Investing in 2023 and Crypto - Conversation with Marc De Mesel (Long Text Version)
Video you can watch here:
Andrii: Hello, everyone. Today I'm happy to see Marc De Mesel, famous investor, famous crypto investor. And we are streaming live on YouTube and Twitter. I'm sharing here the link to Twitter. We'll be featuring questions from the audience.
Marc, it's great to see you, as always. Thank you very much for finding time. Let's speak about investment in this hard year, which I would describe this year not so easy, both global and for crypto community.
Maybe let's start with sharing the percentages of your portfolio, which you often do on your Twitter. I will put the link to Marc's Twitter in case you are not subscribed because Marc is giving great investment views and it's always very interesting to read you. So, Mark, how are you and how is your portfolio doing?
Marc: Hey, Andrii, thank you so much for the invitation. So happy to do an interview with you. It's a long time ago that I did an interview with anyone. Maybe the last one was with you over maybe a year ago or so. Time flies. And I'm very honored that I can have this chat with you. What is your Twitter handle that I can find it to retweet?
Andrii: I sent it here to the chat. It's flodner. I can also send it to you to telegram. Because this stream, it goes live to YouTube and to Twitter. And then I'm sharing it, of course, to crypto blogs. By the way, I will do the text version also very fast, today or tomorrow. Because now with this advancement of AI, there is a new software which transcribes YouTube much better than it used to be in the past.
Marc: Cool. Can you still hear me now?
Andrii: Yes, I can hear you. But the video is frozen. Yeah, it's frozen. Great.
Marc: So I've also retweeted it. Let me double-check that it works so that my audience can also check join to see the question, to shoot questions and make comments. That's always fun. Okay, that works. So that's very good. And your link goes to your link? I don't know, it does not seem to go to YouTube. Is that good? To YouTube?
Andrii: It's streaming directly on Twitter? Yeah, directly on Twitter.
Marc: But people can make comments then? Ah, streaming directly on Twitter. Yes, they can do comments. That's good. That's very good. I didn't know that was possible. Believe so, yeah. Great to see. You will keep an eye on the comments then on Twitter?
Andrii: Yes. Great.
Marc: Are you also streaming on YouTube?
Andrii: Yes, on the YouTube.
Marc: Okay. Should we share that link also?
Andrii: Yeah, I can share it too. I will do it.
Marc: Because I'm not used to. I've never seen a live stream on Twitter and then you can make comments. I've not seen that before.
Andrii: I'm using Restream software and it's very good, actually, because it streams to multiple platforms. I used to stream to Facebook, but on Facebook page, I don't have that much of the audience, but I'll need to figure out which other platforms have good audience.
Marc: Could you also share it for me on Telegram, the YouTube link? I will post it or maybe on maybe on Twitter as a reply to your tweet. Then people have it also.
Andrii: Yeah. And I will also write and we'll tag you now.
Marc: Great. Yeah. So maybe I can start with a few comments on the difficult year that it is right now, 2023. I can certainly relate with that. I find it extremely difficult, but first to share my allocation, because I agree with you that that's the most important thing. Because stock is stock, actions count a lot more and you can tell a lot about someone's beliefs by just knowing how they have allocated their capital. So for me, that's 50% crypto and 40% growth stocks. And then I have just some small investments in commodities 10%. And that's it. Basically. I mean, you don't even have to mention investments that are less than 5% because they don't make any difference or barely any difference on your returns. Except when you're talking about a very small, maybe cryptocurrency or a very small growth stock that becomes in five years or so a major player. But those are the very rare investments that I do not have in my portfolio.
So yeah, that's my allocation. But I have to say that I have lots of doubts about this allocation. And very often I have this urge to diversify and to sell off a piece of my crypto and my growth stocks in exchange for gold and gold mining stocks or bonds. That's really on my mind to do so because there are a lot of red flags in the stock market. I have not so much confidence that the stock market will not make a new low. That's really what caused me the biggest doubt.
And the growth stocks I'm invested in are not the kind of stocks where I can say, look, I know this company through and through and no matter what the economy does, these companies will do very well. No, that's not the case. I'm invested in stocks that I followed picks from other people, and so I don't have so much confidence in that. To the contrary, my cryptocurrency selections. For example, what kind of growth stocks am I invested in?
Well, my biggest position is basically Tesla options, but that's managed by a hedge fund, but that's about 10% or so. But then I have also like 25% or so other stocks, and those are companies like Zoom, Taylor, Doc, Draft Kings and yeah, these companies. I don't really know, I just follow other people's opinions here. And so my conviction is not strong, and I'm considering to sell those for gold and gold mining stocks, but I have not pulled the trigger. So that's where I am.
Andrii: Yeah, I see. And as I remember, in past you used to have more percentage in cryptocurrency, like 60%.
Marc: That's right. And actually, typically at this time of the cycle, in this time of the cycle, I would be actually 80% or 70% crypto in previous cycles. But the reason why that's not the case is because I really burned myself badly with leverage during the previous bear market. And I continue to be exposed to 60, 70% crypto as the market was going down, but I continued to be liquidated also because I had a DeFi loan that was only 10% or so originally of my portfolio.
But as my portfolio tumbled through the floor, that became 20, 30%, I got margin calls and I had to sell crypto to pay down the DeFi loan. And actually, that happened again. At the bottom. I was invested 60 70% in crypto, but I got another margin call and in one swoop I got liquidated actually. And I lost like 40% of my crypto. And in one liquidation event I was just beaten through the floor and I went from an allocation of 60-70% to 40%. And I said to myself: Okay, normally what I should do here is I should sell some other assets to bump up again my crypto exposure.
