Welcome to the Madness of Crowds
In 1841, Charles Mackay published Extraordinary Popular Delusions and the Madness of Crowds. In summary, he wrote about the folly of group-think and its disastrous results. This newsletter intends to bypass the madness in order to secure consistent, short-term profit.
In a world of Quantitative Easing, MMT, U.S. national debt over $27 trillion, record-low interest rates for the foreseeable future, Coronavirus shutdowns, and somehow a cyclically-high S&P 500 P/E ratio, it is easy to see that investors are faced with a tremendous amount of uncertainty and risk.
In tandem, I generally buy into the following arguments in order to have a diversified portfolio:
1. You should own precious metals like gold and silver.
2. You should own bitcoin.
3. You should own dividend-paying stocks.
4. You should heed Warren Buffett’s advice: “Never bet against America.”
5. You should avoid trying to beat the market and simply plant your money in an index fund.
Truthfully, I disagree with the last statement for myself personally, but I understand the draw for many investors. It is very difficult to consistently beat the market – that’s why most people don’t.
As you gain more experience as an investor, you learn that you want to maximize returns while simultaneously minimizing risk. The way to do this, though, is not by watching Jim Cramer, by reading The Motley Fool, or by listening to your friends’ stock tips they received at work or at a bar. Particularly given our current situation: businesses have shut-down across the country, Donald Trump and his puppets at the Federal Reserve have somehow calmed investor nerves, and gambling millennials working from home have flooded the stock market through Robinhood. To navigate these waters, you have to be very cautious with how you deploy your cash, assuming you’d like to earn more than offered by your less-than-1% APY (Annual Percentage Yield) savings account. The goal is to avoid what the mad crowd is doing, and instead sidestep the masses by pursuing a less-practiced, less-understood strategy.
My intention with this newsletter is to demonstrate a key options strategy that is easy to implement because it requires very little effort – in terms of execution, not in terms of analysis and careful consideration! I will provide further details in a follow-up post.
In the meantime, welcome! I hope that you will subscribe and that you will benefit from reading.
Regards,
John