The Wolf Den #49 - Altcoin Wreckage, Berkshire Hathaway, Bitcoin
Bitcoin Thoughts
I am going to keep this REALLY simple today, because there's no need to overcomplicate the situation. Price is at an absolutely key level. Bulls want to see a break of the descending black line on the daily chart. It does not have to happen today, but ultimately that is what they are looking for.
Also, price has failed to close a daily candle above the red line, also key. I will be watching for that today.
The whole shebang is the purple line. Breaking that would make a higher high and would crush bear dreams. That level was also a previous swing high from before, which failed to break and sent price down to the $3,000s.
Hold red line. Break black line. Break purple line. Why make it harder than that?
If price is rejected, my plan has not changed. My orders are in the blue box, the potential bullish breaker that I have discussed ad nauseum.
Trading Quotes That I Love
I constantly look to the wisdom of experts who came before me to learn lessons. Here are just a few of my favorite quotes about money and trading.
"Trade money for time, not time for money. You’re going to run out of time first." Naval Ravikant
"The rich invest in time, the poor invest in money." Warren Buffett
"The money you have gives you freedom; the money you pursue enslaves you." Jean-Jacques Rousseau
"My favorite things in life don’t cost any money. It’s really clear that the most precious resource we all have is time." Steve Jobs
“The men on the trading floor may not have been to school, but they have Ph.D.’s in man’s ignorance.” Michael Lewis
“The expectation that you bring with you in trading is often the greatest obstacle you will encounter.” Yvan Byeajee
“The market can stay irrational longer than you can stay solvent.” John Maynard Keynes
The Wolf Of All Streets Podcast Ft. Dan Gunsberg
This was the first episode of the podcast that I ever recorded, many months ago. Because of the global economic meltdown and COVID pandemic, we chose to change focus with the content and this one was put temporarily on the shelf. This is a MUST LISTEN for every trader. Dan is one of the best traders that I have ever met (for decades) and offers insight into trading psychology and mentality that you will be hard-pressed to find elsewhere. I have already listened a few times myself - both of us share a lot of past experiences and losses for you to learn from.
"Woodstock For Capitalists"
Berkshire Hathaway held their annual meeting last weekend, which is often referred to as "Woodstock For Capitalists." As impressive as always, 89 year old Warren Buffett spoke for nearly 5 hours, addressing a number of questions about the economy and updating the world on Berkshire Hathaway's situation. I listened to the entire thing and would like to share a few takeaways.
First, it is important to understand that, to a very large degree, Warren Buffett IS the stock market. He is a part of every high level meeting and has his finger on the pulse of everything that is happening. Mark Yusko articulated this idea very clearly in our recent podcast, which is a must listen anyway if you missed it.
My main takeaways are that there was a somewhat wide gap between Buffett's words and actions and that the meat of the message is probably to be found and interpreted somewhere in between.
Buffett praised Powell and the Fed for their decisions. I think that this is partially accurate, as they clearly had to do something. However, the follow through with further printing and propping the stock market is criminal, at best.
“I’ve always had Paul Volcker up on a special place, a special pedestal in terms of Federal Reserve chairmen over the years... Jay Powell in my view, and the Fed board, belong up there on that pedestal with him because they acted in the middle of March. Probably somewhat instructed by what they’d seen in 2008 and 2009. They reacted in a huge way and essentially allowed what’s happened since that time to play out the way it has. March, when the market had essentially frozen, a little after mid-month, ended up on March 23 — it ended up being the largest month for corporate debt issuance, I believe, in history... Every one of those people that issued bonds in late March and April ought to send a thank you letter to the Fed because it wouldn’t have happened if they hadn’t operated with really unprecedented speed and determination.”
He did, however, lightly touch on the fact that printing and QE could be a bad idea...
"It's probably the most interesting Q I've ever seen: Can you keep doing what we're doing? We've been doing it for a dozen years, but we're testing it with a lot more force than we've ever tested...We're doing things & really don't know the consequences."
