Back in early March I asked a fellow finance/market Substack writer if it’s even possible that the bubble that everyone knows is a bubble could still actually be a bubble? My point was one of the major factors in bubbles is that you’re not supposed to know that you’re in them. From Investopedia:
A basic characteristic of financial bubbles is the suspension of disbelief by most participants when the speculative price surge is occurring: It's only in retrospect, after the bubble has burst, that they're recognized (to many an investor's chagrin).
Given this, if everyone is buying a house, coin, stock, or index simply because they believe that their chosen market is already in a bubble that hasn’t yet popped, what if it isn’t actually a bubble at all? What if it’s just an extremely greedy market filled with buyers today who will be very disappointed tomorrow when they find out they were actually the greater fool?
Is the dumb money on the sidelines still waiting to jump in at an even higher market valuation? I don’t have any answers for you. But I will say that I don’t think buying an asset that is undoubtedly overvalued by any traditional metric simply based on the expectation that someone else will pay more for it later is a good enough reason to buy it. Does this contradict the entire premise of a long Bitcoin position at $70k? Perhaps. But I’ll leave that up to you to decide.
Still, the market presses on. The S&P 500 closed out the first quarter of the year with a monstrous 10% gain. This was essentially just a continuation of the late-October bottom that has seen the market climb 28% over 5 months essentially without any buyable dip whatsoever. Is it 1999 or 1995? We won’t know until 2025.
RSI-divergences all over the chart... no matter. Up only. Year to date, my Roth IRA is up 7%. In any rational market, 7% in 3 months would be terrific. But against an S&P index that is up 10%, this feels like losing. Which is insane. That said HSEP is ripping:
In my Festivus post from late-December, I foreshadowed major changes to how I was approaching HSEP in 2024. For much of 2023, I was trying to convince you that the “heretic speculator” could actually be a respectable fundamental investor. Perhaps that is true more broadly, but in a smaller account it probably makes more sense to go for the bigger scores:
Going forward, the sole focus of the account is to make as much money as possible. I don’t care about the sectors, diversification, or whatever narrative is driving gains in the broad market.
Turns out, simply dumping out of value plays and focusing on a couple of volatile movers has worked out well through Q1. If my goal is to double this account this year (it is), 24% in Q1 is a pretty good start. It got a little uncomfortable in January, but March ends as the first month ahead of the index since launching the portfolio in January 2023. Monkey off the back. No looking over my shoulder now…
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