Leverage Expands Both Profits and Losses

Leverage increases profits but also amplifies losses. Bankruptcy always comes from leverage. When central banks supply liquidity, all assets rise, and when liquidity is withdrawn, all assets fall. The cryptocurrency bull market of 2020-2021 was a result of excess liquidity, while the downturn in 2022 was a consequence of liquidity withdrawal. Monitoring global liquidity indicators (M2, Federal Reserve balance sheet) is fundamental to macro investing. Debt investment is a double-edged sword, with the sharp side facing oneself. Investment maxims are the collective wisdom of the market that cannot be attributed to any specific individual. These principles, honed and passed down over centuries by investors worldwide, contain universal truths that transcend time and asset types. Simple yet profound sayings like 'No risk, no reward', 'Cash is also a position', and 'Compound interest is the reward for patience' serve as a compass to remind investors of the fundamentals in a complex market environment.

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