But I said to myself, I'm not going to do that because I don't deserve it. I don't deserve a bigger crypto exposure. I fucked it up. And I'm going to remember this for my life not to take these kind of risks anymore.
So I remained at 40% allocation and therefore 60% other investments, which was mainly like growth stocks and maybe some a little bit commodities. So yeah, that's why I'm only at 50% crypto currently, despite crypto having done very well.
But I should have been at 60%. But actually, I sold down about 10% of my crypto already when Ethereum was around 1700 to pay down half of my DeFi loan because I refused to close down my DeFi loan when I got margin calls.
My last margin call was around $1,200 Ethereum, $1,300 Ethereum, that's like now three months ago or five months ago. That was the bottom, also the second bottom of Ethereum. The first bottom was $900 or $800 but then it went back up strongly and I had expanded my margin loan again, I had taken more DeFi loan to invest in more crypto as the prices went back up and I was able to do so. But then Ethereum went up $2600 but then went back $2200 and I didn't see that coming. And that's where I really made the big, I got a big margin call and I lost a big piece of my crypto. But I still had like half of my margin DeFi loan open and I could have decided to close it all but then I would have very little crypto left.
So I had to basically I didn't do that and I kept my DeFi loan. But I said to myself: Okay, if prices recover, first thing I need to do is get rid of this DeFi loan because it's a bad loan. It's just a bad loan. Something I didn't realize before. But yeah, now I certainly am aware that certain loans are good and others are bad. And you should avoid the bad loans and try to only get the good loans. And so that's why I'm building down a DeFi loan now already quite early and that's why I have a low exposure to crypto relative to previous cycles.
Andrii: Yeah, that's an interesting question, especially for new investors, the notion of the loans. What is good to take or maybe better not to take the loan in general. And another question is how to distinguish a good loan from the bad loan.
Marc: Yeah, that's something I've learned the hard way. But I think any loan that's able to call you when things go bad is a bad loan. If you take a loan from a friend and he says, okay, I will borrow you the money. But if your company goes bad or your project goes bad, I'm going to force you to pay me back right when your company or the project fails. Or let's say you go to a bank and the bank says: “Okay, I'm going to lend you money for your real estate. But if your real estate drops to the floor and goes down by 50%, I'm going to force you to pay it back in one swoop”. And so you will have to sell your real estate after it went down 50%. If that's the deal, that's a bad loan. You shouldn't take such loans because you have to pay back right when you can't and you're going to lose all your assets. And be forced to do so in such an event.
A good loan is where the loans you can get from friends who have family, where they say, okay, I'll borrow your money and I'll pay you back when I can. That's a good loan. Because then when you're down and you can't pay back or the value of your portfolio is down a lot, well, they can't force you to pay back. You don't have to pay back the loan. You can just only pay it back when things are going well and you're able to afford it to pay back without taking a big hit yourself. That's a good loan. And that means there are not many good loans in this world. But there are some. There are loans, not DeFi loans, also not leverage you get from your broker because those are all bad loans also.
Certainly, not all these products that contain leverage, those are all bad loans. But the good loan, the only good loan I know that is available is mortgages. Because the banks actually won't force you to sell your real estate if you're down 50%. They don't do that. Why they don't do that is because they get a bailout from the central bank or they go broke. And even when they go broke, they don't force you to pay back the loan. Your loans are just sold to another bank. And that new bank will not force you to pay it back also. I'm talking about private residential real estate here, not about commercial real estate and not about company enterprises. And that no, but those are the deals in the west. Those are good loans, mortgages.
But other than that, I don't know any good loans. So I've decided to only take those loans and I've decided that I will go into real estate for that reason also. And another reason also is that my portfolio has been extremely volatile over the years, the past ten years.
And now it's the third time that I lost a major. I've lost over 80%, I've lost twice 80%, but now I lost 95% at the bottom. Now it was even worse than before because I made more mistakes. But I don't want that any more of course. I'm getting too old for this. Too many children, too many ladies to take care of. And the wrinkles are starting to show. I need much more stability in my portfolio.
How can I achieve that? Well, you could, for example, keep a certain percentage of your portfolio in cash. If you say I'll always keep 25% in cash, for example. Well, that will stabilize your portfolio a lot because as prices go up, you're forced to sell and so you make less profit on the way up. But then as prices collapse, your cash position becomes very big very quickly and you're forced to buy back some assets. But so you will go down a lot less fast. So that's one way to bring stability into a portfolio.
But I really don't like cash because it's bad. Returns are below inflation always. Even today, if you get 5%, it's still below inflation. Well, actually that's inflation, but it won't last long, it will probably go down again. And so cash on average, returns are very bad. And then of course, you're also investing in the government, which is also not, from a moral standpoint, a great idea.
But another idea I've been playing with is like, why not do real estate? Because that's actually a hard asset and it's actually also not volatile. Of course, it depends when you buy, also where you buy. But you can manage to buy in countries where real estate did not just have a big boom, but prices have been flat for five years or ten years, I mean, chances are extremely low that will go down considerably in value, except if a war breaks out. But actually, on that, I have a question for you. How are real estate prices in Ukraine right now? Since the war broke out?
Andrii: It might be strange, but they didn't fell so much, especially in the capital in Kyiv. So. Right now, almost for a year, it's already, I would say, safe in Kyiv. There is a chance of some missile strike. But last time it doesn't happen. But even when in the March of last year, when the russian troops were near the capital and it wasn't understandable how it will end for many people - there was no big drop in the real estate.
