By Bitcoin Barry on The Capital
— — — — — — — — — — Smart Money vs Dumb Money — — — — — — — — —
Keeping tabs on the Wall St Wonga.
In my previous article, I talked about what the hell is going on with all this money printing, and the possible consequences; inflation, inflation, inflation!
The first thing to understand is that one of the core principles behind successful investing is to follow the ‘smart money.’ This basically means that you should be doing what successful investors, hedge funds & are doing. They have all this money for a reason (think: Warren Buffet, and other old guys), they kinda know their stuff! They have people working around the clock to ensure their liquidity (cash) is in the right markets at the right time, so why not take advantage of these nerds? Do take in mind that no one is always right and you should always DYOR, just give serious weight to what the big dogs are doing.
Conversely, you should always try to ‘buck the trend’, and avoid what the ‘dumb money’ is doing, that’s everyday people, or ‘retail investors’ (don’t shoot the messenger!). If Uncle Pete, Dave from the pub, and Janet’s pug are raving about Facebook stock, then you better sell it all before the price crashes! This is partly due to market cycles, human psychology, and the unfair rules of capitalism.
What the cash cows are up to can be difficult to find out, people pay lots of money to have this information, these companies aren’t exactly notoriously honest and open about their activities. This is for various reasons, but mainly to maximize their profits.
Also, watch out for bias. For example, don’t sell your house to buy gold because Peter Schiff, CEO of a firm that has heavy exposure to gold, told you that gold is the best investment of the century.
The best way to gauge this is to monitor their activity, there is a wealth of resources on YouTube (no pun intended). Simply subscribe to channels which do the research for you in your areas of interest.
Now, what are the big dogs, the fat cats, the heavy hitters up to?
Well, gold has historically proven itself as a hedge against economic chaos for hundreds of years, so this is always a good bet. Some firms are suggesting to buy stocks as they rebound, but considering that we have the highest unemployment levels since 1930, and are well overdue a bear (down) market this advice is very suspect.
One interesting trend has come to light….. hmmmmm…… (smoulder)
Hedge fund manager Paul Tudor Jones recently publically announced that he is investing in bitcoin, as a hedge against pesky inflation. This is huuuuge, bitcoin is still considered a bit of a rogue investment by traditional investors, the weird cousin that never gets invited to the parties and always up to no good. There are major players that back the cryptocurrency, but you can always flaw their arguments by accusing them of bias due to a vested interest in the price of BTC going up. However, Paul has no prior interest in bitcoin and is a poster boy for the old school Wall Street investor.
You may think of bitcoin as this weird digital money that died after the ‘bubble’ in 2017/18. But behind the scenes, in the last 2 years, there has been a lot of serious movement towards making Bitcoin available and appropriate for institutional investors. A hedge fund would not be willing to simply buy bitcoin directly, they want complex solutions around the purchasing, storage, contractual and insurance aspects of anything they park their ‘illions into.
The current crisis is now making Wall Street look around for alternative places to protect their assets, or counteract some of the losses arising from stocks and inflation. This once underground cryptocurrency, once only used for drugs and pizza, now has billions of dollars of digital infrastructure built around it. Trading volume is the highest its been since the ‘bubble’, the old white guys are snapping up bitcoin privately and publically, maybe it is worth a thought… (even sharper shoulder)
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