Cathie Wood Loves THIS about Bitcoin | Special Trick!

hey everyone me kevin here i'm not

drinking coffee instead we're going to

talk about betas

maybe we'll touch on alphas but mostly

we're going to talk about betas in this

video which is really exciting because

of something that kathy woods said about

betas

and bitcoin now in order to understand

what kathy woods said regarding betas

and bitcoin it's helpful to understand

betas a little bit so let's do a quick

little primer on

betas and uh show you something really

interesting and while i show you

you'll actually learn the magic of what

kathy woods said regarding

bitcoin it's actually something that

gives you a reason to um

well i'll let you know regarding bitcoin

all right let's hit it up so here we go

okay we're going to jump over to this

chart which obviously isn't showing

right now

because i didn't plug the ipad in it's

helpful before you

start recording a video like this to

plug your devices in but anyway while

that comes up i may as well say

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tonight all right folks so here we go so

let's imagine you created a portfolio

that had six stocks in it

so you've got tesla uh bitcoin walmart

peloton neo and etsy

okay and you had a hundred dollars in

each of them so equal weight

uh that would be a total portfolio of

600

so far so good pretty easy now here's

something interesting here's something

that says adjusted

beta nasdaq alright so this gets a

little tricky so

let's try to make this as simple as

possible we'll just go down here to the

white screen we'll say this

the stock market in this case let's say

the nasdaq

oftentimes referred to oftentimes people

use the s p 500 for this but

in this case we're going to use the

nasdaq so let's say the nasdaq

has an increase in stock price of

say 10 well if you have

a stock that has a beta of

one so a beta of one your stock should

go

up 10 if you have a stock

that has a beta of 1.5

your stock should go up 15 in other

words you're multiplying

by whatever the beta is beta of 2 20

beta of 0.5

5 see beta is really just anchoring

usual returns to whatever an index

does and so think about it this way if

you're looking at the nasdaq on a chart

over time

and over time the nasdaq is kind of

doing

this over time well this right here is

the beta of one that's what the market

is doing but let's say you have a

stock that has a beta of two well just

amplify this whole thing by two

this is generally what your beta looks

like like this

now what's cool is some stocks also get

something called

alpha and alpha is if you end up getting

something that looks like

this where the stock actually went up

above what the amplification of the beta

was so i know that that could be a

little tricky and this will make more

sense when we hit some numbers

and we're going to see a really sweet

conclusion regarding bitcoin we don't

have to worry so much about alpha though

right now we're gonna stick to beta

basically what we did here is we said

look beta equals one

stock market okay consistent path got it

beta equals two

twice the up and down swings so

when the nasdaq goes up 10

tesla for example is going up 20 but

when the nasdaq see the reverse works

too when the nasdaq's going

down 10 tesla's going down 20

and sometimes this gets amplified in

both directions uh by

by other extremes when you have net

returns above beta

we call that alpha that's why there is a

website called seeking alpha

so anyway again if we have a negative

over here if we say negative 10

on the nasdaq then you can expect

something with a beta of one to be a ten

percent

uh beta of 1.5 to be a negative 15

percent and so on so how do you figure

out what this beta is well you could do

math for it or you could cheat and you

could use websites that tell you like

here's yahoo finance that tells you the

five year

monthly average beta for tesla

is 2.06 but in the example we use two

fine

now usually if it doesn't tell you what

index this is based on

they usually use the s p 500 because

you're comparing to

an index all right so now take a look at

this what i did is i listed the adjusted

betas

for the following stocks from their

correlation to the nasdaq

and the s p 500. now adjusted beta is

just a way of trying to estimate a

little bit into the future

it's oftentimes pretty close to the

normal beta but if some of these numbers

look different

from numbers or betas that you're

looking up that could be why but anyway

we're not going to go into detail on

that

so for right now let's focus on the

adjusted beta here for the nasdaq all

right so the test

so tesla's at 1.77 so in other words

if the nasdaq went up 10 we would expect

tesla to go up

17.7 percent if it went up 27.7 percent

over an extended period of time

then we could say that extra 10 is the

alpha at tesla

all right anyway let's focus here so

bitcoin is actually under

one compared to the nasdaq we're going

to talk about bitcoin in just a moment

that's 0.905

then we've got walmart at a 0.4 then

we've got

peloton at 0.854 we've got neo at uh

1.88 and

etsy at 1.61 and if i average these

together i get an average portfolio of

about 1.24 that's my beta weight here

so for every 100 increase in the nasdaq

i would expect my portfolio to go up

about 123 dollars

and if i compare to the s p 500 the same

portfolio

s p 500 goes up approximately a hundred

dollars

then i would expect my beta weighted

into the s p 500 portfolio

to go up about 110

and 93 cents and that's because the s p

500 and nasdaq

they don't trade the same right okay

good so now we're going to do something

really interesting let's go ahead and

get rid of the drawings and we're going

to manipulate this a little bit

so what i want to do is i want to say

you know what i want to

increase my beta when people say they

want to increase their beta it usually

means they want to increase their risk

so watch what bitcoin can do here first

thing what i'm going to do is going to

jump in here to the editor i'm going to

take out walmart

walmart has very low beta so we're going

to pull out walmart

and immediately you can see if the

nasdaq goes up 100

instead of making 100 what was it 123.

