The Wolf Den #924 - IQ
You don't have to be smart to invest
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In This Issue:
IQ
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Matt Hougan Introduces “Everything Season”
The Craig Wright Saga Is Over
Another Massive Platform Adds ETF Exposure
CBDCs Are Closer Than We Think
Raoul Pal Reveals His Crypto Portfolio & Explains Why Bitcoin & Alts Will Continue To Skyrocket
IQ
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. Rationality is essential.” - Warren Buffett
Warren Buffett, one of the most successful investors of all time, has always emphasized that while intelligence is beneficial in the investment world, it doesn’t guarantee success. This observation resonates with me deeply. I've seen countless highly intelligent individuals—doctors, lawyers, engineers—masters in their fields and potentially acing any IQ test, yet they often stumble in the investment arena.
It’s a provocative thought, but I’d wager that in many cases, a third grader, unburdened by ego or market knowledge, might outperform many adult professionals who underestimate the complexity of investing. This isn’t to downplay anyone's intelligence; rather, it highlights that successful investing demands a unique blend of skills and mindset not universally held.
Buffett's own intelligence has been a focal point throughout his career. Whether it’s in his book "Warren Buffett Speaks," his annual letters to shareholders, or high-profile interviews, the subject frequently arises. Despite having an IQ reportedly over 150, Buffett seldom credits his intellect for his investment success. This stance could be seen as humility, a disconnect, or disingenuousness. However, I see it as Buffett underlining a crucial point.
A memorable moment that illustrates Buffett’s perspective occurred during a 2011 interview in India with students from the country’s top universities. When asked about his intelligence, Buffett's response was illuminating.
Audience Member: So, as we all know you are an extremely intelligent person at the same time you are very disciplined with your investing approach so what makes Warren Buffet a great investor is it the intelligence or the discipline?
Warren Buffet: Well, I think to some extent, at birth, I was wired for capital allocation, but I think plenty of other people were too. I think the good news I can tell you is that to be a great investor, you don't have to have a terrific IQ. You know, if you've got a 160 IQ, sell 30 points to somebody else because you won't need it in investing. What you do need is the right temperament. You need to be able to detach yourself from the views or opinions of others. You need to be able to look at the facts about a business, about an industry, and evaluate a business unaffected by what other people think. And that is very difficult for most people. I mean, most people have a herd mentality, which can, under certain circumstances, develop into delusionary behavior. I mean, you saw that in the internet craze and so on. So, I would say that I'm sure everybody in this room has the intelligence to do extremely well in investments.
Moderator: They're all 160 IQ.
Warren Buffet: Well, they don't need it. I'm disappointed that they haven't sold off some already. The 160s won't necessarily beat the 130s at all. They may, but I mean, they do not have a big edge. But the ones that have the edge are the ones who really have the temperament to sit, look at a business, look at an industry, and not care what the person next to them thinks about it. Not care what they read about in the newspaper. Not care what they hear about on television. Not listen to people who say, you know, this is going to happen or that's going to happen. You have to come to your own conclusions, and you have to do it based on facts that are available. If you don't have enough facts to reach a conclusion, you forget it. You go on to the next one. And so, you have to also have the willingness to walk away from things that other people think are very simple. A lot of people don't have that. I mean, I don't know why it is, and I've been asked a lot of times whether that is something that you're born with or something you learn. I'm not sure I know the answer, but that temperament's important.
Pretty incredible right? You can watch the interview below. Skip to about the 25-minute mark.
In the interview, Warren Buffett was the exceptional figure among a room full of highly intelligent individuals. Despite the likelihood that many present had higher IQs, Buffett’s investment success remains unparalleled, a testament to his unique capabilities. While Buffett may have downplayed his genius-level IQ, his mastery in emotional intelligence (EQ) truly set him apart as an investing savant.
A recent interview between Bill Ackman and Lex Fridman shed further light on this aspect. Around the 39-minute mark, their conversation offered insights that echo Buffett’s ethos.
Lex: Is it as simple as just being financially secure? Is there some just human qualities that you have to be born with/develop?
Bill: I'm a pretty emotional person I would say. Or I feel pretty strong emotions, but not in investing. I'm remarkably immune to kind of volatility and that's a big advantage and it took some time for me to develop that.
Lex: So, you weren't born with that, you think?
Bill: No.
Lex: So, being emotional, do you want to respond to volatility?
Bill: Yeah.... Again, you can learn a lot from other people's experience. It's one of the few businesses where you can learn an enormous amount by reading about other periods in history. Following Buffet's career, the mistakes he made. If you're investing a lot of capital, every one of your mistakes can be big. So, we've made big mistakes. The good news is that the vast majority of things we've done have worked out really well. And so that also gives you confidence over time…And so the other nature of our business you have to be comfortable with a lot of public scrutiny, a lot of public criticism and that requires some experience.
