💸 What To Do If You Have a Windfall of Money

What’s on the Menu 🍴

With bitcoin at all-time highs, gold miners back in action, and many investors feeling the “wealth effect”…

Today, we’re diving into trade management, a new gold miner idea, and what to do if you have a windfall of profits.

Let’s get it!

• Can Gold Miners Make a Comeback? ⛏ 

• What To Do If You Have a Windfall of Money 💸

• When Should You Sell Your Bitcoin? ₿

Today’s newsletter is a 5 minute read.

Can Gold Miners Make a Comeback? ⛏ 

The crypto bull market has been very good to bitcoin and bitcoin mining stocks alike.

Since bitcoin bottomed at the end of 2022, many of the mining stocks are up several hundred percent:

Traders have flocked to these “bitcoin proxies” as a way to get more exposure and upside, resulting in millions of shares traded daily and several multibillion dollar market caps.

Yet in another commodity market, the story is very different…

Gold is up a very respectable +24% over the past three years, but gold mining stocks are broadly down in that same time frame:

This underperformance of gold miners is somewhat puzzling.

In several prior gold bull markets, the gold miner stocks outperformed the underlying gold price, though admittedly only for brief time periods.

This leaves us wondering if there might be potential for a “catch up” trade on gold miner stocks and gold miner ETFs such as GDX and GDXJ.

At current gold prices, most gold miners are solidly profitable and current valuations across the sector look reasonable.

The median forward price-to-earnings multiple for the gold miner universe currently sits around 14X versus 21X for the S&P 500.

If the price of gold continues to surge higher, gold miner earnings should inflect higher and their valuations will have plenty of room to expand.

The gold price chart certainly looks bullish at the moment:

What are the risks?

Gold mining is a very difficult business, subject to swings in the price of gold as well as geopolitical shifts.

In addition, most gold miners face a daily struggle with operations, high capital requirements, debt servicing, mine safety, labor availability, and more.

We’ve seen quite a lot of capital destruction in miners over time, especially with smaller operators.

So we’re not huge fans of holding gold miners in our long term portfolios, but that doesn’t mean there isn’t a compelling trade opportunity in the short run.

If gold remains in a bull market and investors start to jump on the miners the way they did with the crypto miners, look out!

There could very well be some explosive moves ahead…

What To Do If You Have a Windfall of Money 💸

There’s a recent hot post on Reddit from a guy who asked…

“Just won $100,000 with a Scratch Off Lotto. What should I do next?”

The comments ranged from everything from “blow it on a Lambo” to “save every penny”…

And we think this brings up a very important question:

What should YOU do if you have a big windfall of money from the lottery, inheritance, investment, or you find some buried treasure?

Like all things in personal finance, the answer is “personal”, which means it depends on a bunch of factors…

But here are a list of things to consider if you run into a bunch of cash, bitcoin, or gold.

1. Stash it in an Emergency Fund: Before you buy that island, remember the rainy days. A plush emergency fund is your financial umbrella.

2. Wipe Out Debt: Got loans? Use your windfall as a get-out-of-debt-free card. Say goodbye to those pesky interest rates.

3. Invest Wisely: Don’t just save it; make it work for you. Think stocks, bonds, or a piece of that crypto pie.

4. Retirement Boost: Your future self will thank you. Beef up that retirement account and dream of beachside margaritas.

5. Self-Improvement Splurge: Always wanted to learn guitar or get an MBA? Now's your chance. Invest in yourself.

6. Philanthropic Flair: Make it rain on your favorite charity. Good karma and tax deductions? Yes, please.

7. Fun Fund: Life’s short. Allocate a small slice for pure, unadulterated fun. Yes, that might include a jet ski.

8. Real Estate Rendezvous: Consider snagging some property. It’s like Monopoly, but with real houses and hotels.

9. Start a Side Hustle: Got a business idea brewing? Use that windfall as seed money and watch your empire grow.

10. Insurance Upgrade: Protect your assets and your peace of mind. Maybe it's time for that fancy umbrella policy.

We think it’s a wise move to think about these options, because you never know when luck will strike in your life!

When Should You Sell Your Bitcoin? ₿

I came across this tweet and it got me thinking….

A lot of people are talking about Bitcoin price targets with the new all-time-high being achieved.

It’s begging the question: what price will be “enough” to take an exit in Bitcoin?

Here’s the problem though, it’s not that simple!

A lot of Bitcoin investors are in it for the long haul now. Just like stock investors buy the S&P 500 to hold stocks for decades on end.

We don’t ask people invested for retirement “what price will the S&P 500 have to get to for you to sell it?”

We don’t do that because as long-term investors, we have no idea what the future price will get to. We just expect the price to be higher to give us a sound return for the risk we took on.

Bitcoin is coming into its own as an asset, and asking someone who is invested long-term “what price will you sell?” could end up sounding as silly as asking someone “what price will you sell the S&P 500?”

Assets can run further than many people think.

Who would have thought as an early Apple investor, they’d be looking at shares in a company worth almost 3 TRILLION dollars?

The key to knowing “what price to sell” here is knowing what type of capital you’re working with. There are 3 main types, and they’re all managed differently:

1. Short-term trading capital: You should absolutely have designated price targets to take profits on with short-term trading capital. You should have an idea of these price targets before even entering a trade. Always.

2. Short-term investment capital: short-term investments are not trades, but they’re not retirement-like long-term holds either. It’s the middle of the road. You might hold the position for multiple years. You will have designated price targets ideally here just like with trades but it may not be as clear on the exact price, and more of a range where you’ll be interested in pulling out profits. Usually, this is where you’re building wealth for short-term life goals.

3. Long-term investment capital: This is your retirement capital with a really long-term time horizon. You’re investing for a decade or multiple decades. This is where it gets really hard to put a future price on an asset like Bitcoin or the S&P 500. You’re “along for the ride” as they say.

Another way to look at “what price of Bitcoin is enough” is to look at your wealth created and match it with your goals.

There are people making life-changing money in Bitcoin. If that’s happening to you, or happens in the future, and you’re still unsure of what to do, you have a few important questions to ask yourself:

1. What kind of capital are you making decisions on? (See above and make sure you’re managing it properly). If you’re trying to make selling decisions on long-term investments, why? Are you no longer comfortable holding the asset? Has something fundamentally shifted with the asset?

2. Can the money that has been made in the asset (or even a % of it) help you change your life in a positive way and assist you in other goals? If you aren’t clear on what kind of capital you should be managing for, go to your goals. This will help you decide what the right thing to do is.

3. How much risk do you want to have on? Bitcoin is an extraordinary risky asset- and maybe re-assessing risk helps you realize you need to diversify some risk out. We want you sleeping well at night.

So, as you can see, many factors can go into how you should be managing what price Bitcoin will have to get to for you to sell.

We try to frame the type of capital, your goals, risk, and your overall ability to live with yourself and have no regrets!

Food For Thought 🧠

"The electric light did not come from the continuous improvement of candles.”
- Oren Harari

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.