This Week in Barrons – 2-18-2018:
Courtesy of MJP, there has been a dramatic decline in the ‘dynamics of business’ in the U.S. In 2014, authors Hathaway and Litan noted that entrepreneurial activity (as measured by churn) has fallen 50% since 1978. Historically, people in their twenties were the most likely to start businesses because: (a) they possessed the most current skill set, (b) they adopted an adventurous attitude, and (c) owned a more conducive ‘risk to reward’ profile (aka = less to lose). However, those in the millennial generation (currently aged 21 to 37) are much less entrepreneurial than their Baby Boomer and Generation X predecessors. Assuming this decline in entrepreneurial activity continues, the economic impact will be dire in terms of growth and employment prospects for young people.
Within the U.S., entrepreneurial education can be traced back to Harvard University, which offered the first entrepreneurship course in 1947. Additional entrepreneurship education programs were developed in the 1970’s by such notables as Jack Thorne and Richard Cyert (1973) – leading to a total of 250 entrepreneurship programs being offered in the early 1980’s. Acceptance and growth followed, and currently there are over 2,000 universities offering entrepreneurship education to more than 400,000 students through 5,000 different courses. Despite these efforts, new venture creation continues to decline. In fact, a recent investigation reviewed 73 studies covering 37,285 students, and found NO statistically significant impact of entrepreneurship education on entrepreneurial activity.
For years studies have pointed fingers at the ‘millennial’ generation, and correlated it to entrepreneurship’s lack of ‘participation trophies’. I would argue the reason that entrepreneurship education has failed can be directly attributed to the outdated educational techniques being used to teach it to today’s students. Educators are still attacking the problem as a ‘thinking’ issue rather than a ‘doing’ issue. Just yesterday I received notice of an ‘entrepreneurship panel discussion’ on how to ‘legally’ form a corporation. This is the same old panel discussion that has existed for the past 3 decades. With our current technology, why aren’t we replacing those stodgy panelists with ‘live’ incorporations of 5 to 10 entrepreneurs picked directly from the audience. This would not only give the audience the answers to their problems, but also the ability to experience corporate formation for themselves – live. The millennial student is different. There is well-documented research showing that millennial behavior includes a heightened fear of uncertainty and/or failure, along with an entitled attitude toward success without struggle. Who can blame them? They’re seeing (as a result of the new tax plan) corporations announce more stock buyback programs than at any other time in history. So much for those reduced tax dollars going into new plants, equipment, education, and/or higher employee wages.
And millennials that thought cryptocurrencies were a quick recipe for success were given a fast reminder when Bitcoin fell from $20k to $8k. Many had little knowledge of how a digital currency and the associated blockchain technology functioned. They were reminded of why Warren Buffett invests in Coca-Cola – because he understands everything about Coca-Cola. The same investing rules apply to the cryptocurrency world. In fact, crypto education and trading skills are even more important than catching a rising tide that may lift all boats.
Getting back to mapping the correct entrepreneurship educational elements to the millennial generation. It’s our job as educators to adapt our techniques to our prospects – otherwise our prospects will go somewhere else for their education and corresponding customer relationship. Our prospects love to experience and to do – so our educational techniques must revolve around engagement and involvement rather than simply thought processes. I remember an old mentor of mine (while we were on a global conference call to educators) remarking: “So what you’re telling me is that we (as a university) are delivering the same 20-year old PowerPoints to this new generation of students and expecting them to accept it as their own – yes? Wow, that really seems backward because I’ve never known a customer base that has remained stagnant for 20 years.” For the most part, academia has never had to adapt a multi-disciplinary product like entrepreneurship to a moving-target. The facts surrounding entrepreneurship speak for themselves. With educational enrollments dropping, alumni involvement and donations falling, entrepreneurial relevance and successes declining – I wonder how long the ‘publish or perish’ world has on life support? Just like the photo above, there’s nothing like a ‘brush with death’ to get your blood flowing and to create a fresh, new view of the world.
- Google (the world’s largest online advertising company) is taking a bold step to block the most bothersome and invasive ads. The latest update for the Chrome Internet browser includes a built-in ad blocker. Chrome users will be relieved of pop-up ads, noisy ads, ads that block the screen, ads that will not go away, and other types of ads classified by the Coalition for Better Ads (CBA) as intrusive. FYI: Chrome enjoys a 56.3% share of the world’s browser market.