If the best of the best look up to Buffet and are repeating what he is saying, then there has to be some merit to his points on IQ—but you can decide for yourself.
At the end of the day, I hope this introduction gives you the confidence you need to believe in your ability to succeed. IQ is not the end-all, be-all; many other factors contribute to success. And if you are really overthinking it all, just engrain this meme in your head, and you will turn out perfectly fine.
Bitcoin, along with the broader market, is currently in a period of consolidation, which is ultimately beneficial. This pause provides an opportunity for the trend to gather momentum for its next move. The best course of action during this time? Stay put, continue accumulating satoshis (sats), and maintain a long-term hold (HODL) strategy.
Patience is key; the journey to $100k seems more tangible than ever. Stay the course.
Bitcoin Thoughts And Analysis
The signs of a correction were there... but I was not watching. I have not been a chart hawk this week, so this analysis is in hindsight.
We had VERY clear bearish divergence with overbought RSI on multiple time frames, including the daily. The good news? We have potential hidden bullish divergence forming, but need to see a clear elbow up on RSI to confirm. This would "cancel" the bearish divergence.
Bulls want to see the area around $69,000 hold on the daily and above - that was the previous all time high support.
I still think dips are very much for buying.
Many of you are using Trading Alpha like I am - you can see that the daily is potentially losing the green dots (I don’t think it will). More importantly, we have a retest of the track line. If you have been watching my streams with Wick about how to use Trading Alpha, then you know that this is usually considered a great buying opportunity.
If you were trading on lower time frames, you saw that Trading Alpha also gave a clear short signal around $72,000… squeeze shading, a red arrow and red dots. Such an easy indicator to use. I like the demand shown on the last candles, with the long wicks down. When I check the daily above, I think this is a decent time to consider a dip buy.
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Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
I first bought Frontier under 20 cents, and have been trading in an out since. I actually sold quite a bit around 70 cents and a dollar, so this is not something that I was looking to add more to… but now it has one of the most appealing charts I can find.
You always have to pay attention when a coin shows relative strength on days when everything else is red. Further, this is attempting to make a new all time high, and you know that blue sky breakouts are some of my favorite setups.
It is hard to buy this on a huge candle, not something I would ever recommend. This is more about putting this on your radar for dips, as it is clearly a big winner with real volume on a down day.
It has already closed the daily above the previous all time high, with a perfect retest as support. I would love to see the weekly do the same thing.
I absolutely love this pattern - for those who traded EGLD with me in the past, it remind me of that chart when it launched… a huge rounding bottom and breakout.
Legacy Markets
Stocks and Treasuries stabilized at the end of a volatile week, with signs that U.S. inflation data might not immediately prompt Federal Reserve rate cuts. The S&P 500 is poised for a slight weekly increase, while European stocks are heading for an eighth week of gains, fueled by expectations of decreasing euro-area interest rates. However, market volatility is anticipated due to the triple witching options expiry. The Japanese yen weakened amid speculations of a Bank of Japan rate hike, which could lessen its yield advantage over the dollar. The Federal Reserve is expected to maintain interest rates at the upcoming meeting, with attention turning to the updated economic forecasts. Meanwhile, copper prices surged, signaling optimism about global manufacturing, and oil prices remained high due to anticipated supply deficits. Bitcoin experienced a retreat from its recent high.
Key events this week:
Bank of England issues inflation survey, Friday
US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 8:03 a.m. New York time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 rose 0.3%
The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0892
The British pound was unchanged at $1.2753
The Japanese yen fell 0.2% to 148.64 per dollar
Cryptocurrencies
Bitcoin fell 4.2% to $67,726.16
Ether fell 3.9% to $3,689.73
Bonds
The yield on 10-year Treasuries declined two basis points to 4.27%
Germany’s 10-year yield was little changed at 2.43%
Britain’s 10-year yield was little changed at 4.09%
Commodities
West Texas Intermediate crude fell 0.6% to $80.76 a barrel
Spot gold was little changed
Matt Hougan Introduces “Everything Season”
Given Bitcoin's history of never reaching an all-time high before a halving and the undeniable presence of institutional investment, it seems reasonable to assert that this time is ‘different.’ This isn't to say that a 'super cycle' of guaranteed price increases is imminent, but rather that the driving forces behind the market differ from the retail-driven waves of the past. The ongoing influx of traditional capital is reshaping the value distribution within the ecosystem in a manner distinct from previous cycles. My good friend, Matt Hougan from Bitwise Asset Management, offers insightful perspectives on this matter, which I highly recommend reading below.
“This alts season differs dramatically from prior versions, and here’s why.