And then for some time the prices keep the same. The only thing is that because many people really left the country and there are more, I would say, like hot options. Because I think it's everywhere: If the person wants to sell something quickly, they need to lower the price and it can be way below market price. This happens. And I think in general the prices for real estate to buy, especially not on the secondary market, but from the real estate developers, they fell a little bit.
But also the rate of hryvnya, national currency to USD, it fell. So if you think in dollars, so there is not a big difference. It feels like almost the war did not affect real estate market because the prices were falling a little bit anyway because of the, I think general economical situation.
Of course, in the cities which are in the south and in the east, the prices fell and it's understandable
Marc: Like by 50%?
Andrii: Maybe something for 50%. And it also depends from which cities. Because cities which are closer to the front line, like Zaporizhzhya and Kharkiv, the life is going on. Unfortunately, there were more damages and just being there takes more risk than being in Kyiv or in the western Ukraine. And the prices fell. It's hard to say which percentage. And what's interesting that on the west of Ukraine the prices rose and both rent and sale prices, and especially in the cities like Lviv and Uzhorod. Uzhorod, which is near Hungary, I saw some diagram: the prices rose, I think more than 100% there. Because it's relatively small city. It's nearby in Carpathian Mountains and it's near the border. Which is like almost if you have a car, you can live there and travel to Central Europe easily. And in that region there is no curfew hour because we still have a curfew hour in all of Ukraine apart from that Transcarpathiian region. It's probably the most distant region from the war. So even the pessimists who might believe in the future escalation and nuclear war and other, can consider that place as safer because: mountains nearby and good ecology.
And also in the rent business, I think, off course, the demand is much smaller than it used to be because there are less foreigners. But the demand exists because those people who unfortunately had to move from their cities in the east, in the south, people who were under occupation, they are looking for another places to live. Some leave in the country, but many stay in Ukraine. So they need to rent something. So there is a constant demand but it's smaller than it used to be.
I would like to ask in real estate which countries, maybe geographical locations are you considering in general and what is the way you usually go with some maybe company which proposes or you go to the real estate developer directly? I think in this case you might get the best price and in general, the more you buy from real estate developer, the best price you get as I understand. What is your way of considering this area?
Marc: Yeah, let me get back to you, first of all, to check when you talk about prices in Ukraine is it US dollars or in local currency?
Andrii: Well, prices in local currency they rose for everything because inflation is going on. And going to the shops you can feel that the prices rose comparing to dollars the price
Marc: When you talked about real estate prices. Were you talking about US Dollar prices or local currency prices?
Andrii: In US Dollar prices.
Marc: Okay, so it doubled 100% in US Dollar in that one city?
Marc: Okay. In US Dollar, it went down by 50% or so in the war zone, close to the front line?
Andrii: Yeah, maybe even more. This is something I will need to check. And it also depends from even in the one city, there might be several locations. In Ukrainian real estate, usually people count in dollars, prices in dollars.
Marc: But it's an example of, like, even when war struck the area where you have real estate. Then it's not like a simple case of, oh, you will lose everything when you're in real estate. No, it's actually very rare that we're able to see examples of this because war has become very rare, actually the past 50 years in the West. But here we have an example where we can see, like, actually, it's not that the whole country drops by 90%. No, even then, actually, some places go up, others go down, but on average, it stays quite flat.
Even in a currency, a stable currency like US Dollar, people don't lose much. Even in a country where it's strict with war, on average, maybe they lose 10-20 % in real estate. That's not a disaster. It can get a lot worse. When you invest in crypto or in growth stock, you just lost 90%. Real estate is a quite stable asset. And actually, the average returns of real estate is around the same as the average returns of the stock market, which is that it goes up with inflation plus some extra thanks to rental income. And that means that in US dollars that's around 7% or so that it goes up real estate per year. Which is actually more than, for example, gold that goes up with only 5% in the long term.
And why is that? Because while in most places land has become more expansive thanks to population growth in the West. Mainly due to immigration in the West, but even in the East, Eastern Europe and russia, okay, you have a lot less immigration there. But what you do have is that people have become a lot more wealthy and that is expressed in the land prices also. So real estate is actually a good investment. But then, of course, there are periods where it's really in a bubble and then you shouldn't be buying.
But for example, if you look at the United Kingdom. In contrast to most other places in the West, it did not go up the past five years. Actually, it went sideways since 2016 - 17 prices have not gone up, expressed in pounds than for the United Kingdom. Which is very different, for example, from Belgium or Switzerland or the United States or the Netherlands. Their prices have gone up a lot the past five years and have at least gone plus 30%, sometimes plus 50%.
So that's a different story. But the United, for example, I think it was because due to Brexit they left the Zone, the European Union and that has caused a lot of companies and individuals to have to leave the United Kingdom and they have to leave London and has caused depressed.
A climate that's different from other regions. And I think that's why real estate hasn't gone up there for five years. But, of course, rental prices did go up and did go up a lot. And that shows that it is still in demand real estate. And if you look at the cycles in the United Kingdom. For example, I looked at those charts for the past 30, 40 years. 40 years, and it's everywhere like that. If real estate went down sideways for five years, well, very likely it's going to go up for the next five years or ten years, and it will catch up to that average of 7%.
So if it went sideways and you have like, 0% for five years, well, you're probably going to have 12% for the next five years, so that you get an average of 7% or so. So I think that's a more likely scenario to happen in UK.
But the reason why I never invest in real estate is because, of course, you become a landlord, and I didn't want that. But now I found someone who's actually interested to do all that hard work for me, where we would work together. Usually people do that together with their family, their brother or sister or their mother or their children, where they buy some properties. And there's only one person that needs to manage it. The other ones don't need to be bothered by the tenants.
