Nearing The Point of No Return.
An event horizon marks the boundary around a black hole beyond which no light or matter can escape, symbolizing the ultimate point of no return.
As we navigate the early months of 2024, the world's geopolitical and economic landscapes seem on the brink of something monumental. Every new headline brings us closer to a metaphorical abyss from which recovery could be both challenging and uncertain. With Murphy's Law lurking ominously, we might be just a few unfortunate events away from being tipped into this abyss, like gathering ingredients for a perfect storm that needs only one trigger to set off a colossal mega-event.
The surge in immigration over the past five years might just be the catalyst that propels the Western world into a vortex of geopolitical turmoil. In cities across Europe, the increase in violent incidents, including fatal attacks by migrants on locals and a rise in street crimes such as phone-snatching and armed robberies, has become alarmingly frequent. A similar trend is emerging in the US, underscored by a recent incident where two NYPD officers were assaulted by migrants, allegedly linked to Venezuela's notorious Tren de Aragua gang. This unsettling pattern suggests that the refugee streams flowing into Europe, America, and Canada could be carrying a hidden contingent of criminals, gang members, and terrorists. With the US elections on the horizon and tensions already high, the stage is set for significant upheaval.
In this edition of Something To Consider, set against the backdrop of a world teetering on the edge, I delve into the measures I'm taking to fortify my portfolio against the potential storms on the horizon.
Thinking Ahead in uncertain Times
When I look at the world today, I often ask myself "what if" questions. What if tensions around the globe lead to something as big as a World War? What if inflation, which we thought was under control, skyrockets like it did back in the 70s? Or what if we face a major cutoff, not just of oil, but of many essential imports we rely on? These kinds of questions help shape how I manage my investments, especially when the future feels so unpredictable.
In this edition, a pressing concern on my mind is the fallout from unchecked governmental expenditure and escalating national debt. I'm apprehensive that this could devalue our currency and reignite inflation to levels reminiscent of the 1970s and 80s, but with potentially more severe consequences given the current scale of debt. In such turbulent financial waters, where traditional currency might falter, I'm seeking investments that could serve as a lifeboat, ensuring my assets stay afloat even as the ship of conventional finance faces the risk of sinking.
History teaches us that certain assets often serve as reliable lifeboats. Gold and other precious metals have traditionally safeguarded wealth during inflationary periods, while real estate and commodities like oil and agricultural products have also held their ground. More recently, cryptocurrencies have emerged as potential hedges, offering new avenues for investors to protect their purchasing power. As we brace for possible economic turbulence, diversifying into these assets could be key to maintaining financial stability.
Bitcoin & Etherium
Bitcoin (BTC) and Ethereum (ETH) are both blockchain networks. Bitcoin is the largest blockchain network in terms of market capitalization and was the first cryptocurrency to be created. Ethereum is the second-largest blockchain network by market capitalization and offers more functionality, including smart contracts and decentralized applications (dApps), beyond just being a digital currency.
Recent events have highlighted the growing acceptance of cryptocurrencies within the mainstream financial sphere. The United States, for instance, saw the introduction of its inaugural Bitcoin ETF in January, marking a notable endorsement for digital currencies. Similarly, the potential launch of an Ethereum ETF could further expand its investor base and enhance its market value. Additionally, we're on the cusp of a significant change where daily transactions might soon be facilitated using BTC, ETH, and other cryptocurrencies via well-established payment networks such as Visa and Mastercard. These industry leaders, with their substantial market presence, are delving into blockchain technology to streamline cross-border payments and incorporate cryptocurrencies into their payment and reward schemes
In light of these developments, I have been strategically positioning my portfolio to capitalize on the burgeoning potential of crypto currencies. By incorporating Bitcoin and Ethereum, I aim to fortify my investments against economic uncertainties while seizing the growth opportunities presented by the maturation of blockchain technology.
To diversify my portfolio with cryptocurrency exposure while earning a steady income, I've chosen two Canadian ETFs that focus on Bitcoin and Ethereum. In January, I selected the Purpose ETH Yield ETF (ETHY.TO) for its alignment with Ethereum's performance, currently providing a 9.13% yield. This ETF strategically invests in the Purpose Ether ETF (ETHH.TO) and utilizes an option writing strategy to generate monthly income. Additionally, I've incorporated the Purpose Bitcoin Yield ETF (BTCY.TO) into my portfolio, adopting a similar investment model centered around Bitcoin, with an 8.19% yield. These ETFs offer an easy way to participate in the mass adoption of Bitcoin and Etherium.
The chart below provides a side-by-side performance analysis of Bitcoin and Ethereum against their respective ETF counterparts, BTCY and ETHY, over the past year. Bitcoin's value soared by an impressive 122%, with BTCY also achieving a notable 69% growth. Similarly, Ethereum enjoyed a 92% uplift, while ETHY saw a 47% rise, and this is before including the annual income these ETFs generate. A key advantage of investing in BTCY and ETHY is their annual yield, exceeding 8% with monthly payouts, thereby offering a lucrative income stream that currently beats inflation.
