I’d Rather Own These Than Bitcoin
Crypto-currencies are all over the news, and being shoved into investors’ faces like .com stocks two decades ago. At the risk of making a really poor pun, these speculators are partying like its 1999. Good for them. But I am not buying it, literally.
“But Rob, you can make so much money investing in these,” people tell me. I am not going to tell you what to invest in, certainly not within the boundaries of this column. As always, whatever an investor does with their money should be based on their own unique objectives for whatever wealth they have accumulated. Big shots can be taken…but preferably with small amounts of money relative to your total. Otherwise, its pure speculation, and despite the increasingly apparent benefits of blockchain technology, anyone who takes money they cannot afford to lose and invests it in crypto-currencies like Bitcoin, they have only themselves to blame. Because just as 1 high school athlete out of hundreds or thousands makes it to the pros, there will be more horror stories than success stories when people mortgage their home to buy invisible money, invest in companies simply because they changed their names to sound like they are crypto-businesses, and other insane stories my team and I keep seeing reported.
So, for the benefit of the few of us who hear “Bitcoin” and think dot-com bubble, Tickle Me Elmo, Nifty Fifty or Tulip Bulbs (look it up!), I present a list of 5 ETFs that I would rather own in 2018 than Bitcoin or any of its cousins. Sure, these may not perform as well (and Martians may attack us), but I am all about the sleep at night factor. To be clear, this is a relative statement (ETFs versus crypto-currencies). I am not recommending these ETFs because nothing in this column should ever be considered a recommendation.
My idea for this post came from a discussion I was having earlier this month with a group of friends. How did seven middle-aged guys end up talking about Bitcoin? Because these days, everyone seems to be (no, I did not bring it up). One fellow in the group (we’ll call him Jack) mentioned that he owned a small amount of Bitcoin for about a year, stashed in an account, and that stoked a discussion and debate on the topic. Finally, another group member (let’s call him Derek) suggested we all throw a $20 bill on the table and have Jack buy us some Bitcoin. Well, that suggestion went nowhere, except that Derek then suggested that I come up with an investment that I thought would survive 2018 better than Bitcoin. I told him I’d not only come up with one, I’d come up with 5 (all ETFs). Furthermore, I’d blog about it, so everyone could be bored by our now slightly-more-famous-than-yesterday group of guys.
Here is my list of 5 ETFs that I think will outperform Bitcoin in 2018. I chose these from the list of 100 I track daily. Keep in mind that Bitcoin could very well surge in price during the year. But like many manias of the past, while there is a core value in building blockchain infrastructure to process the online payment superhighway of the future, Bitcoin and its Crypto-brethren are unlikely to see their prices continue to grow to the sky, any more than a beanstalk can. Hey, did you see what I did there – Jack and his Bitcoin beanstalk? OK, never mind, here’s the list (ticker symbols in parentheses, along with the ETF’s 2017 Total Return through December 19):
- DJ US Telecom Ishares (IYZ, -13.7%) – the Telecom sector is going through a transition of sorts. We are down to four primary wireless carriers, wireline companies are fighting to stay relevant, media content providers are a threat and there are price wars in some segments of the industry. But as is often the case on Wall Street, prices overreact, and I think that is likely happening in this sector. I will take this sector over Bitcoin, thank you.
- Global X MLP (MLPA, -7.1%) – the MLP sector is comprised of businesses that transport oil and gas from where it is sourced and refined to where it is used. These companies are essentially pipelines. Unfortunately, while they should be less sensitive to fluctuating energy prices than companies that produce oil and gas, they have been more susceptible to the price of oil in recent years. I like this sector’s chances to claw its way back into investors’ hearts in 2018. Their above-average yield should help do that.
- QQQ Short Proshares (PSQ, -25.8%) – if you have read my column this year, you know that while I acknowledge the incredible strength of the Nasdaq rally this year (and its heavy influence on the S&P 500’s performance), partying like its 1999 will eventually give way to what occurred starting in 2000: a bear market, in which the gravity strikes the leaders first. The largest 100 stocks in the Nasdaq Composite Index are where many of those recent leaders are found, and as soon as that train ride ends, I think investors will be surprised how quickly euphoria turns to panic. At the very least, 2018 should see at least a modest pullback in the Nasdaq 100, and that would make this “inverse ETF” a profitable investment.
- High Yield Short Proshares (SJB, -5.6%) – call me the Grinch, but another “bear” fund makes my “better than Bitcoin” list. High yield bonds are near their lowest yields in…well, ever. That means that investors are buying these lower-quality bonds without demanding much of a yield premium compared to US Treasuries. This too is a bubble waiting to be popped, and it won’t take much.
- S&P Retail SPDR (XRT, +3.9%) – retail stocks are as dead as the ghost of Christmas past, right? Not in the aggregate, in my opinion. 2017 has been a year that this sector would like to forget. Investors spent the summer assuming that anyone who sells anything to consumers was on the way to being “Amazoned.” While there are weak players to be shaken out, that is normal for any industry trying to adjust to secular change, which I acknowledge is happening in retail. But have you seen what they’ve done to the stock prices?! As I expect 2018 to be the most sobering year for investors (after New Year’s Eve, of course) since 2008, scouting for out-of-favor groups of companies was at the top of my Hanukkah list. After trailing the S&P 500 by over 17% this year, I prefer to be a contrarian in 2018.
So, with my response to the guys in the books, it is time to look forward to the New Year with optimism about certain slices of the investment markets, even if I am not very optimistic about the prospects for the broad stock and bond markets themselves. I will have more on that in next week’s blog. Thanks for reading in 2017, have a most joyous and safe New Year, and be careful not to let the egg nog trick you into speculating on Bitcoin.