That's how that's manageable, because, of course, many people don't want to be a landlord. That's a bit of a problem. And for me, I've always been against real estate for that. Like, the average returns are too low.
But I've changed my mind on that because I don't look at it anymore as an asset that really needs to bring the performance to a portfolio, because, indeed, you're not going to get there. Every butcher, every baker, every lawyer, and every doctor is investing in the real estate. There is so much competition there that the average returns are only a little bit higher than inflation. That's true. But then you have the good loans that enter. If you take advantage of the good loans that you're able to get then actually, for your money, you cannot buy one property, but actually you can buy three properties or four. Because you're able to borrow so much money against it. And so you can leverage it up and you are not at risk of a margin call.
At least that's how it works in the West. I don't know if it works like that also in Ukraine. If you get real estate loans, can they ever be called or they are also never called?
Andrii: Well, in Ukraine there were problems with real estate loans because it was really something very hard to get. And usually, the loans were from the developers, from those who are building real estate. But the loan you could take a loan for real estate which is under construction. And usually, when the building is going to be finished, the loan is ended. So that's not a good deal. Actually, many people use it because that's a really easy way to maybe double the amount of investment in some time. Because at the stage when the building is only starting to be built, it's really lower price and sometimes it can increase like two times, or there were cases in certain real estate than three times.
But the problem is also the big risk. Because with some developers, the risk is that they cannot finish, that real estate not complete. Then it's also very important to make the research and choose really the best and reputable developers.
The bank loans were usually something like 40% of interest. But right now there is some new program which proposes 3 - 7% loan. 3% are going to some particular categories like teachers, scientifical researchers, military people, and state servicemen. 3-7% is good because. In general, bank loan was firstly hard to get, to approve. And then the percentage was really like something like 40%, sometimes more.
Marc: Is that in US Dollars? Is that US Dollar loan?
Andrii: It's in Hryvnya loan. Because the real estate is counted in dollars. So people evaluate in dollars, but the transactions are made in Hryvnya, in local currency.
Marc: Okay, yeah, that's hard to judge them for me, what's the interest rate? Because how much did that lose that currency, for example, the past year versus US dollar? Do you know that since the war started?
Andrii: Yeah, it was quite significant.
Marc: Yeah, that's a different story. So of course there are many markets where actually you can't get bank loans easily and the interest rate is very high. At the time when I was in Kenya, I was also surprised to see that. Yeah, bank loans actually it's a very different world out there. You pay 13% to 15% interest and that's a lot more than at the time.
Two years ago, it was like 3% invest in Europe or so for a loan that's a lot less. And if you don't look at inflation rate well, my estimation was that inflation was here 5%, whereas interest rate was 3%. So actually you make a profit. However, in Kenya, inflation was maybe 10%, but the interest rate for a bank loan was 13%. So you have to, of course, judge all these things. But in the West, many people that watch these shows here. They have access to bank loans that are very long duration and very low interest rate.
And of course, the climate has changed now. Interest rates went up a lot. So the question is, and indeed I predict, continued rising interest rates. And that's why I was also very negative, actually, towards real estate up until recently.
But actually, I've changed my mind studying the real estate prices in the United Kingdom more in depth. What I saw was that actually, and I thought that was not the case, and it probably depends from area to area, but real estate price went up a lot in the 70s when the interest rates went up a lot also.
So we always think that, oh, as interest rates go up, that will put a cap on the valuations of real estate, because mortgages become more expensive. But what you see, for example, in the United Kingdom, and I think that was also the case in the United States. Homes that were sold for $10,000 or so in 1968 or 1970. Wow that was $30,000 at the end of the 70s. In ten years, real estate prices went up a lot. But interest rates went up a lot also. How is that possible?
Mortgages did become a lot more expensive. How come real estate still goes up a lot? I don't know. But that's what happened. That's why I'm more open to and also there's an alternative scenario. Even when indeed, real estate prices would not go up due to rising interest rates, while rental prices, they are going up, they can also go up a lot. And that also is okay. Let’s say your real estate didn't do as well or didn't go up or not as much, but your rental prices went up a lot. Yeah, that's also okay. I mean, we're not expecting stellar performance from such an asset.
The point of it is not to bring that, but is to bring more of a stability in a portfolio. I was explaining about leverage there, getting the good loans, because even if you get a bank loan, an expensive bank loan in Ukraine, for example, where you have to pay 40% interest, is it callable or not? That's the question. So is it callable or not? Do you know that? If real estate prices go down in Ukraine, are they able to say, that bank okay, actually we want to close this loan early here, and we're going to force you to pay it back? When the real estate price went down.
Andrii: Usually it's a way that if you pay earlier, then you have to pay with all the percentage. And if you can't pay… I don't know, actually, I don't remember such cases. But if you just don't pay the ordinary bank loan, then there is this long process. So what they can do, they can move your profile to some collecting company and they start bothering you and calling and imposing additional interest.
Marc: No, I meant that when your collateral goes down in value. That's the problem with bad loans. Then they will call you to pay back the loan when your collateral goes down a lot in value. And that's right, when you don't want to pay it back. Have you ever heard of that? That they do that with real estate loans in Ukraine?
Andrii: No, I think they don't do it. I just think there might be two types of the loan. One type of the loan might be in Hryvnya national currency, but another one might be tied to the dollar.
So for example, if Hryvnya rate falls, then maybe you should pay more in Hryvnya. So as I think the dollar rate might be fixed, so it might be fixed at the time of the loan, or it might be not fixed.
And by the way, did you consider this resort real estate? Because it seems that it's also interesting market. You can invest either in existing projects with some developer company or you can do it everything from the scratch, if you find good manager, somebody to do it.
