Past performance is no guarantee of future results. Trend signals are proprietary research of Fortunatus Investments, LLC, a Registered Investment Advisor with the Securities and Exchange Commission (SEC). Reference to registration does not imply any particular level of qualification or skill. Prior to June 2014, Fortunatus Investments was a wholly owned subsidiary of Executive Wealth Management, LLC and they continue to share common ownership and control. Data source for returns is FactSet Research Systems Inc. This chart is not intended to provide investment advice and should not be considered as a recommendation. One cannot invest directly in an index. Executive Wealth Management does not guarantee the accuracy of this data.
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There are some powerful prefixes in the English language. Modifiers that can introduce an air of glamor and excitement to any word they attach to. For example, let’s look at the effect of adding the prefix crypto- ( ultimately derived from the Greek word for “secret”). A zoologist is just a scientist who studies animals, rarely making waves in the wider world. A cryptozoologist, on the other hand, is part showman part adventurer, exploring the Pacific Northwest for footprints of Bigfoot, usually on his own History Channel TV series. Similarly, a currency is simply the medium of exchange that binds together an economic ecosystem. That’s nice and all, but a cryptocurrency is the future of unfettered finance, the technology that will undermine and overthrow the primitive banking and investing systems of yesteryear all while generating substantial profits for early adopters. Or maybe not.
Cryptocurrencies, or digital assets that use cryptographic algorithms to secure transactions on decentralized databases called blockchains, have been popular topics in the investing world for years now. Their high-tech features and possibilities, along with the fear of missing out on the next big thing, have caused many retail and institutional investors to buy the assets, most notably Bitcoin. What the future may hold for this technology is uncertain, but it is important to recognize what dangers investors in the crypto-world face in the present. A recent Wall Street Journal article detailed the numerous crypto-frauds that have targeted investors, and the Federal Trade Commission has announced a nearly exponential growth in the amount of money investors have reported as lost in crypto-scams in recent years (see the chart below):
The chart above only includes self-reported victims in the U.S., so it probably vastly understates the magnitude of the problem. Tech analytics firm CipherTrace estimates that the worldwide crypto-crime total is at least several billion. Many of the criminals deceived investors with the promise of new, untested technologies; only to delivery old, tried-and-true scams. Even The Wall Street Journal acknowledged that they had been deceived by crypto-crooks. They had repeated unverified amazing return numbers from crypto-hedge fund Virgil Sigma Fund LP going back to 2018; a fund whose manager would eventually plead guilty to securities fraud earlier this year after admitting all of his data was fraudulent.
It is important to realize how volatile even the most well-established crypto-investments are. The downside of volatility can be visualized with an underwater analysis chart. These charts show how far in value an asset has fallen from its previous high, capturing the downward swings in the price. The graph below gives an underwater analysis for Bitcoin thus far in 2021. As of 6/21/2021, Bitcoin is down -48% from its high in mid-April. For comparison’s sake, the maximum drawdown of the S&P 500 during 2021 is approximately -4%.
Possible fraud and price volatility are part and parcel of any new, lightly regulated asset class, even one with the potential to change the future of finance. That is why it might be best for only the most risk-tolerant individuals to tiptoe through the crypto jungle.
Model Update
There were no trades in the Fortunatus models during the week ending on June 19th, 2021. The major equity market sectors remain in a long-term favorable trend, and the Fortunatus Asset Allocation models are near their maximum allowable equity exposure with domestic stocks favored over international shares.
Executive Wealth Management (EWM) is a Registered Investment Advisor with the Securities and Exchange Commission. Reference to registration does not imply any particular level of qualification or skill. Investment Advisor Representatives of Executive Wealth Management, LLC offer Investment Advice and Financial Planning Services to customers located within the United States. Brokerage products and services offered through Private Client Services Member FINRA/SIPC. Private Client Services and Executive Wealth Management are unaffiliated entities. EWM does not offer tax or legal advice. Please do not transmit orders or instructions regarding your accounts by email. For your protection, EWM does not accept nor act on such instructions. Please speak directly with your representative if you need to give instructions related to your account. If there have been any changes to your personal or financial situation, please contact your Private Wealth Advisor.
Returns are calculated as indicated below with reinvested dividends not considered except for the Barclays U.S. Aggregate Bond Index. Data source for returns is FactSet Research Systems Inc. The London Gold PM Fix Price is used to calculate returns for gold.
1 Week = closing price on June 4, 2021 to closing price on June 11, 2021
1 Month = closing price on May 11, 2021 to closing price on June 11, 2021
3 Month = closing price on March 11, 2021 to closing price on June 11, 2021
YTD = closing price on December 31, 2020 to closing price on June 11, 2021All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions as well as any prices indicated are current only as of the date of this report, and are subject to change without notice. Material provided is for information purposes only and should not be used or construed as an offer to sell, or solicitation of an offer to buy nor recommend any security. Any commentaries, articles of other opinions herein are intended to be general in nature and for current interest. Some of the material may be supplied by companies not affiliated with EWM and is not guaranteed for accuracy, timeliness, completeness or usefulness and EWM is not liable or responsible for any content advertising products or services.