“There are years when nothing happens, and there are days when years happen.”
Over the recent weeks the financial markets and the traders that trade them have had to digest mountains of financial information that would normally take years to provide. The question always remains, what is the best move forward? In this article, we are going to explore the prevailing NARRATIVES in the stock, Gold, and bitcoin markets.
Narratives are fascinating to dissect. While I am a bull in many markets, my discussion today is not about trying to convince you of my perspective. Rather, my intention is to help you realize that it is difficult to understand which narrative, if any, is accurate at portraying the events occurring in any of the financial markets.
Narratives are stories that are actually just well-disguised opinions. We like to think that the narratives we hear are genuine, honest, and reliable; but when you put these financial narratives under a microscope, you quickly find that often they are just well-engineered stories.
One of the most exciting and volatile markets to trade is bitcoin. But it is a very polarizing market; it is very easy to find zealots and skeptics who are 100% sure of their narrative. But what makes bitcoin so unique is that it is the single best performing asset class of all time.
Haters of bitcoin are everywhere, and they will tell you that it has no intrinsic value. On the other hand, the believers of bitcoin propose that since there will only ever be 21 million bitcoin that when it becomes the reserve currency of the world that each bitcoin will be worth several million dollars. The debate really is over how society and civilization defines money. Does government define money or is value determined by participants in a market? These are very fundamental questions with extremely profound implications. More importantly, markets are trying to adapt to this changing landscape and the volatility it creates is breathtaking.
Governments around the world are playing catch up to the cryptocurrency revolution that has unfolded over the last 12 years. Many are planning on launching their own versions of digital currencies shortly. As all of these trends unfold, the narratives in the marketplace are almost infinite with regard to how the financial media is attempting to interpret the news.
Recent headlines announced that bitcoin was adopted as legal tender on September 7, 2021, in El Salvador. It is currently being considered as legal tender in multiple other nations too including Ukraine, Honduras, Guatemala, Paraguay, Panama, Nigeria, Colombia, and Mexico.
Up until last year, bitcoin was considered a highly speculative asset. But last year large multinational corporations began to adopt bitcoin as their reserve asset since they did not feel comfortable holding U.S. dollars in light of the massive printing press spree we have all just witnessed. Now sovereign nation states are jumping on the bitcoin bandwagon as more and more countries’ citizens are coming to the realization that fiat currencies are a horrible store of value.
Over the past month we have witnessed the United States withdraw from a very costly 20-year war in Afghanistan. Estimates are coming in that over those twenty years the United States was spending $300 million dollars a day.
But remember, whenever we analyze anything, context is particularly important.
In 2001, after 9/11, the Federal Reserve balance sheet stood at $600 billion. Today it stands nearly 14 times higher at $8.3 trillion. Back then the movement in the balance sheet was very small year over year. Today the Fed has committed to purchasing $120 billion is U.S. Treasury Bonds every month. The new norm is now indefinite expansion. The balance sheet will hit $10 trillion by mid-2022. At any point when The Fed even hints at slowing down its purchases (referred to as tapering) of U.S Treasuries, the stock market tumbles.
History paints a very unfortunate picture of what comes after massive balance sheet expansion.
In 2001, the U.S. Dollar Index stood at 117. Today the Dollar Index closed at 92.53 which represents a 21% decline in value.
This means our dollars have lost 21% of their value in the last 20 years. Regardless how you look at that it is an ugly trend.
Today we also have the economy wrestling with a devaluing dollar, a loss of confidence in centralized power structures, and an unabashedly political class that prints money as the solution to all problems…all while refusing to admit that they are perpetuating massive wealth inequality by doing so.
There are a handful of narratives that have emerged to attempt to make sense of these scenarios.
#1) Don’t fight The Fed. This narrative says that when The Fed opens up its wallet, only fools will stand in its way. Since The Fed is the main player in the trend, all you have to do is buy an Index Fund ETF and surrender to the trend. How has this worked out since 2001?
In September 2001 the S&P 500 was at 1627.82, today it is at 4500. That represents a gain of 176% over the last 20 years.
#2) Meanwhile, Central Banks around the world are stockpiling GOLD. According to a quarterly summary from the World Gold Council, global gold reserves by countries expanded 39% higher than the five-year average for the first half of the year, noting strong purchases by Russia, Brazil, India, South Africa, Thailand, and Hungary.
In September 2001 Gold was trading at $425. Today it is trading at $1800. This represents a gain of 323%. As hard as it might be to believe, since the 9/11 tragedy Gold has outperformed the stock market by almost 2 to 1.
Most traders are completely unaware of this reality; especially since the financial media bombards us with stories of the stock market making new highs every single week. The S&P 500 index has produced 50 record closing highs so far this year. Based upon only these two asset classes, where does the safe money go moving forward?
Are you the kind of investor-trader who likes to bet on the winning horse? Or do you cheer for the laggard?
#3) Hold it! There is a new asset class that is also disrupting the financial markets — cryptocurrency. The leading digital currency is bitcoin.
Bitcoin’s performance is nothing short of breathtaking. But more importantly, what bitcoin is offering is a programmatic money supply that is completely known ahead of time with a completely transparent network.
As you ponder that performance think of what the future could hold for bitcoin as nation states fight amongst themselves to acquire the scarcest monetary asset that has ever existed.
Now think again about September 7, 2021, when El Salvador made bitcoin legal tender. The bitcoin community was anticipating this moment for a few months. The fireworks started when President Bekele posted on Twitter that El Salvador had made the first purchase in history of bitcoin for a nation state.
President Bekele also announced that all citizens of El Salvador would receive $30 in bitcoin to celebrate the historic event.
The outcome was better than any spy thriller!
