Week 51
4 min read

Week 51

Hi Reader,

Some of you have been asking for more opinion-sharing. The usual newsletter format is at the bottom, but for those of you who are looking for good investments, you may like the thoughts below. I'm not qualified to recommend investments, I'm merely highlighting a minimal level of secondary thinking that's required to even try and outperform and hoping to get some challenges and interesting thoughts from those of you who disagree.

We're all hunting for yield in this climate. My approach has been to consider both asset classes that performed well in previous downturns as well as assets that relate to the unique nature of the current cycle.

Which assets usually do well in a down turn

This article from visual capitalist beautifully summarizes several past crises and return rates on different asset types. The four classes that performed well being managed futures, global macro, bonds, gold. I'm not going to debate why the downturn is coming, We are continuing to share more and more evidence of that :). If you're skeptical, read this.


Seems like a great place to be. The potential of US-China conflict, across-the-board-currency devaluation and reserve currency crisis all point towards gold. Gold is nominally at all time highs, however, real prices (CPI adjusted) still provide a decent margin of safety.

Ole S. Hansen suggests moves into silver as well, which is why I'm optimistic about both. Gold is relatively safer while silver may have more upside.

Just in case you are wondering why silver would qualify, silver price nearly doubled throughout the global financial crisis (past prices are not an indication of future returns):


While US bonds have been a good place to be all year, the prices of negative yield bonds have become somewhat speculative and been driven up by a lowered cost of capital across the market.

I'd stay out of high-risk bonds at this time. You may consider US bonds for a long-term yield play if pessimistic and stay out of speculative investing unless you have a good grasp on pricing these bonds for intrinsic value.

Global macro

Global macro returns are highly manager specific. Unless you are a fantastic fund-of-funds investor, it's likely you will overpay in fees and suffer in returns. I'm staying out.

Managed futures

I'm still new to this asset class, but it effectively is a highly managed asset class that bets on movement as opposed to upward-or-downward movement. In 2019, this looks dangerous, because there is a lot of volatility in markets driven by external factors like Twitter accounts, China, etc., which could also be prolonged longer than previous downturns. It also has the manager choice problem of global macro.


While not an asset class, put options on equities would have performed well during downturns (they all come with significant drops in equity prices). There are several risks of getting put options right:

  • pricing (need to consider risk when pricing options)
  • timing (if you are too early, you still lose)
  • asset selection (what if you stumble on a resilient stock)

I personally haven't built the right knowledge to overcome these risks right now.

In terms of asset classes that could uniquely benefit from this cycle, bitcoin is the main one I've heard about.


Bitcoin didn't perform well in 2008 because it didn't yet exist. Some argue that it was created precisely in response of the 2008 crisis. While bitcoin has been designed as a hedge, it still has a developing anti-correlation to the stock market. What makes me skeptical is that many psychologically see bitcoin as a speculative return-generating investment and hence may not rely on it for capital preservation. While it does have a soft anti-correlation with stocks during low drops, it correlates with stock prices during big drops and for that reason it's not clear that it would be a good hedge in downturns in general.

What makes it more appealing is the deflationary aspect of bitcoin, especially in the current climate of potential currency devaluation. For that reason, I'm still bullish on bitcoin as a small long-term investment, but expect gold to be a more reliable downturn hedge in the short-term. I'm also featuring an article below which on balance explains the bull case for bitcoin in the current negative yield cycle.


"Hardcore Bitcoin people think there’s a new aristocracy. They’re super convinced that they’re the new .01 percent, and there’s a decent chance that they’re right."
- Vice


💵 Crypto

Bitcoin is the new Birkin Bag reports Vice. This article repeats the reality that Bitcoin is looking more and more like a macro instrument for the wealthy and less like a pathway to a decentralized world with greater freedoms for all.

The best explanation of the current macro climate comes in the context of another Bitcoin post Bitcoin for safety with some gloomy forecasts: "The setup in front of us is not for a garden variety recession. It’s for potential cataclysm: a drawdown that will hit normal investors hard, but retirees and pensions especially so, threatening the premise of our financial system. This crash, or even just the threat of it, will lead our governments to take extraordinary action in an attempt to avert a long depression. That action will cause an incredible level of inflation."

🌍 Macro

Ray Dalio thinks rate cuts are becoming less effective [Tweet -> Bloomberg Paywall].

Trinh Nguyen recommends top shortcuts in Bloomberg Terminal.

🚀 Start-ups

Marc McGranahan shares lessons from Stripe enginering, a crystallization of Stripe's core distinctive principles: optimism, ambition and recruiting.

Todd Goldberg thinks authenticity should be shared between a brand and its founders. A good example of this working is 100 Thieves, which strikes a delicate balance between promoting the Founder (Nadeshot) and the company. Lambda School feels like another example where that is working.