Marc: Yeah, I think those are more like that's all possible, but there's more risk, a lot more risk. That's basically commercial real estate. No, that's not of interest to me. There is very low risk in certain areas of real estate, but it's much more in the residential real estate, I think, than in the commercial. But of course, the returns are a lot lower also.
I'm now looking at a project to invest in residential real estate in London, the United Kingdom, and you can lever that up. You can get loans, let's say it's like 6% or 5% interest to pay, but you only need to pay the interest and not the capital. And then what do you earn from rental income? Well, it's maybe about the same or a little bit higher, but basically what you're getting is you're basically getting a property. You need to pay down maybe like 20%, and basically, 80% is borrowed, or 70%. And you're betting on the valuation. Because the interest payments are the same as the rental income. But the rental income is going up, clearly. So even if interest rates go up, you might just be able to cover the interest rates. Just continue to be able to cover interest rates, rising interest rates, thanks to a rising rental income. And then the question is, what happens with the underlying property value? If it goes up, you're going to make lots of money. If it goes down, will you lose lots of money? No.
Andrii: Because you paid only 20% in the beginning
Marc: Yeah, because you only own 20% of the place. It goes down a lot. As long as you're able to pay the interest rate with the rental income, it doesn't matter. Yes, in your books you need to say like, okay, the value of that 20% you put in is now maybe cut by half. Yes, but you don't need to lock in that loss. Nobody's calling you saying: “Hey, now you need to pay back the loan” and you lose the property. No, as long as you keep paying to the bank what they want from you every month, you're fine and you can keep the property. And in the long term all these things just go up. So even if in a bad scenario, you're okay, except in extreme scenarios where indeed you're right in a war zone, you don't have any rental income and you still need to pay the interest. Then you have a problem. But that's a very low probability to happen. And you can diversify real estate. You can have properties in different countries or in different regions in the same country and then you're already covered. So that's what I'm playing with, that idea.
Andrii: Yeah. So recently you are studying more real estate and some other investment areas and not cryptocurrency area? Are you following Crypto World and what's going on there?
Marc: Not in detail, but of course I'm following the big things but not the small things. I mainly invested in Ethereum now and then also DeFo, DPI index and then also a little bit of Bitcoin Cash but not as much at all as I used to be before.
So basically I'm betting on the biggest player, which is Ethereum, which is the easy play. And I have only a few smaller projects, but I don't even study it. I outsource it to other people to make some selections of smaller projects for me.
Andrii: And how is this DPI index? How is it doing?
Marc: It took a big beating event from $400 dollars to $50 dollars during the bear market. Now it's back at $80. Yeah, I think it's okay, but I think it's not the better investment.
I think Ethereum is still the better investment. Now because we're in early bull market and then the most solid projects go up the most in the beginning or the biggest projects go up the most. You can actually Bitcoin BTC goes up even more than Ethereum this first stage.
That doesn't mean it's a better project, but it's normal that the money looks still for safety. And the new players, they always go for the biggest projects and so that's a normal thing to happen. So I do think Ethereum is still a better project right now than DPI, but that can flip more quickly as we expect. If indeed the bull market goes more quickly than we expect. So holding a small position of these smaller projects is still, I think, not a bad idea. But the biggest position should be the bigger coins right now.
Andrii: But you are still considering if there will be some new project, you might take a look at it?
Marc: Yes, or I just outsourced that and other people do that for me.
Andrii: What about stocks you mentioned today? Tesla, Zoom, for example. Regarding Zoom, I remember how it went so up during Coronavirus, during the beginning of Coronavirus.
But then how it performed? Don't you think that it might be overpriced? Because right now there are so many software program which is similar to Zoom. Like right now we are speaking in this Restream and another software and there are so many messengers, so many ways to communicate. And about Tesla, how it's performing.
Marc: Yeah, I agree with you. And Zoom is for me not a strong conviction play. It's just like a bunch of growth stocks that dropped so much that it's ridiculous. Of course, the valuations were also ridiculously high before. But even on a dead cat bounce, these things should be making money. So even if you're right that Zoom will lose its market share, it still can bounce considerably. But also I followed the lead of others there.
There was “Not Sweaty”, who had a YouTube channel and Twitter channel. He sadly closed it down. But he made some calls on videos on certain growth companies that he liked. And one of his selection was also Zoom.
And also Katie Ruth also is a strong believer in Zoom. So I follow their lead more, their judgment more without having done any research myself, where I can give you a strong thesis for the company, I can't do that. But I trust these people have done their research well and have good reasons to believe that this company is a good investment.
Andrii: Do you still follow Kelly Criterion in your investment decisions?
Marc: Yes, I do. It's still very much there. But I should do it still more. But I do yeah, it's there. Kelly Criterion is very important, I think.
Andrii: So maybe the last part of our today's conversation about investment of your personal time in your girlfriends and how are you doing in this area. Because I mentioned for those maybe some new viewers that you spoke a lot about this topic on your channel. And we can use this analogy of investment of time because time is the most scarce resource.
Marc: Yes, absolutely. A very interesting topic. I would like to check first to the Twitter questions. Did we get any interesting questions there or on YouTube?
Andrii: Yeah, let me check. Yeah, I don't see but maybe that's also because we didn't announce this conversation. Maybe for the next time we'll announce in some, I don't know, week period, I'm also getting more active to YouTube interviews because that's really interesting for me to grow the channel and to grow media to do the text versions, because this will stay and people still visit read these topics. However, of course, because of the market situation, that's not so popular as it used to be before.
Marc: Yeah, I think I'll make a final conclusive remark on the markets. So yeah, I'm still invested for the most part 50% crypto, 40% growth stocks and I think that is the right call.
