What Keeps Me Up At Night?

Last week a friend dropped by and told me about a conversation he recently had with his mother-in-law, the first five minutes of which were prefaced by a series of uncomfortable shiftings and readjustments, punctuated with a series of “ums” and “uhs” as she struggled to voice the hellish discomfort brewing inside her.

Ultimately it was something trivial, splitting the cost of hotel rooms on an upcoming trip or something.

In this context her physical distress is funny. In others, it’s not so amusing.

Legendary trader George Soros once said that he knew something was wrong in his portfolio - though not with specificity - when he began experiencing back pain, as he wrote in his classic book, Soros on Soros.

The backache didn’t tell me what was wrong – you know, lower back for short positions, left shoulder for currencies – but it did prompt me to look for something amiss when I might not have done so otherwise.

Tempting as it is to dismiss this with a casual “OK Boomer,” Soros pre-dates the Greatest Generation so an ageist slander in GIF format is probably more appropriate.

Then again, Soros did break the Bank of England - pocketing a cool $1 billion in the process – so maybe there’s something to be learned from listening to your body.

Two weeks ago I embarked upon a suicide mission. I shorted Tesla.

My philosophy on shorting strong stocks is to be patient and wait until the perfect moment to act.

Then, when you think you’re ready, wait some more. And after you've waited, and it looks like the move is totally exhausted, wait even more.

Finally, when there is absolutely, positively no possibility of the stock going higher, skip the trade and move onto something else.

That being said, as you can see from the chart above (click to embiggen), it was a sweet spot to go short from a technical standpoint.

Let me count the ways.

  1. Price as extended from the 8EMA as you can get.

  2. Bollinger Bands distorted beyond recognition.

  3. Parabolic post-earnings run capped by a gap up spinning top candle.

Easy money.

Yet, once after-hours trading closed, weird thoughts began creeping into my head about potential overnight news, and I started to get uneasy, physically.

What if Elon announces a split? That’s probably good for a 300 point pop.

Worse yet, Tesla announces a teleporter that makes users younger and more beautiful. That's an easy 500 points.

And what if Lorde Edge reveals that he's actually an alien from a faraway galaxy, who possesses all the answers to mankind's problems, and demand for a $75,000 electric car was the litmus test to see if earthlings are worth saving?

That’s definitely good for at least a double.

As irrational as those thoughts were, and as solid as the technical evidence was, I really had an uncomfortable night, and couldn't wait until pre-market trading opened and I could cover.

Here’s the punchline: I made a whole six bucks, and two days later, Elon “I Fuck With Investors For Fun” Musk tweeted his "sell or no sell" poll which sent Tesla’s stock tumbling 150 points lower.

Trading is fun like that.

The point here is that as much as technical traders like me try to convince ourselves that the analysis we do transcends narratives, we’re still human beings.

We still have emotions, and those emotions – as irrational as they may be – can subconsciously affect our decision-making process.

This is why I find it much more important to know myself than to know the technicals in situations like these

That brings me to the subject of cryptocurrencies and all things metaverse.

Admittedly, I was late to the crypto trading game, but I’ve spent the past six months making up for it.

And it’s been extremely rewarding, as crypto trades like a technician’s dream.

But last week I sold almost all my holdings because I was beginning to become uncomfortable with my risk exposure.

Physically uncomfortable.

I’ve got a laundry list of why, but here are the top seven.

  1. Trading crypto feels like trading stocks, options, or any other asset class. But it’s not. The interface is the same, but what happens on the backend is a totally different beast. I don’t trust the mechanics of the “exchanges” and fear they will fail when they’re most needed.

  2. Dogecoin at a $40 billion market cap.

  3. The psycho factor.

  4. Regulatory risk. I can’t day trade Apple unless I’ve got $25K in my account, but I can day trade Shiba Inu as much as I want with 500 bucks. How long can that last? And to those who say the SEC, FINRA, the CFTC, etc., can’t regulate a decentralized asset, trust me, the government can do whatever it wants to U.S. citizens.

  5. Nassim Taleb is pretty smart and has a history of calling BS on things that everyone else thought were sure winners.

  6. Tulips, Beanie Babies, The Dot-Com bubble, The Financial Crisis, et al.

  7. Too many people are making too much money too easily. It won’t stay that way forever.

Don’t get me wrong, I believe that the blockchain, smart contracts, NFTs, and such are the future.

My concern is that cryptocurrencies will become commoditized, and not unlike during the Gold Rush when miners (no pun intended) went broke and only those who sold them the picks and shovels made bank, the real money will go to those who build the infrastructure for Web3, the Metaverse, or whatever the buzzword of tomorrow will be.

Not to the diamond hands, HODL’ers, and YOLO’s of today.

Regardless, I’m not a crypto bear, a technophobe, or a Luddite. I’m still going to be active in the space, snapping necks and cashing checks.

I’m just going to be more strategic in my approach to crypto.

And sleeping better at night.


Weekend Strategy Video: 11-13-2021


After clicking the video below, make sure to maximize it and change the definition to 1080HD.

This post is for paid subscribers