Relatively Good?

As I prepare to reflect on 2022 and prepare for my portfolio thoughts for 2023, I have found to feel not too bad about where we are currently at. I think the most unfortunate thing that transpired this past year was how correlated the Crypto asset class became to the traditional equity markets despite having somewhat different drivers around valuations. However, it did prove that easy money provided by Central Banks and Governments can move all financial assets in unison.

While I am likely being too narrow in my comparisons to returns by not looking at a more broad index like the S&P 500 or Nasdaq, the fact that any stock or group of them have declined as much as a bitcoin or any Crypto asset is eye-opening. Tesla at one point was worth more than the bitcoin market capitalization despite earning only a small percentage of it. This has all occur while the global economy is not yet in a recession and Companies are still earning near historic amounts. How will these stocks and the broader indexes hold up once the impact of tight monetary policy and a strapped consumer take hold?

I do not think it will be a good 2023 for most risk based assets as we have not seen the worst of many metrics. Unemployment remains at historic lows and despite interest rates seemingly are record highs, we are likely still below long term medians. This does not bode well for high valuation stocks which we still have in today's market. I have always agreed that investors should not "fight the Fed" as I myself have learned in the past. This will be the driving force in the markets next year.

I cannot say if the worst is over for Crypto, maybe not; but the likelihood of some events leading to the final capitulation needed to create a base is probably a good bet. This has been building some capital on the sidelines for the right moment. At the same time, it does not hurt to be earning 3-4% on these funds while I wait. Once opportunity arises, scaling in will likely be the best way to create a portfolio of solid Crypto assets for the long term. Most importantly, I am building a savings in an asset that has proven to be monetarily sovereign!

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