He also defended stock buy backs, which I believe is a gaping blind spot in his thinking. He may be right in principle. “If a company thinks it’s stock is undervalued, it should buy it back." I believe he is wrong in his inability to recognize that ‘undervalued’ is almost entirely a short term calculus these days that has nothing to do with long term. Buy backs make sense... until they don't. I believe that airlines buying back stock with 96% of their available cash and then needing a bailout after being out of business for a week clearly supports my thinking.
“It’s very politically correct to be against buybacks now,” he said. “There’s a lot of crazy things being said about buybacks. Buybacks are so simple. It’s a way of distributing cash to shareholders.” Buffett noted share repurchase programs should be executed in a price and need-sensitive manner, but “when the conditions are right, it should also be obvious to repurchase shares and there shouldn’t be the slightest taint to it anymore than there is to dividends.”
He made a number of grandiose comments about his belief in America, that the market is absolutely going to recover and other statements about the strength of the underlying economy and country.
“In 2008 and 2009 our economic train went off the tracks, and there were some reasons why the roadbed was weak in terms of the banks. This time we just pulled the train of the tracks and put it on a siding. And I don’t really know of any parallel — in terms of a very, very well the most important country in the world, most productive, huge population — in effect sidelining its economy and its workforce.”
“But even facing that, I would like to talk to you about the economic future of the country. Because I remain convinced, as I have -- I was convinced of this in World War II, I was convinced of it during the Cuban Missile Crisis, 9/11, the Financial Crisis -- that nothing can basically stop America.”
We have addressed his words. Now let's look at his actions.
Berkshire was sitting on a pile of cash before COVID even struck - 127 Billion dollars. He was already expecting a market downturn. How much cash does Berkshire Hathaway have now?
137 Billion dollars.
The company has spent 1.8 billion buying stocks, and 1.7 billion on buy backs of Berkshire Hathaway. That's it. They famously made an early bet during the downturn on Delta Airlines - which they later sold for a sizable loss. Buffett is now COMPLETELY out of airlines. He was too early and dead wrong, which he also addressed.
Buffett may truly believe that the market is going to recover and soar to new highs - but his actions say that he's not ready to buy. He's not even dipping his toes. He is still hoarding cash and did not even buy at the LOWS a few weeks ago, when stocks seemed irrationally low. His actions say that he expects far more downside. Actions speak louder than words.
Another important point that echoes what I have been saying for ages - Buffett clearly states that the best thing the average person can do to do is buy into S&P 500 index funds. I wrote an article about doing this to make a million dollars on Tuesday.
I love the conclusion of this article on the meeting from The Reformed Broker. It really sums up the meeting, which basically can be summarized as "who the hell knows what is coming."
"A Berkshire meeting without the meeting, a pep rally for investors but the rallying cry is “I don’t know, perhaps not yet.” Berkshire Hathaway as a quasi-religious institution for capitalists just fading away like this…it’s so anti-climactic. Unsettling. The fastest bear market panic in history and St. Warren was a seller, not a buyer. No “one last big score” bravado. No talk of “we’re reloading the elephant gun.” No mention of great opportunities having been created by the latest crisis. No kneejerk greediness while others are fearful. Just a shrug, the meeting was essentially a five-hour caveat.
“We’ll see,” says the Oracle, to the delight and relief of absolutely no one.
Here is another play by play analysis of the meeting, from CNBC, which you should absolutely read. It touches on all of the key points.
US National Debt Hits $25 Trillion
Breaking this record is not something that the United States should be proud of. National Debt only reached $24 Trillion on April 9th. That means $35 billion new dollars every day. Or, $24 million a minute.
Here are the quick highlights:
The US national debt just crossed $25 trillion for the first time in history.
The national debt is now just inches away from breaking the record for highest debt to GDP ratio in US history.
There are growing suggestions that the US should shirk its debt obligations to China.
