How to invest in a world that has gone parabolic.
Apples don’t rise from the ground to reattach themselves to the tree, pigs can’t fly, and neither can Tesla be worth the same as the entire global automotive sector combined. You can even throw in all the battery makers and most clean energy companies, yet Elon Musk is still the richest guy on the planet. He even has half a million followers on Instagram, but why would an 8ft Wookie choose to live with 2ft tall Ewoks? It just does not make sense (Chef Aid, South Park, 1998).
Tesla is not alone. If you look at the performance of many other stocks, sectors or commodities you would think we live in a new paradigm. It all has had a profound change in the expectations when people invest, and nobody wants to make 8% on average per year anymore. If something doesn’t have the potential to go “ten x”, it just won’t get the pulses racing. Enter cryptocurrencies and with a market capitalisation of about $3 trillion the tangible effects of living in a world that seemingly no longer makes sense are clear for anyone to see.
Far be it for us to take a view on where this will all go. Much more important is how do we participate in the greatest money-making opportunity since Tottenham last won the Premier League? First of all, we do not want to put all of our money into things like Rivian, which despite its hefty valuation of $100 billion has zero revenues. However, even a very small amount can suffice when the expectations are that anything we do can be exponentially more valuable in an instant.
The next thing we need to figure out is what to do once we have made so much money, we no longer know what to do with it. Say you had bought shares in Happiest Mind Technologies on margin at the beginning of the year, because you got a tip from someone who used to be a hairdresser, then you would have made more than 3,500% before Christmas. Strangely enough, the decision as to how much to sell is not as depended on the profits we have made, but how do we feel if the stock went up another 35,000% from here.
Ultimately, we all know this cannot last. However, when everyone becomes a millionaire, you have to get involved, even if just to maintain your relative net worth and rightful place in civilisation. What do we buy? That’s why God invented Twitter and there is an abundance of ideas available from “experts” all over the world at zero cost. How much do we invest? Only what you can afford to lose. When do we sell? When you have doubled your money. By taking off half, you only play with the market’s money and that’s why Chewbacca lived on Endor.