Week 2017-06-19 Slow Week Expected. ES Puts. Bitcoin Investing.

This Week

There is very little news to drive markets this week. Central Bankers are chatting to dinner crowds to jawbone policy, but it is unlike to move markets. There is a UK 30 year bond auction that will only provide excitement if it is an utter failure.

So, look to take chops out of slower markets this week. Use caution if prices seem to march in a direction, but expect a reversal over the day.

Sell US Stock Index Futures

It looks like a good time to get a short position on indexes. I like ES put options.

After rolls, the current contract to watch is the September 2017. This is a decent amount of time for options on that contract. That also means you`ll be paying premiums on time. Out of the money puts are in decent value, and will be a greater value if the share markets have a boost higher over this week. Patience should yield a good entry price.

There is the worry of October. This is when share markets have taken some big dips in the past, so the question is a timing issue: Will the market dip/crash before or after September expiration?

I don`t think this market will make it to October, but I will be limiting size (and risk) just in case. If a position is winning, it can be piled onto in greater volume.

The reasoning to sell:

Everyone expects a dip in share prices (don`t fight the herd). FANG has experienced weakness, and will no longer carry markets through turmoil. Brick and mortar retailers, including grocers, are feeling the competition with online retail, especially as Amazon buys out Whole Foods, and will likely perform poorly in this quarter. Housing is sluggish and will become less tenable at higher interest rates. Mining and manufacturing will likely be sluggish as buying power of the population diminishes. Shipping lines are going under water as goods are not moving in volumes sufficient to carry that industry. That also means lower demand for fuel which will hit the oil complex.

The reason NOT to sell:

The Fed / ECB will try to save share price by printing more money.

Money printing is unlikely as central banks seek to raise interest rates to levels that will encourage sound long term financial planning, or at least bond buying. It is going to take much higher rates before bond yields become an attractive investment for yield. However, if markets move lower, then the low risk offered by bonds will be attractive. This will cause greater flows out of shares and into bonds, driving markets lower.

Bitcoin Investing

Should you invest in Bitcoin? No, probably not.

Should you speculate in Bitcoin? Sure. Limit risk by limiting size and using multiple Wallets.

http://blockchained.com/profit/

There are some compelling arguments to invest in Bitcoin, but there is also excessive speculation in the current market. This speculation has driven prices beyond what would seem fair value for cost of production (mining) and spending power of the currency (tangible use). So in the near term, wait for a dip in price to buy Bitcoins once the speculation frenzy has died down.

If you are looking for a long term investment, Bitcoin will likely go up in value. This is because they are limited in number. As use becomes more widely available, there will be a limited number of coins available for that use compared to a large population.

Over time, lost hardware or lost key codes has taken Bitcoin off the market (lost forever and irreplaceable). If you are the type of person that breaks your phone frequently, then your Bitcoin wallet will likely be lost. If you are bad with passwords or backing up data, then you are also likely to lose your coin wallet. This increases the holding risk for such an asset.

Outside of San Francisco and now Japan, there are limited options to spend Bitcoins on tangible goods. Often, brick and mortar retailers that take Bitcoin charge a large premium to use Bitcoin due to volatility. This can make for dramatically higher prices for the things you are buying. This diminishes the allure of using Bitcoin as a tangible currency.

If you are shopping on the Dark Web, Bitcoin`s anonymity still holds appeal. However, if you are not shopping for illicit or questionable goods, then you won`t know what market value for your Bitcoins really is. This makes determining the underlying value of your coins challenging.

Adding some Bitcoin to your portfolio may be a decent punt. That is because of good odds of higher prices in the long term future. However, balance that with the likelihood of you losing all of them because your computer got a virus or you lost the scrap of paper with your key code.

You may also want to spread your speculation through buying other crypto currencies. Some are more dodgy than others. Most don`t spend as easily as Bitcoin. So, do some homework before you buy.

DISCLAIMER:

YOU ARE AN ADULT and must make your own decisions. ONLY YOU know what level of experience you possess. ONLY YOU know what level of risk you are willing to take. ONLY YOU know what your financial goals are, and to what lengths you are prepared to go to meet those goals. You will be the one to wear your losses, so trade with caution and do your own research.

Henry Ledyard is an independent trader. He has NO affiliations with banks, brokerages, funds, trading houses or markets. He trades for himself and posts trading ideas merely to share information. He does NOT want your money, advice or opinions. He does NOT want your unsolicited emails. If you require further financial advice, seek it elsewhere. Henry`s opinions should be considered as addled as his blog site:

www.addlepated.com.au