Can you hear that sound? BRRRRRRRRR. The printers are working over time, with no end in site.
Open Interest On Bitcoin Is At An All Time High
Open interest is the value of outstanding derivative contracts that are yet to be settled. Open interest has reached an all time high on the CME for Bitcoin futures.
This is bullish. CME contracts are traded by institutional and accredited investors, not Average Joe retail traders. This is a clear indication that big money is increasingly interested in trading Bitcoin. How could they not be? It is the ultimate hedge against the nonsense that is occurring around the world.
Interest In Bitcoin From Retail Is Skyrocketing
Square’s Cash App reports record revenues from Bitcoin as well as quarterly growth. "$306 million of Cash App’s $528 million revenue for the first quarter of the year came from Bitcoin. "
You read that correctly. A majority of the revenue made by the Cash App was because of people buying Bitcoin. Unlike the open interest discussed above on the CME, the Cash App is used largely by Millennials to buy small amounts of Bitcoin. It is VERY clear that people are becoming increasingly interested in Bitcoin in the face of unlimited money printing and the fear of hyper inflation.
Chart Requests
AAPL (APPLE)
Crazy bullish movement over the past few weeks for Apple. I am not sure how sustainable it is, but "if it ain't broke, don't try to fix it." As you can see here on the weekly, price pierced the clear support zone many weeks ago at the bottom, but closed the candle inside (blue rectangle). Since that bottom, it has been nothing but upside. It broke the downtrend (black line) and has not looked back. That said, it is at a key resistance level (purple) and has definite supply over head from the area of the all time high. I would be surprised to see it pass through that area easily. Hard to buy it now after all of this insane movement, but it's also clearly in a strong uptrend for now.
Also - this is one of the few companies that is actually sitting on a huge pile of cash and doesn't need any help. That's worth considering.
BAND/BTC
This looks better than most. It is holding the red support line and has formed a descending wedge. That said, it's testing the bottom of that and support, so a breakdown with current market conditions would not be surprising. I am considering orders at the next horizontal white line down. Otherwise, would MUCH rather see a break of the top descending resistance.
BAT/BTC
I was feeling somewhat optimistic while price was ranging, but that ended quickly when the range broke to the downside. I have shared this weekly chart in the past and it still looks really awful. That black ascending line was the story - clear support, broke down, retested as resistance and dropped. Also, the blue horizontal box across the whole chart was a key support that looks likely to flip to resistance, although this weekly candle is still open. I don't see much here. Demand zone is drawn below price - that seems a bit like a magnet now. Below is the daily view.
BCH/BTC
Gross. Price is testing a key support area now, but I am seeing no buying show up to indicate that it is likely to hold. This is in an aggressive downtrend with no sign of stopping. There will be bounces and relief, but I see no reason to trade this unless you really think this support area will hold. But that's knife catching and trying to catch a bottom. I would much rather wait and see if break that descending black line in the future. A break of the present support should send it down to the purple line at the least.
BSV/BTC
Sitting on a key level now, at the 705% retracement level. This is called the OTE or Optimal Trade Entry by Institutional Flow traders. It's not a fibonacci level. That said, it's pushing down and there's very little reason at this moment to expect a bounce. I see the pink zone below as a likely place for this to land if it continues, although it was retested once already with that long wick a few days back. VPVR shows that this is the area with heavy volume and also has the POC (point of control, blue line) sitting there. The pink box shows the price action in that area and why it is a likely target. Either way, I would not be interested until it breaks the descending black line.
BTT/USDT
This actually looks interesting. It closed above a key resistance at the purple line and has held as support. An old descending resistance was also broken and is being retested as support. I would remain cautiously optimistic on this above 2621 and the ascending new support.
CHZ/BTC
Yesterday, a friend mentioned to me that CHZ was likely to announce a partnership with UFC. Price was 120 at the time. I told him I had no interest in trading a rumor, but thanks. Also, if that came out today, price had already pumped and it looks like a "buy the rumor, sell the news" situation.
