This
Week in Barrons – 9-17-2017:
“Bitcoin is a fraud.” … Jaime Dimon (CEO of JP Morgan Chase) … 9/12/2017
Mr. Dimon – You’re losing the ‘Race for the (fiat
currency) Cure’:
Mr. Dimon, this past week at the Developing Alpha
Conference I heard you call bitcoin a fraud.
Not minutes after you finished your statement (as seen by the graph above
detailing bitcoin purchases) your bank started buying bitcoin
hand-over-fist. Your bank finished that
day’s crypto-buying frenzy slightly behind Morgan Stanley but ahead of Credit
Suisse in the ‘Race for the (fiat
currency) Cure’. The above snapshot combines client and bank crypto-purchases, but I was a
little surprised to see JPM as the 4th most active buyer of bitcoin
notes on a day where you called it a ‘fraud’. It’s yet another example of a bankster doing their
variation of the ‘pump-and-dump’. I just
thought that you (being one of the world’s most influential banksters) after
calling bitcoin a fraud – would have instructed your bank to be net ‘sellers’ and
NOT net ‘buyers’ of crypto for at least one day.
But it goes further
than that – doesn’t it Mr. Dimon? JPM doesn’t
simply purchase bitcoin notes after you call it a ‘fraud’, JPM is also heavily immersed in the ‘blockchain’ technology
associated with the crypto-currency world.
In fact, JPM has applied for over 175 U.S. ‘bitcoin alternative’ patents
since 2013. JPM is also working on
additional Ethereum-based blockchain solutions alongside Zcash’s (another
crypto-currency) development crew. To
jog your memory, your Ethereum project is called ‘Quorum’, and has its own
Github repository that explains how the permissioned blockchain does not
need consensus mechanisms like Proof-of-Work (POW) or Proof-of-Stake
(POS).
Oh Mr.
Dimon, if that memory escapes you – maybe a picture of one of your previous
derivative executives Ms Blythe Masters, (pictured above) along with a Bitcoin
appreciation chart will jog your memory?
After all, Ms. Masters (after leaving JPM) started her own blockchain
firm called Hyperledger which is now run by the Linus Foundation with Ms.
Masters remaining on its board and heavily involved with their blockchain
efforts. And you must remember the
departure of your former 50-year-old veteran commodities trader, Mr. Daniel Masters, who joined
JPM right after college and recently left JPM announcing the Island of Jersey’s
first fully regulated Bitcoin hedge fund. It seems that his Global Advisors Bitcoin
Investment Fund (GABI) will hold bitcoin denominated in sterling, and focus on
U.K., European and Middle Eastern clients.
Mr. Dimon, if you think bitcoin is in a bubble – according
to currency experts: you ain’t seen nothing yet. They are expecting bitcoin to surge over 300
times – when it is granted ‘legitimate currency’ status. Iqbal Gandham, U.K managing director at eToro, has mapped other
‘legitimate currencies’ against bitcoin and the math is telling him that once
bitcoin attains ‘legitimate currency’ status – it will be worth upwards of $1m
per coin. He simply equated the Satoshi (the
tiniest component of bitcoin = 0.00000001 bitcoin) to the ‘penny’ and asked the
question: “When the Satoshi equals one penny – what does bitcoin equal?” The answer becomes over $1m per coin. This also falls in line with John McAfee’s
prediction of bitcoin reaching $500,000 over the next 3 years.
Mr.
Dimon, you do remember that you and your fellow banksters were the impetus for bitcoin
– as it was created at the height of your financial crisis - yes? It emerged as one of the clearest
alternatives to government-backed currencies.
It is decentralized from central banks or governments, and underpinned
by a blockchain technology that acts as a non-alterable digital ledger. In fact, for many, the blockchain technology
is the most crucial and lucrative aspect of the crypto environment. It’s that aspect in particular that allows it
to execute things like: mortgages, stock trades, and loans without any bankster
intervention.