all of a sudden i'm making hundred forty

dollars on my portfolio

by taking out walmart walmart in this

case is kind of like an anchor

it's kind of holding me back when the

indices are going

up but when things are going down

walmart helps soften the blow so if i

want

less volatility i want more stability in

my portfolio

i would want more stocks like walmart i

would want low beta stocks in my

portfolio

to help dampen some of those

fluctuations if i want higher returns

heck you know what let's get rid of in

that case uh piton and this is higher

returns above the nasdaq right not

necessarily guaranteed higher returns in

general

uh and and you have more risk with high

beta stocks too right more of a chance

of bk really

but anyway if i got rid of walmart and

peloton i would actually have a

portfolio

that would go up or should go up 154

dollars

when this is within you know certain

standard deviations every time the

nasdaq it goes up a hundred dollars uh

if i go over here and i take out

we we take out let's see walmart oh we

already got it out here uh

do we no no hold on there we go we take

out walmart and politon there we go

uh and the s p 500 goes up 100 bucks i

would make about 131 dollars

obviously if you invest into an s p 500

index fund if you invest 100 bucks

and it goes up 10 you'd expect to make

10 anyway

here's the cool thing so uh one thing

and this is what where kathy comes in

and she says okay

let's say you have a really high beta

portfolio

so you've got tesla some bitcoin

neo and etsy that's all you have neo

etsy and i mean that's that's uh you

know

pretty pretty concentrated right anyway

you've got neo etsy

bitcoin and tesla you've got a hundred

dollars in each pretty concentrated

you're gonna have some crazy swings so

then as that goes up a hundred dollars

you're making 154 dollars that's awesome

unless of course it's going down because

if the nasdaq goes

down a hundred dollars you're going down

154 dollars with it right

so let's say you wanted to introduce

some beta uh

or or some beta averaging to your

portfolio where you said you know what

i can't handle those kind of crazy

fluctuations

i still want to be exposed to tesla i

still want to be exposed to

etsy and neo though that have these

really high betas

well kathy suggests hey you can invest

in bitcoin to help beta weight your

portfolio because in her opinion when

you compare

the way she did her numbers when you

compare bitcoin to the s p

500 and with her beta calculation she

got

it down to close to around a third or so

a beta of around .33

that's pretty close to real estate she

says in other words

very uncorrelated to the market now my

adjusted beta comparing bitcoin to the s

p 500 is about 0.54

but if i compare it to the dow which

maybe is what kathy was doing

you get pretty dang close to 0.3 when

you compare bitcoin to the dow

but i want to compare bitcoin to the

nasdaq in my beta weighted portfolio

here now because we're going to change

one of the investment amounts that is

they're not all going to be equally

weighted here

we're going to actually look at this

right here which is the beta per

investment so we're going to go ahead

and drop in

300 per bitcoin so we've got 300

in our portfolio in bitcoin a hundred

dollars in tesla 100 and neo100 and etsy

and what you can see is all of a sudden

the beta on our portfolio

actually went down we were at basically

1.54 which is relatively high beta

it's large swings right all the way down

to 1.33

and we could make this more and more

extreme by adding

bitcoin which is really incredible now

it becomes a lot more noticeable

when you add it over here at uh

on the s p side because look at this on

the s p

you would have a beta of 0.54

but by adding a bunch of a bitcoin you

can actually

lower your beta substantially that's

fascinating because that means you could

lower the insane ups and downs of your

portfolio

by adding bitcoin look at just how much

when we compare betas

in other words look at this your s p

weighted uh portfolio

ordinarily would swing about 1.32 times

for every

dollar that the s p swung you put in

that bitcoin

it might actually only swing 1.06

which is much less of a swing but you've

actually

invested into the assets maybe that you

want to invest in

while at the same time weighting your

portfolio for

less insane up and down swings now why

is that freaking

amazing well kathy woods suggested that

hey

if people can beta weight their

portfolios with bitcoin

because it has a low correlation to the

market then that means

firms could have more predictable

returns the

lower likelihoods of margin calls and

lower likelihoods of massive

fluctuations that lead to massive pain

or massive euphoria both which could

lead to irrational decision-making

this argument by the way brilliant my

opinion

brilliant argument if you found this

kind of perspective helpful

consider checking out my amazing

programs i'll link it down below and i

look forward to seeing you there

thanks so much for watching and we'll

see you next one

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