The root cause for market crazy

I am starting to think the market froth is due to millennial entering into the markets.  I have heard stories that Robin-hood app is disrupting the market, but then I ran across an article that really brought the market distortion into focus.

For the first time - ever - there is more option trading than the underlying stock trading.  That means high risk, high leverage is driving the market direction rather than actual stock purchasing as a primary driver.

That to me means that if at anytime there is market exhaustion, the shift maybe dramatic.  Further these market traders don't have the experience to know that the market makers will on an options expiration on a Friday let the market close, and co-incidentally explosive news hits with markets opening materially lower on Monday.  This enables the option expiration to settle in the market maker's favor.  I have seem dramatic gaps like this back in January 2008, and in the recent market descent in 2020.

My concern is with a market gap down, the many small traders will trigger a panic trade.

To read more on this odd event of option trading exceeding stocks, click here.

What Next Gold, Crypto, or Both?

Gold and Silver miners have done fantastic.  I had made recommendations on breakout price and all the stocks that hit it, are up substantially.  Link here.

While I have been an advocate for Gold/Silver miners for a WHILE, I wanted to call out Crypto as a competing future as the world reacts to future events.

I have been buying and selling crypto stocks, but I started edging more into crypto today.

Please be warned! I wouldn't be surprised if at this price crypto drops 50% or goes up  500%, it is the wild west.  But a few things started to push me in this direction.

I read an article for Bitcoin Cash and Lite coin Trust to be listed as a trade able stock ticker (BCHG & LTCN) , and it has passed its first hurdle. (click to read)  

Update 8/28: Ether and XRP are two crypto’s entering into mainstream currency trading in Japan on 8/31/20. ( click to read )

I am mildly optimistic that a new way to 'trade' these assets will cause material valuation increase in these coins.  I expect when the listing is getting closer, the assets will rise materially in price in anticipation.  Therefore I bought some of each today, and will monitor and purchase more depending on the movement.  I highly recommend using Coinbase.com , its trustworthy and integrates into Fidelity.

I also own Bitcoin, but I bought it waaaay cheaper than the current price.  I may roll more into it, depending on action.

If these get listed, I have to expect at 10X if not 100X price rise.  The ability in times of crisis for people to sell their stock ETF and buy these 'stocks' will cause bubbles.  Further, I wouldn't be surprised if ETF's appear that buy a blend of crypto tickers eventually, which will also increase the values.

Let me be perfectly clear, Crypto currencies as they are today at PONZI SCHEMES.   But one or more may evolve into a future , functional, storage of wealth that isn't a Ponzi scheme.  Also much of our current system is also a Ponzi scheme, such as real estate or bonds.   That is why the Federal Reserve is breaking laws to circumvent money creation to the tune of 2 trillion and buy assets it isn't allowed to buy by law.  It is also trying to keep the Ponzi going.

I just think between now and later, a 10-100X return is worth the risk of 50% drop.

This is high risk, high reward, you own the consequences (good or bad).

Crypto Miner stocks

Alternately can buy stocks in companies involved in crypto, some to consider, with current price (for future reference)   Please be careful, these are depending on the Ponzi schemes of crypto.  What is good about them is if any one crypto takes off, chances are these companies will benefit as they can mine any crypto they wish.

HVBTF 0.60

RIOT    2.19

HUTMF 0.80

GBTC   10.39

I looked at ETF's and they dont invest in Crypto companies, but online retailers or payment processors.  So please share any good ETF you find.

Detailed thoughts

This is over-the top thoughts shared, proceed at your own time-loss risk. :)

By me being in Gold/Silver heavily, if there is ANY government intervention the market could collapse in a second.  This WILL happen the moment any world power views gold as a threat to their monopoly on currency.   It could be as simple as slapping a 50% tax on all miners, which would crush their stock prices.

Plus gold is physical, it can be confiscated, and again, depressing values or  even if it doesn't make it not liquid.  For the record, I don't believe or own physical gold, its just too risky.

I do believe the EVOLUTION of crypto is the future, and a likely short term winner is Facebook if they ever issue their own crypto, which again, could collapse the competing crypto. 

 Facebook does face government 'permission' challenges and is 5 years out from becoming a reality.  Longer term however, the spirit of Crypto is to not have a single entity control its creation or rules, and a Facebook crypto owned would be a long term failure.

Finally, the rift with world banks just infusing cash, circumventing normal cash creating processes, I believe will have unintended consequences.  At some point, the appeasement of perpetual money creation will have consequence.  Further if traditional investments such as stocks, real estate, or bonds have issues there isn't many places to store wealth, Crypto I think will benefit.  Finally if any one large country has issues (CHINA, RUSSIA, USA) a flight of wealth will benefit crypto.

Worse  case the next 4 years is all roses, but crypto will continue to evolve and make inroads.

Good Luck!

Information is power

President Trump tweeted a story that Covid-19 was in China as early as August 2019.

On a hunch, I looked at Federal reserve bank purchases of 'distressed assets'.

After years of flat to lower assets, the FED started increasing assets Sept 11.

Therefore the ramp up into January and February was potentially a preparation for a market dislocation.

Potentially a coincidence.