- Last week the cryptocurrency market regained the $500B mark. Main stream outlets in S. Korea reported that many families have given Bitcoin to children and young adults as the traditional lunar New Year present – instead of cash.
- Tom Lee, the Head of Research at Fundstrat Global Advisors, found that when bitcoin corrects over 20% - recoveries normally take about 1.7 times longer than the drop. So Bitcoin should be fully recovered by July, 2018.
- Ride-hailing giant Uber's full-year net loss widened to $4.5 billion in 2017. The results also showed that Uber’s ride-hailing market share fell from 82% to 70% in 2017. With results like that, it can only make going public more difficult.
- The February 26th launch date for the Litecoin / Visa cooperative – LitePay is still holding steady. Fortunately, the integration is completely seamless for merchants. The announcement was well received by the market, with Litecoin spiking higher by 18%.
- More defined regulation, increased capital inflow, and the introduction of additional Bitcoin ETFs has Thomas Glucksman (Gatecoin Marketing Head) predicting a Bitcoin price of $50,000 by the end of 2018.
- Through a partnership with IBM, several central banks will be issuing fiat currency on the Stellar Lumens (XLM) blockchain network.
- Bloomberg reported that: “A whistle-blower told U.S. regulators that a scheme to manipulate the VIX (the market volatility gauge) cost investors hundreds of millions of dollars. Sophisticated algorithms were used to move the VIX up or down without needing to physically engage in any trading or deploying any capital. This resulted in billions in ill-gotten profits being made by unethical electronic option market makers."
- Special counsel Robert Mueller has indicted 13 Russians and 3 Russian organizers for illegally interfering with the 2016 U.S. presidential election. Their goal was to support the campaign of President Trump, and to spread disparaging information about Hillary Clinton. They had a monthly budget of more than $1.2m and hundreds of employees. The indictment will also make it much harder for the Trump administration to dismiss Mueller’s investigation going forward as a ‘witch hunt’.
Last week (following our first 10% pullback in over 2 years) brought us monthly options expiration. The U.S. stock market has characteristically averaged three pullbacks of 5% every year. Virtually all of the indices incurred major damage in a short time frame, but stopped short of any trend change. The week saw gold finding support and then rising rapidly – while crude oil had a small bounce that failed before pushing higher at the end of the week. The U.S. Dollar’s bounce higher ended, and it dropped to recent lows along with Treasuries. Volatility moved lower all week taking pressure off of equities, and they responded with strong moves to the upside. The SPY and IWM recovered more than 61.8% of their drops while the QQQ was stronger recovering over 78.6% of its move down. What does this mean for the coming week? Friday’s lower close (after touching both the 61.8% retracement and the 20-day moving average) will give some pause and prevent the all clear signal from sounding too loudly.
At current levels, the Dow is 5.3% below its all-time high. The S&P is 4.9% below its own record, while the Nasdaq is only 3.6% shy of its mark. Despite the 10-year US Treasury yield hovering around and touching a four-year high of 2.94%, the S&P 500 continued its rally from last Friday’s four-month intraday low. Corporate earnings are the key guide for market performance, and their overall annual increase of 15.2% has been encouraging. Revenue is growing at the fastest pace since the fourth quarter of 2011 – 7.9%. Low unemployment and optimism surrounding the new tax laws have overshadowed the financial market’s volatility as Michigan Consumer Sentiment rose to 99.9 in February from 95.7 in January.
Last week, even the most bullish of talking heads was not shy about saying that there is nothing normal about this market. It continues to be the tale of two cities. On one hand we have the market's relentless march higher, and on the other we have retail stores closing and the middle class getting shut out of housing because it's too expensive. Given the $91T increase in global debt levels since the 2008 financial crisis placing the total debt burden near $233T trillion – it’s no wonder that one of the drivers behind cryptocurrency investments is a fear of another financial banking disaster and wishing a more secure store of value for their wealth.
