In today’s Money Morning…our new, FREE ‘New Money Masterclass’…picking up pennies…the best opportunities…the big picture…and more…
‘After this war, “money” will never be the same again…’
That’s how a Credit Suisse research note summarised the shake-up we’re seeing in the monetary system right now — as a direct result of the war in Ukraine.
Coming from a ‘bastion’ of the financial system like Credit Suisse…that’s quite an extreme claim.
But then, the world is facing an extreme situation.
And there was more. ‘Bitcoin (if it still exists) will probably benefit from all this, ’ the note continued.
As my colleague and our in-house crypto specialist Ryan Dinse put it, we’re watching the collapse of the old financial system…and the birth of something new. Exactly what shape that new system will take is unclear.
But you can bet cryptocurrencies will likely play a part in it.
And with huge companies and powerful countries either adopting crypto tech — or planning to — it might just be time to make cryptos part of your long-term plans, too.
But what should you do? Buy Bitcoin [BTC]? Ethereum [ETH]? The up-and-coming ‘altcoins’?
Crypto is not my expertise. But it is Ryan’s. That’s why the first thing I recommend you do is look out for Ryan’s ‘New Money Masterclass’.
The first episode goes live to all Money Morning readers — free of charge — tomorrow.
In it, you’ll get a real expert’s view on the crypto markets. And you’ll hear about Ryan’s top crypto play for 2022.
He thinks it’s perfect for people who’ve missed out so far — and want to play catch-up.
Check that out tomorrow. It’ll be with you in the morning.
Now…to today’s issue…
There’s a lesson in today’s Money Morning that can serve you very well if you know how to use it.
Inflation is a huge risk right now. Bonds are falling, tech stocks are under pressure, and so is crypto.
Investors are returning to value over growth.
There’s a huge mistake that many investors make in times like these, and the solution might shock you…
It’s to do less, not more.
You see, one of the secrets to trading and investing success is to know how to do nothing. Sounds strange, doesn’t it? But it’s actually a really powerful principle for success.
Before I tell you how you can use this secret right now, I want to talk about how I first stumbled upon it…
Picking up pennies
When I first started day trading, it took me a long time to figure this out. There was always a pressure to perform.
You’re told to make money every day.
Well, after a few years, I found some of my most profitable months came with the smallest number of trades. In the early days, I would make about 10 trades a day. Later on, I would make fewer trades than this in a whole month, some months.
The thing is, I was making more money, even while trading less.
The reason is simple.
Early on, I was picking up pennies in front of a steamroller. I’d make a bunch of small wins until I got squashed by an unstoppable market force that I wasn’t paying attention to.
When I dramatically cut back on the number of trades I was taking, I was only taking the very best opportunities. I overcame the temptation to overtrade and take the less juicy set-ups.
Some months, I did just six or seven trades and had a great month.
Picking the right opportunities is critical for maximising your return and minimising your risk.
The best opportunities
But how do you pick the best opportunities?
It’s simple. Always keep the bigger picture in mind.
If you’re a day trader looking at one-minute or five-minute charts, always keep an eye on what the daily charts look like. Don’t get sucked into a short time frame’s weak opportunity while ignoring a looming bigger picture risk.
Your daily charts help you form your bigger picture view of the overall markets. You should keep this bigger picture in mind every time you make a decision.
I like to look at five-minute charts for intraday price action. But I always have a daily chart up, to keep firmly in front of mind where the biggest risks are.
When you go down into a lower time frame, that’s just to pinpoint entry and exit points.
This is, by the way, also key to the success of Exponential Stock Investor. It’s about being positioned to take full advantage of those unstoppable market forces to maximise return.
The big picture
So what’s the bigger picture in terms of the markets right now?
On the surface, tech is down and inflation is up, and a lot of mainstream journalists are worried about a crash.
However, the important thing to keep in mind is that the economy is very strong. Our problem right now is that central banks went too far with the free money parade. And that lifted valuations to unsustainable highs.
But there are two ways those valuations come down. One is through prices falling, and the other is through earnings increasing.
This year could catch some of the perennial market bears with a very nasty surprise. After all, this is the doom and gloom set-up they’ve been bleating about since they missed calling the high before the 2008 crises — so they’re all in on the doom parade.
The thing is, market crashes don’t happen when everyone is calling for them. In those instances, people have pulled their money out and are expecting the worst.
The crashes happen when we are looking at the shiny penny in our hand and completely oblivious to the steamroller bearing down on top of us.
Now, as I’ve said before, I expect a lot of volatility this year. In fact, I welcome it. As one of my colleagues said in a meeting last week, ‘Never-ending bull markets are boring’.
I expect at the end of 2022, there will be a lot of people kicking themselves for spotting steamrollers everywhere. This could be a big year for share market earnings, and that could be the major driver bringing down some of those lofty share price valuations.
The bigger picture is a very strong economy. That means I want to own shares. Any dip this year is a buying opportunity.
To hedge against inflation, I’m also happy to have a bit more commodity exposure, but not just anything. There are plain-old boring commodities, and then there are the commodities of the future. These are things like graphene, rare earths metals, and lithium.
These are the kinds of commodities we’ve got exposure to in Exponential Stock Investor.
Not to mention collagen. But more on that another time…
Until next week,
 |
Izaac Ronay,
Editor, Money Morning
PS: If you haven’t had a look already, check out our ‘Metaverse Mania DECONSTRUCTED: A Sceptic’s Guide to Becoming an Early Stakeholder in Web 3.0’ report.
PPS: And don’t forget, if you’ve always wanted to invest in cryptocurrencies but don’t know where to start, keep an eye on your inbox tomorrow morning. We’ve put together a ‘New Money Masterclass’ that shows you how to start playing catch-up. Episode One goes live tomorrow — free of charge.
