Socio-economic

The Art of Knife Catching

Was talking to a great friend the other day and they asked if they should buy bitcoin. I said before you do let’s play a game. I will get on the roof, with you on the ground and I will throw some knives to you. Depending upon how many you catch will determine how much you buy. She laughed and got my point. I have nothing against bitcoin, in fact almost any vehicle is on the table as an investment but any purchase comes with a major condition, only buy if its price is rising. Let’s take a look at the bitcoin chart to see why I don’t believe now is the time to be acquiring this cryptocurrency.

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Long-term readers should easily recognize the ominous parabolic arc pattern. Parabolic Arc chart patterns are generated when steep rise in prices are caused by irrational buying and intense speculation. Parabolic Arcs are fairly rare but they are reliable that when they finally end, the result will be a steep and swift decline. The pattern typically terminates its uptrend and reverses direction upon a price break below the arc. If you are lucky enough to get in early, they are a way to immense riches … or devastation if you don’t have an investment plan (buy and hold)

As you can see after bitcoin broke the arc, it continued to fall, making lower highs and in the process forming a descending triangle pattern. These are typically continuation patterns, meaning there is a higher probability the break of the pattern will be in the direction of the prior trend (lower).  In this case, the break of the pattern that occurred 4 weeks ago points to a target in the area of $2900.  If that doesn’t hold, look out below as support doesn’t really show up until you get to $1000.

Because this is a logarithmic chart, it hides the magnitude of the decline. Put into perspective since peaking in December of last year, bitcoin has lost more than 80% of its value. Unfortunately for the millennials, they are the latest to be schooled by the markets and their early retirement dreams put on hold. It happens to everyone at some point which is being able to recognize irrational human behavior (parabolic arcs), confirmed by repeating patterns, helps to keep knowledgeable investors out of big trouble.

At some point BC will find a bottom and will be something worthy of your investment consideration. Until then, be happy you weren’t a part of the delusional crowd falling for the “hype” and “story” as they always precede parabolic arcs.   

5 for 5

I normally leave these types of topics for Mel to post about but this one hit close to home. Longer life expectancy and healthy habits is something that is not new, but now has a long-term study confirming what most already knew from using common sense. Ever since seeing my first Arnold Schwarzenegger book (senior year in college) I have religiously followed the 5 habits mentioned in a Harvard School of Public Health study. There is no one I know who has been a health zealot for a longer period than me. But, some 40 years later, being eventually proven right that living a healthy lifestyle is the right way (if you want to extend your life), with the prospect of a potential 30+ more years I am seriously doubting whether I want those additional years. Don’t get me wrong, I have no death wish but without knowing the quality of those future years I am now questioning whether I should have just had that slice of cheesecake rather than the carrot sticks and rice cakes 😊.  As I get older it has become clear that the focus has shifted to quality from quantity.

Here is a summary of the Harvard study findings …

Maintaining five healthy habits — eating a healthy diet, exercising regularly, keeping a healthy body weight, not drinking too much alcohol, and not smoking — during adulthood may add more than a decade to life expectancy.  It was also found that American women and men who maintained the healthiest lifestyles were 82 percent less likely to die from cardiovascular disease and 65 percent less likely to die from cancer when compared with those with the least healthy lifestyles over the course of the roughly 30-year study period.

The study is the first comprehensive analysis of the impact that adopting low-risk lifestyle factors has on life expectancy in the U.S. Americans have a shorter average life expectancy — 79.3 years — than almost all other high-income countries. The U.S. ranked 31st in the world for life expectancy in 2015. The new study aimed to quantify how much healthy lifestyle factors might be able to boost longevity in the U.S.

Harvard Chan researchers and colleagues looked at 34 years of data from 78,865 women and 27 years of data from 44,354 men participating in, respectively, the Nurses’ Health Study and the Health Professionals Follow-up Study. The researchers looked at how five low-risk lifestyle factors — not smoking, low body mass index (18.5-24.9 kg/m2), at least 30 minutes or more per day of moderate to vigorous physical activity, moderate alcohol intake (for example, up to about one 5-ounce glass of wine per day for women, or up to two glasses for men), and a healthy diet — might impact mortality.

For study participants who didn’t adopt any of the low-risk habits, the researchers estimated that life expectancy at age 50 was 29 years for women and 25.5 years for men. But for those who adopted all five, life expectancy at age 50 was projected to be 43.1 years for women and 37.6 years for men. In other words, women who maintained all five healthy habits gained, on average, 14 years of life, and men who did so gained 12 years, compared with those who didn’t maintain healthy habits.

Compared with those who didn’t follow any of the healthy lifestyle habits, those who followed all five were 74 percent less likely to die during the study period. The researchers also found that there was a dose-response relationship between each individual healthy lifestyle behavior and a reduced risk of early death, and that the combination of all five healthy behaviors was linked to the most additional years of life.

September 2018 Charts on the Move Video

The bulls were out in force as we closed out the third quarter. With the expected year end rally, 2018 looks to be another strong year for the market…. the US stock market. Bonds, commodities and foreign investments continue to under-perform and act as an anchor to portfolios. Mean reversion will eventually show up but, based upon the charts, Q42018 seems like more of the same.

My Q3 recap video can be viewed in the link below.

https://youtu.be/MgUbcV8Ckb8

Rarefied Air

Scouring through 100’s of charts it becomes obvious investors have a clear idea on which companies they expect to benefit from the current political climate. One that immediately jumped out at me can be seen below in the chart of the Aerospace and Defense ETF, ITA. As you can it has broken out to new highs after consolidating for 6 months and using the 200 day moving average as a trampoline to propel higher. With RSI momentum unwinding during the consolidation, it appears to have a lot of room to move higher before investors need concern themselves with being overbought and expecting a pullback

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The pattern’s (rectangle) target is still some $12 higher than where we closed yesterday. Keep in mind targets don’t mean a whole lot when stocks have entered rarefied air (new, all-time highs). As such, I expect ITA to likely ignore and blow right through it as long as this bull market has legs.