My plan is to keep these ETFs in the portfolio indefinitely, seeing them as long-term holdings. As I witness the transformation of the crypto space from speculative, whimsically named tokens to technologies with tangible applications, I'm increasingly convinced of the pivotal role blockchain will play in our everyday lives, much like the internet revolution in the late '90s.
Harvesting Yield
At Trendpost, we're always on the lookout for emerging trends that could put our readers ahead of the curve. One such trend gaining momentum is crypto staking or earning crypto rewards from your holdings. This trend, once a niche within the vast crypto landscape, is attracting significant attention from big financial players, signaling a shift towards mainstream acceptance.
The influx of 'smart money' into staking services hints at an impending boom in this sector. Following this trend, I ventured into staking with The Graph (GRT) tokens earlier this year. A month into staking, I'm already reaping monthly crypto rewards, projecting an annual yield of around 12% in additional tokens.
Encouraged by this success, I'm expanding my focus to include other stakable tokens. This month, I tackled staking Polygon (MATIC) tokens. Although the process involves several steps, I'm finding it increasingly manageable and am excited about the potential rewards this staking avenue offers. While it's still somewhat early in the staking game, I'm keen on continuing to explore promising projects where I can buy and stake tokens, aiming to grow my income before the sector becomes overcrowded and entry costs rise.
Polygon
Polygon (MATIC) plays a pivotal role in addressing some of the critical challenges faced by the Ethereum network. The growth in blockchain applications and users on the Etherium network, has led to significant issues such as network congestion and high transaction fees. Here, Polygon steps in as a decentralized platform specifically designed to scale Ethereum. By enabling developers to create scalable, secure, and user-friendly decentralized applications (dApps) with minimal transaction fees, Polygon acts much like an infrastructure expansion in a growing city, adding 'lanes' and 'roads' to alleviate congestion and improve usage for its digital inhabitants.
Polygon's approach focuses on integration and enhancing its network, thereby broadening access for decentralized applications (dApps) to utilize its services. These applications span a wide array of sectors, including banking, gaming, and identity verification, paralleling the diversity found in traditional app stores. Through a series of strategic partnerships, significant funding rounds, and carefully targeted initiatives, Polygon is solidifying its essential role within the Web3 ecosystem. This upward trajectory promises a future where its contributions and value in the digital realm continue to grow. As I've previously mentioned, my investment strategy includes embracing the expansion of the Web3 sector, and Polygon represents a key opportunity for me to engage with this burgeoning space.
Trendpost Takeaway
As we move into March, despite the S&P 500 and other major North American indices reaching new highs, various developments prompt caution. The ongoing wave of job cuts across North America is particularly concerning. UPS is cutting 12,000 positions, Nike is reducing its workforce by 2%, and Bell Media is parting ways with 4,800 employees. In Canada, the economic pressure is tangible, highlighted by a 41% increase in business bankruptcies in 2023 compared to the previous year. Recent layoffs in mainstream media, including significant cuts at the Los Angeles Times, TIME, Business Insider, and Vice Media, underscore the broader economic challenges.
In response, I'm maintaining an ultra-defensive stance in my portfolio management, primarily keeping my assets in GICs and using only the interest earned from these to fund select acquisitions. My focus is increasingly shifting towards cryptocurrencies, recognizing their potential as asymmetrical bets with a favorable risk-reward ratio. To streamline the Trendpost Portfolio and maintain focus, I've made several divestitures: selling Aris Gold warrants for a 53% return, exiting BigBearAi warrants with a 6.88% gain, and cutting losses on Desert Mountain warrants while holding onto the shares for the long term.
Looking ahead, my strategy remains consistent with recent months: holding a substantial cash reserve and strategically acquiring assets that could hedge against major geopolitical upheavals. My outlook is admittedly grim; I foresee the potential for a significant global conflict or an economic downturn, possibly coupled with a surge in commodity and cryptocurrency prices. Thus, the portfolio is being carefully balanced to withstand such eventualities, with a significant cash buffer complemented by targeted investments in sectors likely to be crucial in the face of major global events.
Below, you'll find a detailed table outlining the portfolio's composition as of February 2024. It's clear from this overview that cash and GICs constitute the bulk of the portfolio, offering a solid foundation and ensuring that the portfolio remains robust amidst uncertainty.
Portfolio Composition
| As of February 2024 | |
|---|---|
| Category | Portfolio Weight |
| Cash and GICs | 93% |
| Trailblazers | 1% |
| Defensive Picks | 5% |
| Crypto | 1% |
| TOTAL | 100% |
Remember that the content of this newsletter is neither a stock recommendation nor investment advice. This is just something to consider. You can access my watchlist and portfolio through the link below. By clicking the link below you accept all responsibility for any potential losses that might result from buying any of the stocks mentioned in this newsletter.