In the end, results is what counts. And of course risk-adjusted returns is what matters. Like okay, it's not only returns, also what kind of risk did you take to make those returns. That's important also because it's easy to get high returns when you take tremendous risk but sooner or later you're going to get severely punished for that and your average returns would take a big hit as just happened with me also. My average return was 40-50% at the peak one year ago, two years ago. Now it's only 20% and that's because I really fucked up. I took way too much risk over the years and I paid the price for that.
So that's why I'm really convinced I should take less risk and that's why I should have a piece in more conservative investments like real estate. But I would still do it leverage because that's where the opportunity lays. And gold and gold mining stocks like commodities are inversely correlated to stocks and even to crypto the past year. So it is a great diversification, a much better one than so many other bad diversifications such as being long and then also short.
Stock market like that can really blow up in your face or options, put options and call options. All these things are very … Actually I burned myself with these instruments and that's why I really lost a lot more now than in previous cycles because in previous cycles I stayed away from all these advanced instruments and I've learned the hard way like, that's really not a great way to hedge.
It's very difficult, it's dangerous, expensive, and the hatch can totally fail. But that's not the case when you invest, for example, also on commodities, they are really inversely correlated to stocks proven over hundreds of years and it makes also logical sense that they inversely correlated. So that's why I also strongly consider to do a bigger allocation of commodities right now is just uranium for 10%, but I consider to push this up to 20-30%, but also outsource because it's a very difficult sector to invest in.
But some people are specialized investing in commodities and make higher returns than the market. And for example, I've been following someone is called “Van Dam”. First it was a father, Roland Van Dam, and now it's his son, Young Van Dam, who has been publishing a newsletter in Belgium for 40 years, 30 years. But the portfolio starts somewhere in the 90s, have an average return of 20% and they share every position that they take. And you can see exactly how the portfolio is composed. So you can just copy their portfolio and you will have similar returns. They've succeeded in having good returns also during the bear market of commodities while also continuing to invest in that market. That's very difficult to achieve. But there are people like that. So I'm considering strongly to also start a piece in my portfolio for that.
And I'm still busy with the Kelly calculations also all these things, lots of work and we will talk a little bit about it, how little I work these days. And that's for me the right call. But yeah, to do an actual Kelly calculation takes for me lots of work.Yyou need to really think about upwards potential, downwards potential, how likely is that to happen. And only then you're going to have a Kelly calculation where you get scientific or mathematically counted advised allocation for a certain investment. The reason why people don't do that is because it's hard work, and that's a bit of a problem here.
So that's what I'm considering to do, but I'm trying to really not pull the trigger too quickly on these things, because in the end, returns is what counts. And if I do that now, and crypto doubles over the next few months, while these new investments that I take in the real estate and gold and commodities don't do anything, well, that's not cool. That's a big problem, especially after you just lost 90% of your portfolio due to basically crypto and growth stocks, and then the market goes back up, but you sold most of it to steward sectors that actually have done well, because gold and commodities did do well the past two years, and they may even go down now. That's a very bad move. You really have to try to avoid bad moves. You also have to. Patience is a virtue, and I really have not been patient enough in the past, and that has also costed me a lot.
For example, I did invest in oil tankers as one of my big positions, actually, but I sold them off right before they went up. And it was the only commodity position that I had in my portfolio, and I sold it off right before basically the war started in Ukraine. Right before commodities start to go up a lot. And right before stocks started to go down a lot, but commodities not actually went up. And I sold all my old tankers. So patience is a virtue, and I think here, right now, actually, there's still lots of fear in the market, in crypto as well as in growth stocks. People like there's lots of skepticism towards this rally. Many people don't believe in it. Sentiment is still bearish actually. Even though crypto went up from a bottom of 800 billion to 1.2 trillion, that's 50%.
Crypto went up 50%. But most people in the crypto market are still very skeptical towards this rally. Even though, the bears have become quiet, they are still bearish. They're not calling for a new low anymore from 16 k to 10 k for BTC. Of course, they don't say that out loud anymore, but they still think it. Most people still fear it, and that includes me. But that's how you get shaken out of a position that's typical. The start of a new bull market is full of doubt because everybody thinks it's just that cut bounce and it's going to go lower again. What happens with many people is that, yeah, they lost a lot in certain assets. They don't want to sell as it goes down, they refuse to sell, but the moment goes up, they sell and they're out and they make the losses, but they don't do the recovery.
And that's why I really very hesitant to execute these ideas of real estate and gold and commodities right now. But as the market goes up and certainly that's my new plan for the future instead of remaining investment and trying to time the top. I really lost so much due to that strategy, because that's why I lost so much. I thought it would go a lot higher in 2021 crypto, but it didn't. It started to go down and I didn't sell anything at the top. I didn't lock in any profits, and that's why I lost so much. And that's really too risky of a strategy right now. My approach is to follow the Kelly criterion gradually, and so my recommended Kelly allocation for crypto was 60% at the bottom. Well, that's still there, however, the probabilities need to go. Like, you have different variables in Kelly, such as do you do half Kelly or full Kelly? Full Kelly has more risk than half Kelly. I did about 60-70% Kelly at the bottom, but now I put that down to 50% because the market is not so extremely bearish anymore.
There's more risk now. So you do a normal 50% half Kelly, and then instead of a recommended allocation of 60%, I have a recommended allocation of only 50%. And so that's how I do that now. And that means that I don't feel bad actually selling off some crypto to pay down some DeFi loan, because that's also what the Kelly criteria recommands. As prices go up Kelly recommends a lower allocation, and I'm planning to follow that more gradually now and have that money then flow more gradually into these other investments, real estate, and gold, and commodities. So that's my plan for this market.