This is still a manipulated market of Central Bank money and stock buy backs, but governments lately are viewing stock markets as being essential to national security. If equity markets were to implode, the financial connections would cause a debacle far more severe than the one experienced in 2008-09. But you know the old saying, “You have to be in it to win it”, and as long as this market wants to keep moving up – it’s wise to hop on the train and take the ride. However, judging when to step off, is a very tough game.
This coming week I’m looking for gold and oil to resume their climbs higher. I think the U.S. Dollar and the U.S. Treasuries are going lower – leaving rates to rise again. Volatility will drift lower easing the pressure on the equity markets. All three major indices ended the week with possible reversal candles on their shorter timeframes and strong charts on the longer timeframes. Therefore, I’m thinking that some short term weakness remains for the coming week.
I come into the new week fairly light. And after a massive sell-off in crypto earlier this year, this past week brought them back – attempting to regain their footing. Among the top coins, Litecoin has garnered all the attention with favorable news and its upcoming fork. At the same time, Western Union, one of the oldest money transfer companies, has confirmed that it is testing Ripple’s Blockchain-based settlement system. Even George Soros, who had earlier referred to cryptocurrencies as a ‘typical bubble’ has invested in Overstock. (FYI: Overstock is one of the most pro-cryptocurrency businesses, and its stock price has reflected its crypto involvement.) These actions demonstrate that mainstream businesses are slowly recognizing the value of blockchain technology. However, a few skeptics continued to voice their opinions last week as Berkshire Hathaway’s vice chairman Charlie Munger called Bitcoin “totally asinine.” Nevertheless, I continue to view this as an opportunity. Nvidia remains one of the few corporations operating in the market that reflects positive price action mostly attributed to the use of its chips in the mining of bitcoin. With the average bear market lasting 71 days, Dan Morehead of Pantera Capital expects that we will see an upswing in crypto within a few weeks – because we’re already at day 60.
Top Equity Recommendations:
Marijuana stocks (HODL):
- Aurora (ACBFF)
- GW Pharmaceuticals (GWPH)
- Canntrust Holdings (CNTTF),
- First Solar (FSLR = $66.44) – earnings on Feb 21st,
For those of you looking for recommendations of equities that could be positively affected by blockchain technologies – look no further than the MoneyGram and Ripple consortium. If you believe in Ripple’s ability to lower costs, then MGI looks ripe for the picking at these levels.
Top Crypto Recommendations:
- Ethereum (ETH),
- Bitcoin (BTC),
- Lisk (LSK),
- XLM (Stellar), and
ETH/USD ($943): Ethereum is not moving as quickly as I’d like, but has not given up any ground lately either. My target continues to be a move into $1,000 followed by a move past $1,050.
BTC/USD ($10,572): Lately, I’ve liked the price action above $9,500. I prefer breakouts that quickly gain momentum once they clear a resistance area and this did just that. Assuming we remain above the $9,500 level, we should continue to trade higher – using $12,500 as the target.
LSK/USD ($30.70): Lisk pushed through resistance at the $28 level and moved all the way into $36 before pulling back. Although I’m still showing propulsion on the daily chart, the 4-hour chart shows that it’s running out of gas. Be prepared to either hold through consolidation or reload on the first dip moving forward.
XLM/USD ($0.45): Stellar is right back to our buy level of $0.45. I expected a move into $0.63. As long as the pair remains above the 20-day EMA and the $0.41 level – a rally towards $0.63 is likely. Again, I’m keeping a tight $0.35 stop on this one as well.
BCH/USD ($1,510): Bitcoin Cash continues to follow Bitcoin, and I’m looking for a rally into its 50-day simple moving average of $1,818 – followed by a move into $2,000. By breaking out of its downward trend and crossing over the 20-day moving average – it is indeed showing bullish signs. But if the other cryptocurrencies turn down, Bitcoin Cash is very like to follow suit.
XRP/USD ($1.02): Ripple continues to rise – almost in spite of itself and its critics. As long as Ripple remains above its 20-day EMA, I’m looking for it to move rather quickly into $1.50 territory – with a follow-on target of $1.74. I’m keeping a tight $0.90 stop on this one.
LTC/USD ($223): Litecoin continued its move higher, breaking through some small overhead resistance at $214.483. I’m looking for a rally into $250, followed by $270 and $307. This coming week should be an exciting week to 10-days for Litecoin, but keep your stops tight on this one.
To follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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