Portable Monitors: Taking Risk Off The Table

I’m writing this during a time where I have loaded up on cryptocurrencies and commodity stocks on the cheap…they’re volatile and at times irrational…BUT THE GAINS!!!!

Imagine a large compressed air tank being exposed to a rapidly expanding fire. You are at a large industrial yard fire and notice the hazard within a larger expanding incident. The pressure relief valve is whistling away, and a boiling liquid expanding vapor explosion, or BLEVE for short, may be imminent. The tank is big enough that a BLEVE could kill many in the surrounding blast radius. You need to start cooling the tank and evacuating the neighborhood around the yard, but you’re short on resources and the risk of keeping the rig and your people so close to a ticking time bomb is absolutely unacceptable. The half assed immediate evacuation of the neighborhood with just a few crews is also unacceptable. Can you stabilize the incident, keep your people safe, and do your best to evacuate the neighborhood? Cryptocurrency investors, can you build wealth AND eliminate some degree of volatility from your portfolio? In both cases, WE CAN minimize downside risk, and allow for effective firefighting or investing strategies in extremely volatile environments.

It’s a simple yet true phrase in firefighting that big fires need big water. In this case, the fire can become so large that we do not want to be anywhere near the blaze when it gets going. When the risk is too great to stick around, a portable monitor might just be our saving weapon of choice. A portable monitor is a ground mounted “big gun” designed to be supplied by 4″ hose. It can be staffed by firefighters, who can adjust where the cooling stream of up to 1250 gallons per minute douses. Conversely, it can also be set up quickly, charged and then left in place to stand as a fixed firefighting stream. Think about it, you get all the heat stopping power of all that water and you don’t even need to risk your own neck to be next to that big fire. In some cases, this is exactly what you need to do to put a fire out while keeping your crews safe. You take two firefighters and commit five minutes of time in the danger zone to set up a portable monitor. You charge the line, adjust the stream location, and then remove everyone away from the death trap to evacuate the neighborhood. With five minutes of work, you have set up the firefighting capacity of five firefighters each staffing a 2 1/2″ hose line, yet you have zero…thats right, a big fat goose egg, of personnel directly exposed to the danger.

We are in the midst of what will likely be a bull leg up in the crypto markets. By many metrics, in real terms, some commodity prices are at some very historic lows with a higher probability of up to go. I can’t help but think that there are going to be some great returns ahead, but with the inherent volatility, a potential to see those gains vaporized over night also increases. Loosing profits is one thing, but loosing my initial investment makes me cringe. As Warren Buffett says, “Rule number 1, don’t loose money. Rule #2, don’t forget rule number 1.” I see deploying the portable monitor as the perfect metaphor for how I am going to minimize my risk. You see, right now, my portfolio is those two firefighters setting up the portable monitor. I have invested most of what I want to invest in. I’ve bought at the prices I have wanted to, and I am patiently waiting for supply shocks to begin pressuring crypto and commodities upwards. If these assets begin to do what I think they are going to do, (i.e. once the monitor is charged and flowing water), my plan is to pull out my initial investments. This is akin to those two firefighters retreating to the safety of the apparatus, far far away from the massive fire.

I really want to stress on what we are left with. In both scenarios, we have essentially created an incredible force with nearly zero downside risk save for the initial set up. Five minutes with two firefighters in harms way vs. five firefighters staying in harms way for two hours to staff cooling hose lines and possibly die in a fiery explosion. With the same results! In the world of crypto and commodities, you take a few hundred dollars off the table with thousands in profits riding up and down. That’s right, exit with your original investment at a predetermined price. You can sleep at night knowing you aren’t loosing money…or at least money you didn’t have in the first place. If the stocks or crypto kick out a dividend or staking bonus, you also have the added benefit of a passive income stream. You don’t have original money on the line anymore, so essentially you are getting paid to own an asset. Isn’t that a beautiful thing or what?

What’s The Catch?

There are a few downsides of this investing tactic. First, if you pull your initial investment out too quickly, you miss out on some increased profits. This is why it is important to think about you exit strategy almost as much as your entrance strategy for every investment you make. Two, you must consider if you pull out profits too quickly when you could have waited you might be charged a different capital gains tax rate. The difference between long and short term capital gains tax can cut into your profits significantly, but if reducing your risk is the goal, consider the price difference in tax rates when factoring in your exit strategies. And finally, as with every investment, the minute you take some profits, you are going to want to repeat the process of finding the next buying opportunity. This take time and effort to find a new buying opportunity. For me this is the fun part of investing, but it does come with newfound risks. All and all though, the catches of this strategy all are born of positive news in your portfolio.

Much like firefighting, every investor, just like every firefighter has their own personal risk tolerance and acceptance. For me, I am seeking to stay disciplined in keeping a base amount of investment money always on hand for an opportunity to buy an asset cheap. I am working diligently to identify set points I will begin to pull out my initial investment to redeploy elsewhere, and what I am left with are assets that could very well go to zero, but most likely won’t. Some of these assets pay me to own them in the form of dividends or staking tokens. In regards to stocks and crypto, I essentially get to own these free of charge and with zero risk. I learned this risk tolerance by being a firefighter. There are times when we risk a lot to save a lot, but as firefighters and investors, why risk your life or your life savings when you can find an equally effective strategy that gets you to where you need to go safer?