Andrii: Great. Thanks for sharing this plan.
Marc: So let's get into the ladies and the babies now and the time for family. So really, I changed a lot because I went through a very big crisis. What happened in Kenya really shocked me to the core. And at one point I feared losing my freedom and being in prisons. And then you lose a lot. You will be ruined financially. But also you lose basically your family. I mean, you don't lose them. They didn't die. But you lose your freedom and you're stuck in a prison, and that's really a terrible thing to happen. And that made me really look different at life. I woke up to some things that I wasn't aware before.
I had become arrogant, in life, and I was too impatient for many things also in my relationships. I was too impatient towards my girlfriends for them to improve as housewives and do a better job in the cooking and the cleaning and taking care of the kids. I was too impatient for them to grow, and I was rude at times towards them and towards other people when it didn't go fast enough for my liking, towards people that worked for me in a restaurant or Uber drivers. At times, I would be just arrogant because they were too slow. And that's a lot less now, luckily. And, yeah, I spend a lot more time now just with my kids and with my girlfriends. They've also said that I've changed for the better. And, yeah, I'm very happy with that. I used to really be a workaholic. I would be sitting in front of my laptop most of the time. I would say to my girlfriends: “Yake care of the kids, take the kids away, let me to work”. That's different now. Well. I've done very well for myself. I lost a lot, but I'm still well off. Indeed. What's the most important? To be very successful financially or professionally or to be average successful. And also it always comes at the price, You won't be very expensive, successful financially or professionally. It comes at the price of other things. Probably either your family or your health. If you put extra energy in certain area of your life, it's going to be at the expense of other areas. That's not a good trade off, I think anymore. And that's why I do work less. But it also makes that I'm not so good in my job anymore. I think the truth and it's just part of life. But I do am better as a father now. And as a partner, as a lover and as a husband. I'm better there now. And that's a good trade-off because I don't need to be better professionally. I'm still alive. I can pay the bills, so that's okay. And of course, I hope I'll still do well. But not by paying such a high price on the other front.
Andrii: It's also hard to judge in investment how much time you really need to get the work done. Because sometimes you might direct a big amount of time into researching some particular area. And then if you decide not to invest or if it's not successful investment, then, in a way, this time might be considered not so effective, and you could spend it otherwise. By the way, we have some comments.
One is from Pantera. That's our friend from Read.cash and Noise.Cash. These platforms are working, There is no question, but hello, Pantera. That's great to see you. I read your post on Read.Cash. By the way, Marc, Are you visiting Read.cash, Noise.cash?
Marc: Yeah. I'm not using Noise.Cash because you have to sign up there. But then you also have to be invited. You cannot just sign up, You have to be invited. I've changed my mind on the project. I don't think the project will succeed because well, at the time when we started the project, Twitter was still controlled by the previous management and there was lots of censorship. And to me, it seemed possible that there would be, like, other apps like that to take a piece of their market share. Of course, what we saw with Noise.Cash and Read.Cash also is that the feedback I got from the founder was that without any subsidies, this thing is not growing. Without us pumping money into the platform to subsidize the tipping or these bots that are active on those platforms, they were subsidizing, basically. But that's very expensive. And when you don't do that, there is no growth and that means you're not sitting on a winner here. It's just like you need to have spontaneous growth. Growth without needing to put money into it. Like, people should be telling other people like “Hey, this is really great and you should start using that also because there are many benefits”. But that didn't really happen enough. It only happened by people that tried to make money off the platform which comes out of my pocket. They would maybe tell some other people like “Hey, you can make money here”, but that's it.
There is not enough inflow of new users. That's why I don't think the projects will succeed in the long term. Sadly. Also, competition is very important. Twitter has really upped their game a lot by being purchased by Elon Musk and it's going to become a lot harder to compete in that area now that the platform is managed a lot better. So yeah, that's why I stopped being active on Noise.cash, because I don't think pushing that, continuing to push that financially, but also by using it myself will pay off. And actually, the much bigger problem here is Bitcoin Cash. I really think that this project has taken such a severe beating price-wise. But also many of the projects really failed and that's a big problem. I don't know how to crack the nut. I've tried to support different projects, but I don't see any project that's really succeeding and attracting new users to Bitcoin Cash. And so it's really sad because Bitcoin Cash has great fundamentals when it comes to how it's built. It's like you can build a very beautiful car that's really built fantastically, but if you're not able to get the customers, it doesn't matter. You need to close the shop, sadly. And that's painful, but that's how it goes. You have to move on. It's like also a girl, she may be fantastic, but she is not fundamentally deeply interested in you.
Andrii: Yeah, but I continue to be on both because my position is that I'm on all crypto blog platforms. Of course, in this time of bear market there are less readers, less vision. From all crypto blogs I think Hive is doing probably the best way and actually by the Hive price. Because at Hive they have HBD kind of stablecoin and they have Hive. It rose, it's rising a little bit. And we have also the question from “The tattoo school”: “Do you agree to some analysts, that we will have a pump on risk-on the next 3-6 months? And then a temporary crash, cause of recession kicking in?”
