Sell ½
And hope you’re wrong
Parts of today’s market combine a high price with euphoric sentiment. Here’s where I see the two combine — year end bragging over returns that have left securities at precarious heights that could lead to a rocky 2025. If you’re out, stay out. If you’re in, consider selling half. Hope you’re wrong. Feel free to blame me and post angry comments if this is a disaster.
Quantum Computing
IonQ (IONQ) had a strong 2024, but it paled in comparison to Quantum Computing (QUBT).
Congratulations to QUBT holders. Sell ½. Sentiment towards this sector is strong and it especially benefits the stocks with clear names easily findable by thematically inclined retail holders. During the US-listed Chinese fraud boom, a bubble inflated with tens of billions of dollars of market cap representing essentially $0 of actual value. Many of the biggest bubbles were named variations of “China” or “Sina” to ease the burden of even the finite research that credulous day traders needed to do to find them. It appears to be the same in this round with quantum computing stocks.
Bitcoin Miners
Core Scientific (CORZ) had a good 2024 largely due to their pivot to high-performance computing. Other bitcoin miners fared worse.
Bitcoin mining is a bad business. MARA and RIOT are less poised to pivot. Own them? Sell half.
Engine Leasing
There is a durable supply/demand imbalance in the jet engine leasing market. Willis (WLFC) has been a major beneficiary this past year. Yet its market cap is still way behind competitor FTAI (FTAI) despite WLFC being cheaper on almost all measurements.
If you own FTAI, sell half (which simply resizes a year end position to about where it was at the beginning of the year in dollar terms).
Crypto Currencies
Bitcoin (BTC-USD) was just one of many digital currencies up in 2024. It is a sign of the times that even the FTX Token (FTT-USD) was up and that’s after the FTX bankruptcy.
It lacks any utility or scale yet still trades at a significant market cap. If you own it: sell half.
SPDR (SPY)
Sell (half) of your SPDRs. Use the proceeds to deleverage, paying down any bad debt. Start with the highest rates; don’t borrow anything that costs over 10% and question borrowing anything that costs over 5%. Look to diversify across country markets, market caps, and cap structures. But if you still want US cap weighted equity exposure, then roll it into a direct index in the S&P 500 for greater flexibility that offers better after tax compounding. For 10 bps of fees, you can get all of the benefits of owning SPY while harvesting tax losses along the way. A $100k investment in late 2021 would’ve harvested ~$22k in losses. During that time, the S&P 500 was up ~38%.
The benefits vary from individual to individual, but this could be worth ~$8-$11k to a high earner in a high-tax state. That leaves the direct index owner with more wealth to compound. Over time, it will dominate the after tax results from the SPDRs.
Caveat
When I See a Bubble Forming, I Rush in to Buy.
- George Soros
Even if these are bubbles, the bubble could keep inflating. These trades could all be too early.
Conclusion
Certain markets appear expensive and precarious; time to resize.
TL;DR
Sell half of any long in QUBT, MARA, RIOT, FTAI, FTT-USD, and SPY.
Disclosure: long CORZ, BTC, WLFC.