On September 7, 2021, Bitcoin’s chart was looking as bullish as possible. It was higher than the high of the previous day, week, and month – all pointing to a very strong uptrend. But in a period of a few hours the price of bitcoin plunged over 19%. Why? A lot of stories have emerged, but it looks like the legacy financial system is got going to give up their leadership position without a massive fight. The selling took place at the Chicago Mercantile Exchanges and traders suspect that the sellers were the World Bank, The IMF, and the Federal Reserve.
Whenever a market drops almost 20% in one day, it makes the headlines; as they say in the press, “if it bleeds it leads.” But as closely as I watch the financial media, it was barely discussed. Odd!
More importantly, the citizens of El Salvador had received $30 from the government and in the matter of a few hours, it had devalued to roughly $24.
Score a point for the Legacy Financial System.
“The battle that bitcoin is facing is very much about how the world defines money moving forward.”
I consider this to be noteworthy because the battle that bitcoin is facing is very much about how the world defines money moving forward. Traditionally value has always been determined by market participants in a free and open exchange. But today we have a legacy financial system that takes to the printing press to fight each and every problem it
encounters. That printing press has made it literally impossible for people to save money because the dollar is being devalued faster and faster with each passing year.
Thirty years ago, you could take your money and invest in U.S. Treasuries yielding 9%. Even taking inflation into account, a conservative saver was able to maintain the purchasing power of their savings. Today with interest rates near zero percent and inflation looking like it will annualize upwards of 5% you are losing 5% of your savings a year.
Why Is This Important?
I have provided you with three completely different narratives.
Each is competing for your attention, your understanding, and your money.
Who is the fastest and best horse to bet on in this race? That’s a good question!
Opinions are a dime a dozen, mine included.
Smart professional traders approach these narratives by allowing artificial intelligence to determine the trend forecast. When the trend forecast aligns with their prevailing narrative, they establish themselves in the market to exploit the trend.
Let me explain using the Vantagepoint Predictive Blue Line and the S&P 500 Index.
On the following chart you will see the power of the VantagePoint Predictive blue line which determines the medium-term trend price forecast.
The guidelines we abide by are as follows:
- The slope of the predictive blue line determines the trend and general direction of the S&P 500 Index.
- Ideally, the VALUE ZONE is determined to try and buy the asset at or below the predictive blue line.
Over the past year this has been a very effective way for medium-term swing traders and longer-term investors to positions themselves on the long side of stock market without having to carry it on the downside when it falls in price.
When the predictive blue line slopes lower, traders would be anticipating lower prices and either moving to the sidelines or hedging their positions with options.
While my fundamental opinion of S&P 500 is long term bullish, I’ve learned to let the a.i. trend forecast temper my long-term enthusiasm and simply timing my purchases when they align.
I write these words trusting that you will be able to appreciate the power that artificial intelligence brings to your decision-making process.
But truly the only thing that matters for traders is price – not our opinion on a newsworthy story.
Artificial Intelligence provides you with the breathtaking, money-making power of total perspective.
The difference between great traders and bad traders is whether they focus on what “IS” happening in the market or what “SHOULD” happen.
“IS” and “SHOULD” are two very different words!
Great traders understand that putting your money into what “IS” happening is at the very heart of success. Likewise, they understand that “SHOULD” is a word that will take hold of imaginations, but it will never put money in the bank.
To make money you must move past opinions… and focus on FACTS. But truthfully, most traders love DRAMA and there is no shortage of that when it comes to making money. Braggards are everywhere trying to proclaim their dominance and insider knowledge. They’ve got “great” narratives!
There is only one fact in the world of markets and that is PRICE. What the price of an asset does is the only thing that matters to a trader.
Price is the only thing that can create wealth. As experienced traders have learned, the market is never wrong, but opinions often are!
This is painfully obvious in hindsight, but traders often get trapped in the story and it forces them to behave quite irrationally.
“Stories” capture the imagination and make us all think about possibilities. BUT stories are where RISK lives.
Traders must concern themselves only with how the price of an asset responds to NEWS and STORIES. This is exactly why artificial intelligence is invaluable in helping traders focus on solid trends.
We’ll say it again: There is only one fact in the world of markets and that is PRICE.
Stories pull on our heart strings and trigger traders to make decisions irrationally. Trading success comes from making decisions based only on cold, hard FACTS!
It’s all about getting on the right side, of the right trend at the right time.
Most traders have problems with the timing of their trades.
If you want to win, it’s all about who has the best tools. Artificial intelligence excels at keeping traders on the right side of the right trend at the right time.
Let’s get candid here:
- The market is brutally honest – there are winners and losers.
- It’s very black and white.
- If you need a friend, get a dog.
- If you are going to win, someone else must lose.
- If survival of the fittest makes you uneasy, stay out of the financial markets.
We live in unique times. The Printing Press is diluting the value of your money.
Everyone is aware that if the money supply grows 20% you must grow your portfolio by that amount just to break even when you look at your purchasing power.
Since artificial intelligence has beaten humans in Poker, Chess, Jeopardy and Go!, do you really think trading is any different?
How do you think your investment portfolio compares when pitted against artificial intelligence?
Are you capable of finding those markets with the best risk/reward ratios out of the thousands of trading opportunities that exist?
Knowledge. Useful knowledge. And its application is what A.I. delivers.
Join us for a FREE, Live Training. We’ll show you at least three stocks that have been identified by the A.I. that are poised for big movement… and remember, movement of any kind is an opportunity for profits!
Discover why artificial intelligence is the solution professional traders go-to for less risk, more rewards, and guaranteed peace of mind.
Visit with us and check out the A.I. at our Next Live Training.
Discover why Vantagepoint’s artificial intelligence is the solution professional traders go-to for less risk, more rewards, and guaranteed peace of mind.
It’s not magic. It’s machine learning.
Make it count.
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