It did continue up from there, but became an absolute pump and dump today.
DATA/BTC
Historically a strange chart and hard to figure out because of huge wicks. Price is trading above the 21, 50 and 200 EMAs on the daily, which is bullish. It has been in a sustained uptrend since March and has reacted somewhat well to Bitcoin volatility. The key lines for me are drawn. It is sitting near a support that bulls would like to see hold as we speak - 754. The key support is the ascending red line. The key resistance is the descending blue line. A break of either should be the trigger for future movement and information.
FC (FACEBOOK)
Like Apple, Facebook has continued to rage since bottoming in March. Not a huge surprise - Google and Facebook are the biggest in the game for online advertising, which tends to thrive even when all other forms of ad spending decrease. That said, price has just tapped the supply zone formed at the beginning of the economic crisis. This should be really strong resistance, as lots of orders were likely left behind in this area. A break through that zone and this should be headed to new all time highs. A rejection would either lead to consolidation for a push through, or a sizable drop back down. Vague, I know. But the chart doesn't matter much here - it's all about the economy and the company fundamentals.
FTM/BTC
As I have said in the past, sometimes the coins that look the best or have risen actually have the furthest to fall when Bitcoin decides to really wreck house. That is clearly the case for FTM. It actually made a new all time low today, which is surprising. In the words of Yoda, "Do or do not, there is no try." FTM needs to hold the bottom of this range with the daily candle close (preferably 4 hour here as well) to avoid going into all time low discovery. If you are a knife catcher, this is absolutely your buying spot. I wouldn't do it, personally.
KMD/BTC
Rejected at descending resistance from the all time high on Binance. Needs to hold this area of support (around 522). Bulls do not want this to head into price discovery for a new all time low. Another coin sitting near support. Key levels are drawn.
KNC/BTC
Clear rejection at the pivot (P) looks headed straight down to that link zone and the S1 pivot. around 6160. That pink area has been strong support, you could take a shot there with a very tight stop and very low expectations. Below that, the black line is the next key level. Looks bad, like everything else at the moment.
LINK/BTC
I have been outspokenly bearish on this coin, even before alts started to dive. Nothing has changed. Key areas are marked, but this is a falling knife until proven otherwise. Seems like it wants to continue down.
MATIC/BTC
This coin is resilient - I am still in my position. It continues to hold support like a champ! In fact, it just bounced off of the ascending line once again.
PDD (PINDUODUO)
This played out as discussed, with a retest of the previous all time high as support. Cool. At present, it looks like it could be breaking out of the local resistance, although you could draw that descending line to connect the top of yesterday's candle and it would show resistance. Hard read, but this looks generally very good anywhere above that black line. Should continue up if the market behaves.
VET/USDT
Rejected at resistance, as I believe we discussed before. That blue box needs to be flipped to support at this point to be convincing continuation. Price does look to be consolidating bullishly under that zone here - a break of the blue line could signal more movement up.
That said, the BTC pair must look terrible, so BTC is still a far better bet here than sitting in VET.
WEN (WENDY'S)
Fast food is gross, but this chart is not... for now. Wendy's has bounced massively, which is clear from the chart. "V-shaped recovery" for this one. It is presently at a key level of resistance, with the 50 MA on the weekly and the black line. A close above that this week should target the supply zone off of the all time high. No immediate trade here. Would rather see a convincing break of this area and retest as support, personally.
XRP/BTC
Ouch. The weekly chart is just disgusting. A close below that bottom line and it's hard to determine where the bottom will likely be. Bulls really want to see this bounce and have a long lower wick before the week ends. Right now, a retest of that black line on the daily would be a clear shorting opportunity.
XTZ/BTC
This became bearish when the red line broke down as support. I am expecting this to retest the areas where we were trading this months ago - down by the white lines. Anything can happen, but that's where I may become interested again. I do want to own this coin again longer term.
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.