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In this video, I discuss why you should never use leverage when investing in an environment of high inflation or even hyperinflation.
Asset prices like stocks, gold, and Bitcoin will almost certainly go up a lot (as denominated in that local currency), but the path that they take will be extremely volatile.
If you are using any leverage, there is a higher chance that you get stopped out of your trade/investment before you end up being right about the endgame. Investing is always a path-dependent game when you are using margin or leverage.
It’s a much better idea to take an unleveraged position in Bitcoin by dollar cost averaging in and holding it in cold storage for the long-term.
Not investment advice! Consult a financial advisor.
What Happens To Stocks And Real Estate In Hyperinflation?
Chart of Zimbabwe stock market:
Hyperinflation in the Weimar Republic:
What gold did in Weimar:
Monthly returns of gold in Weimar were extremely volatile:
BTC-USD worst drawdowns:
FTX offered high leverage:
The Most Dangerous ETFs (Leveraged ETFs, Oil ETFs, and more):
I am not being paid or otherwise compensated by any company or cryptocurrency project that I mention in my videos.
My opinion is not for sale. Please do not contact me with any affiliate or advertising deals.
#hyperinflation
#stocks
#bitcoin
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LEARN ABOUT: Investing During Inflation
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Hyperinflation is a serious economic issue that can have devastating consequences for an economy and the people who live in it. While it can be difficult to predict when a country may experience hyperinflation, it’s important to be aware of the potential risks and the worst investment mistakes you can make during a period of hyperinflation.
One of the worst investment mistakes you can make during a period of hyperinflation is investing in the local currency. When a country experiences hyperinflation, the value of its currency can plummet rapidly, making it a poor investment choice. Instead, it’s best to invest in assets that are not tied to the local currency, such as gold, silver, or other commodities.
Another mistake to avoid is investing in long-term bonds or other fixed-income investments. When inflation is high, the value of fixed-income investments can decline rapidly, leaving investors with losses. Instead, look for investments that are more flexible and can adjust to changes in the economy.
It’s also important to avoid investing in real estate during a period of hyperinflation. While real estate can be a good long-term investment, it can be difficult to predict how the market will react to a period of hyperinflation. In addition, high inflation can make it difficult to get a mortgage or secure financing for a real estate purchase.
Finally, it’s important to avoid investing in companies that are heavily reliant on the local economy. During a period of hyperinflation, companies that rely heavily on the local economy can suffer greatly, leaving investors with significant losses. Instead, look for companies that are more diversified and can weather a period of hyperinflation more easily.
By avoiding these common mistakes, investors can protect their assets and make wise investment decisions during a period of hyperinflation. While it can be difficult to predict when a country may experience hyperinflation, it’s important to be aware of the potential risks and the worst investment mistakes you can make during a period of hyperinflation.
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Hey Matt, thanks for today's video. I've been thinking about the idea of investments slowly moving to bitcoin (something you talked about on jan 26). My question is: supposing that the existing bonds, stocks and real estate speculation, will – at least partially – move towards Bitcoin. Do you think that would make housing more affordable? Just to give an example, my grandparents didn't finish elementary school and were able to buy a house, while for my generation it's much difficult, even with college degrees. And I'm not considering productivity today which is x10 higher due to technology. So, who is sucking up all that purchasing power!? Maybe you can talk about this in a future video.
The Reason these Leveraged ETFs dont perform as one might expect is the daily reset.
This creates a path dependency where high volatility leads to worse performance.
There are some studies about optimal leverage in a portfolio and i believe it was around 1.4x
But thats just backward looking which is no indication for future performance.
I rather keep my stock Portfolio unleveraged and add a big bitcoin exposure.
ETH has more upside and can be used for CBDCs which gives it another use case besides just being sound money
Anytime I hear the word leverage I tune out
Not sure I understand, these leveraged ETFs would not have a margin call so how would a dip take you out of the market? Wouldn't HODLing work here just as it does for Bitcoin?
Matt is intelligent but just be aware he is about 5years in the future. The fed is fighting inflation, to think assets are going up in the next year or two is to fight the fed.
Sometimes i like to think that Matt is actually Michael Saylor using a voice altering app.
Thank you for the charts and education. Much thanks
I love these videos. So educational! Thank you so much
Saylor is linking to your videos on twitter. Congratulations!!
Thank you so much for these videos. Young people like myself are blessed to get this high quality and sound information from someone who has such good integrity.
In the past you suggested never selling your Bitcoin and using it instead to get a loan (buy, borrow, die). If you were to use Bitcoin as collateral for a loan with a service like Ledn, is this not the same idea as using leverage? You would need to certainly time the market bottom I’m guessing so as to not get margin called by sharp price swings.
Matthew, Thank you again for your content. I have a thought on using leverage. If you have equity in your home, for example, take out a $500,000 mortgage. With a 7% interest rate, monthly payments are $3,496. Five years of payments would be 60 payments totaling $209,760. When you get the $500,000, take $209,760 and put it in a money market. That gives you 5 years of payments no matter what the market does. Then take the remaining $290,240 and buy Bitcoin. After 5 years, the Bitcoin value should be sufficient to pay off the loan with lots to spare. Do you think it is a good bet?
Hey matt i am in my 20s and new to bitcoin and i was wondering if your Ultimate Guide To Bitcoin course is updated for 2023?
The fund itself is leveraged, but the investment in the fund is not. So, no margin call for an ETF investment. Am i missing something?
Don't look at it until the decade is over? I'm trying not to look at it until the day and sometimes the hour is over!
Mathew, I've been buying a few SQQQ call options, stack the in small batches per month, out 3-4 months, as one month expires I buy another 3-4 months out. My idea is if we have a blackswan event I could sell them near the bottom. Most expire worthless, but I figure it's like paying for insurance. Think that is an OK strategy? Or dumb? Lol
So with the new cpi data you got any thoughts on another possible big draw down in the future?
do a live debate with Strong Man Personal Finance on youtube. He's a index fund maxi
Thank you Matt for the great explanation. I have also been following your Hodl philosophy. I have a queston about the opposite advice given by CTO Larsen in his channel, where he constantly says " Hodl sucks" and tries to sell his course to his followers where he advocates basically buying in as BTC goes up, and using stop losses to sell as it drops. In hindsight of course, he has shown that in the past year he has made more money than the hodl approach. But I am wary of this. You also need to trade regularly and keep your BTC on an exchange right? What is your view ?
LEVERAGE IS FINE IF YOU TRADE IN & OUT FREQUENTLY … IF YOU ARE AN INVESTOR AND NOT A TRADER, THEN YOU SHOULD NOT TRADE. INVESTORS HAVE NO IDEA WHAT MOVES PRICE AND NO SENSE OF TIMING, WHICH IS WHY THEY SHOULD NOT DO MANY OF THE THINGS THAT TRADERS DO.
Now how do we get these videos in the hands of the 90% of the world who needs it RIGHT NOW?