I think that is cool.

The New Stocktwits Web – ‘Discover’, Highlights, Advanced Charting, Earnings Calendar

I am excited for the Stocktwits team and community today after the launch of the new Stocktwits website.

Justin spearheads the product at Stocktwits and his post today has all the details of the design and new features.

The most exciting addition is the ‘Discover‘ section of the website (also a button on the mobile apps).

Congrats to CEO Ian Rosen, Justin and the rest of the team.

December 2017…Borrowed Crypto Time

I am interrupting Podcast week here on the blog to just say…. WTF!

This is a month in the markets that will remembered for decades to come.

I don’t believe the traders and the investors comprehend the fragility of this moment in crypto.

The acceleration of gains in crypto stocks and tokens can of course continue, but I sense we are at some sort of tipping point. Either this time it really is different, or a shakeout of mighty proportions is at hand.

I happen to be back in Tel Aviv for two days days soaking in the crypto air with a few friends from Toronto and working on a project and deal that we want to get closed by the end of the year.

I woke up this morning in Israel to see prices of tokens and crypto that made me shake my head for what seems like the 30th day straight.

I sold my last Augur in the 40’s, up from 20 a month ago (outlined on my blog) and this morning it hit $100.

I sold some EOS at $7, up from $1 just 30 days ago (outlined in my monthly Peloton) and it hit $12 today.

My friend Chris outlines four listed tickers (GBTC, OSTK, LFIN, RIOT) that are part of crypto mania.

Here is a picture of my Stocktwits watchlist yesterday morning that sorts by biggest gainers. A cool feature of the Stocktwits watchlist is it allows you to mix crypto tickers with your stock tickers. Notice anything?…

The .x tickers are crypto and token companies that are having overnight gains of 100 percent.

Only two names were actual stocks…

Riot Blockchain which itself was a biotech stock a few weeks ago before the marketing department said ‘Hey, let’s add blockchain to the Company name and mine some crypto’). The stock is up 1,000 percent. Today, they announced a secondary deal got done at $22/share and the stock still traded above $40.

And CGVW (Calavo Growers) the largest Avocado grower and food of the millennials…natch!

The dollars at stake and eventually lost when the party ended in March 2000 were much larger than the dollars at stake today, but I still have the sense that the froth of December 2017 both in the markets and in the air is something we will look back at and go…yep what was I thinking.

In the meantime, Tel Aviv is humming and I am hoping that ‘religion around software code’ combined with network effects means this time it is really different.

Congrats to all the young people around the world that created this beautiful and wild phenomenon. I am rooting for an outcome different than March 2000.

Disclosure – Long Bitcoin, Ethereum, ZCash and EOS