Historically, alts season signaled the beginning of the end of the bitcoin bull market because marginal capital shifted out of bitcoin into the rest of the crypto economy. There just wasn’t enough new money flowing into bitcoin to sustain its momentum.
But bitcoin’s 2024 rally is being driven in large measure by a massive and ongoing influx of money from outside the crypto-native sphere into the bitcoin ecosystem via ETFs. Since launching in January 2024, more than $10 billion in net new money has flowed into ETFs, most likely from investors who did not previously have exposure to crypto. These inflows show no signs of slowing.
This suggests that the wealth effect can continue for some time, and that bitcoin can rally alongside alt coins, as non-crypto money is flowing into bitcoin faster than bitcoin money is flowing into alt coins.
I call this “Everything Season,” and I suspect it will be a defining feature of this bull market.
One last note: Be careful out there. Amid the rise of bitcoin, Ethereum, and other important crypto assets, there’s a temptation to be indiscriminate. The fact is, there are lots of terrible projects that get funded in exuberant bull markets, and many crypto assets are already trading at crazy valuations.
There are some great projects as well, of course. But not everything that’s going up deserves to be. In other words, even during Everything Season, remember that not everything is created equal.”
The Craig Wright Saga Is Over
U.K. Judge James Mellor swiftly and definitively ruled that Craig Wright is not Satoshi Nakamoto, the creator of Bitcoin, and dismissed his other claims as baseless. Furthermore, the judge halted two additional cases that Wright had filed against Coinbase and Block, in which he alleged ownership of database rights to the Bitcoin blockchain. What adds a touch of irony to the ruling is that the judge explicitly forbade Wright from claiming to be Satoshi Nakamoto in any context; even uttering the claim in a park could result in fines or imprisonment for him (which we are all free to do). The final judgment is detailed below.
“I will make certain declarations which I am satisfied are useful and are necessary to do justice between the parties. First, that Dr Wright is not the author of the Bitcoin White Paper. Second, Dr Wright is not the person who adopted or operated under the pseudonym Satoshi Nakamoto in the period 2008 to 2011. Third, Dr Wright is not the person who created the Bitcoin System. And, fourth, he is not the author of the initial versions of the Bitcoin software. Any further relief will be dealt with in my written judgment. I will extend time for filing any appellant's notice until 21 days after the form of order hearing, which will be appointed following the hand down of my written judgment and I ask the parties to seek to agree an order giving effect to what I have just stated.”
Another Massive Platform Adds ETF Exposure
Cetera Financial Group, a leading independent wealth hub, has unveiled a new initiative aimed at educating and assisting their clients in navigating the complexities of Bitcoin ETFs for their portfolios. To provide context, Cetera currently oversees $475 billion in assets under administration and serves 455 financial institutions nationwide, managing assets ranging from $31 million to $141 billion. As part of this program, Cetera has selected a lineup of funds including BTCO, EZBC, FBTC, and IBIT. The head of investment products and partner solutions shared the following statement regarding this development:
“As expected, we are prudently embracing bitcoin ETFs and we prioritized developing this important guidance to help our financial professionals implement these products in client portfolio. Today's investors have increasingly complex needs, and our investment products team is here to support our financial professionals across the investment spectrum. We will continue to proactively evaluate the implications of bitcoin ETFs and related products and modify our policies accordingly, and we look forward to partnering with our financial professionals to adopt bitcoin ETFs when appropriate with their clients.”
CBDCs Are Closer Than We Think
The conversation around CBDCs has encountered a political standstill in the U.S., but outside the 'land of the free,' the rest of the world is swiftly moving toward central bank digital currencies. While the number of countries that have implemented the technology is minimal, those on the verge of implementation or expressing curiosity represent a a very large global shift in interest.
According to the Atlantic Council Central Bank Digital Currency Tracker there are:
3 Launched
36 Pilot
30 Development
44 Research
17 Inactive
2 Canceled
Some of the most notable countries in the pilot phase include Russia, Australia, China, India, South Korea, Japan, Sweden, Brazil, and South Africa.
Some of the most notable countries in the development phase include Canada, United States, Mexico, United Kingdom, Norway, Indonesia, and Columbia.
By turning every filter on, excluding the “canceled” and “inactive,” nearly the entire globe lights up, except for some of Central Africa and some of the Middle East. We are now at the point that not having a CBDC initiative puts a country deep into the minority.
Raoul Pal Reveals His Crypto Portfolio & Explains Why Bitcoin & Alts Will Continue To Skyrocket
Raoul Pal has long been predicting that Bitcoin could reach $250,000. This number seems less and less unrealistic. Let's see what he thinks now as crypto experiences a massive rally and whether his stance on Bitcoin and crypto has changed. In the second part of the show Dan from the chart guys will share his market analysis and some trades.
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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. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
Great post Scott. Keep up your great work!