Marc: Yes, I agree with that and I'm following closely Sonny Mulder, who's also a personal friend, but he also has a Twitter and he's also very convincing that actually Game of Trades used to be convinced of that also but he has changed his mind fully. He's very bearish now and he really thinks at any moment it can collapse. But I am of the same opinion as he was originally a couple of months ago and that Sonny Mulder also still shares. Is that yeah, I think it's much more likely price to go up right now for risk-on assets. But what I also find very interesting is that crypto has really changed. I never expected that during a bank run and bank defaults crypto would go up. I would have never expected that. And that's what happened. And that's very interesting. Is it manipulated? Well, no, I think well, it's just that probably many people had stablecoins, and actually stablecoins were also at risk due to that bank default. And that's why stablecoins were put into cryptocurrencies, and that's why crypto went up. But okay, that's interesting because I already said, like, a couple of months ago, at the bottom of the bear, I had a big back and forth with Colin calls Crypto, who was bearish at the bottom. And I said and I made also tweet. His thesis was like, okay, I agree on chain matrix look very bullish like. We're clearly bottoming out here, but it doesn't matter, because if the stock market continues to collapse, if macro continues to be negative, crypto will continue to go down. That was his thesis. And I said, like, well, you don't know that. Yes, it's possible. And that's indeed what happened the past year. But we don't know how crypto will act in different kind of scenarios, such as a commodity bull market. That was also the idea here of many people, many bears, is that actually now gold and commodities will go up for the next few years, and actually it's over and out with the stock market. And then Colin talks Crypto also said, that means it's over for crypto. But I said, no, we don't know that. Crypto is actually a currency, and it's a hard currency. It's like gold. It's much more like gold actually than it is like stocks.
So even if you get a gold and commodities bull market, actually crypto may do very well in that scenario. Unlike growth stocks who will do very poorly and tax stocks. But crypto may still do very well because actually it belongs to that class even though everybody thinks now it belongs to risk on and growth stocks to that category, but that may just be wrongly categorized.
And that's very interesting that we see that right now that actually, crypto is going up with gold right now. And not with growth stocks. And that's very interesting to see and actually responds to a bank default the way gold responds and not the way growth stocks respond. I think fantastic to see. All that I find interesting.
Andrii: Yeah, great. So I think we are speaking more than an hour. That was very interesting conversation. Thank you very much Marc. I hope to speak with you in a few months and check your updates on the investment on maybe this real estate project which you are researching and we'll see how crypto goes.
Marc: Yes, and I really hope also you do well, Andrii and I hope that things settle down more there at the war and that you can move on to other things. That would be fantastic. Do you want to say anything more on that? Like do you have the impression that the war is like going down and that the stress and the tensions around all that it's like normalizing? Or do you feel that things are still escalating? You have a much better view there being in Ukraine yourself.
Andrii: I think it neither goes down, neither escalates. You know what we can say here is that both for the people and companies it's important to find war-work balance or war-work-life balance. And it's just a lot of people, they adapted. It's interesting to see how the market adapts. For example, last spring we had a fuel crisis. So for more than one month, the lines to get, to buy bensin and gas, they were huge. For maybe one, two months. Then it changed the supply lines, the companies, they adapted and we don't have problem with fuel.
Then russians begin to strike on the infrastructure and there was a period we had problems with electricity. So there was no electricity in many cities and people adapted. People adapted, took candles, bought the generators which work on the fuel. Really that's interesting. Also these generators become, for very limited time, very popular good to sell. But now also these strikes on the energy objects, they were not so effective. The antimissile systems improved and this adapted. In many cities, which are far away from the front line, the life goes on and many people, they adapted and they live in their lives. But I see the end of it only after the collapse of russian Federation when it will be separated into several states. Because evil empire they are doing where they came on those territories, they did very evil things that really genocide. It's the thing that the army prevented them to capturing more territories. That's why on certain periods, certain parts of Ukraine, like near Kyiv in Mariupol, they really did the genocide of the local population. But in some other parts, they tried to be more trying to get the sympathies of the local population. So they were maybe not so cruel. But still, it's very hard to be. And even if the ceasefire would be implemented… Well, right now there is, like, no political solution. There are no negotiations. The russians, they don't want to speak. Sometimes they say they want to speak, but what is the solution? For them, it's easier - they just need to stop the fire and move the troops where they used to be before. That's how I see if in brief.
Marc: Yeah, well, I think it's good that is not escalating, that is more like stagnant and it's not escalating into more war. That's good to hear. Let's hope it stays that way for me then. Yeah I want to add also something more to the but thank you for sharing, Andrii.. That's good to hear. So what the person there thinks about us, about do you think the next three to six months is going to up? It's a very important question, of course, but I think the way things are going, interest rates the market says needs to go down. That's very important because the Fed follows the market. The interest rate on 10 year and 1 year and 2 year has gone down on bonds and that's dictated by the market. Also what I notice is that actually sentiment is changing somewhat, becoming more bullish as the Fed has started to print lots of money again. You see some people in the market also turning from bearish to bullish. Someone famous as Chicken Genius also was very bearish up until a month ago. But now that the Fed starts to print money, he became bullish and starts to invest in assets like Ethereum and Palantir. Still holds a big cash position of 60% though, but probably before it was 100%.
So that's interesting to see. Inflation is often important and very likely to continue to go down in the West and this bank defaults. Well, once the central bank starts to print, it's easy to not go broke as a bank when there is someone behind the scenes giving you bailouts.
So I think that things will also in the market normalize a little bit more and interest rates go down again. Inflation continues to go down and I think that will while the war does not escalate, there's lots of things going on. But I think that's most likely to happen over the next three to six months.
In that scenario, likely the trend that's been set will continue, which is: Markets become a little bit more positive and therefore growth goes up and crypto goes up. And fingers crossed on that scenario for my portfolio.
So, yeah. Thanks so much, Andrii, for the interview. I really liked it a lot.
Andrii: Thank you, too. Have a great rest of the weekend and we'll keep in touch.
Marc: Okay, bye.