Mr. Dimon, your exact
quote was: “Bitcoin is a fraud because it’s value is being driven by
speculation and not by utility.” If you’re
saying that bitcoin has not seen wide-spread adoption for day-to-day
transactions, and is missing that ‘killer app’ – you’re right. But, the number of bitcoin transactions
occurring across the globe has been rising by leaps-and-bounds in 2017. And those ‘killer apps’ that you wish to see
are not only being built by independents but by the
likes of: Microsoft, Google, Oracle, Apple, and JPM as well. So, I must assume (at this point) that the crypto-currency
‘fat lady’ is warming up. Sure, there
are regulatory rumblings out of China in order to better control their ICOs,
and yes, the Chinese have closed 3 crypto-exchanges. But that leaves over 20 open and active
crypto-exchanges, and China is still doing the bulk of global bitcoin mining.
In
fact, just this week Merrill Lynch named bitcoin along with the FAANG stocks their
two most ‘crowded trades’. Their survey is one of the most respected on Wall
Street as it includes over 200 global fund managers with at least $600B under
management. ‘Crowded’ simply means
investors believe that there are too many people on one side of the trade, and
it could be due for a reversal. But I
don’t see you calling Facebook, Apple, Amazon, Netflix and/or Google
frauds. And I haven’t seen any of those stocks
on your ‘must sell’ list.
So,
Mr. Dimon, it appears that your ‘bitcoin is a fraud’ remark was not only a well-time
publicity stunt, but also an extremely profitable one to JPM. Unfortunately, you cannot hide the fact that JPM
is deeply invested in blockchain technology, and JPM (like hundreds of other
financial institutions) is just hoping that it won’t be totally replaced by crypto
and blockchain technology in the years to come.
I’m often reminded of the great Henry Ford quote: “If the people ever understood the banking system…there would be a
revolution in the morning.”
The Markets:
Factually:
-
The S&P 500 reached the 2,500 mark for the
first time while posting its largest weekly gain since January. These gains came together with the news that
the Republicans in Congress are preparing to release the outline of a tax reform
plan later this month.
-
Traders
paid little attention to another missile test by North Korea.
-
The
Japanese Yen saw its biggest weekly fall in 10 months, and the U.S. dollar its largest
rise since April.
-
And
OPEC is forecasting higher demand for its oil in 2018, and is pointing toward a
tighter global market. The International
Energy Agency (IEA) is also reporting that the oil glut is shrinking due to the
strong European and U.S. demand along with production declines. Of course let’s see what happens once Houston
comes fully back on-line.
What continues to bother me is our underfunded corporate
and government employee pension plans.
Boeing (as an example) for the past decade has largely neglected its pension
fund deficit – all the while doling out lavish rewards to its shareholders. What is causing me to raise an eyebrow is how Boeing
plans on fixing this problem. Just last month,
Boeing made its largest pension contribution in over a decade when it
transferred $3.5B of its own stock into the pension fund. It's a bold move, and to pension experts, one
that isn’t worth the risk. Why didn’t
they just ‘cash-out’ the shares and transfer the cash into the fund. Instead, after a record-setting 58% rally
this year, Boeing is betting that it can keep producing the kind of earnings
that push their shares even higher. If
all goes well, not only will the pension fund benefit, but Boeing says it will
be able to forgo contributions for the next four years. If anything goes awry, the $57B pension fund (which
covers a majority of its workers and retirees) could easily end up worse off
than before.
So,
the pensions (and retirement) of so many of Boeing’s employees - rest on the
idea that the market never crashes. Does
anyone but me see a problem with that? This
is just like the Norwegian wealth fund, which wants 70% of its pension money in
equities. Either they know that the Central
Banksters will never let stocks fall, or they've been conned into something
truly frightening. My guess is
that they have seen so much financial engineering, and so much manipulation,
that they're banking on things going just swimmingly forever. Maybe they should consider the following
headline: “CVS Needs Aggressive Buybacks
to Meet FY18 Estimates.” Jefferies
(the brokerage house) is saying that based upon organic growth, revenue, and expense
estimates – the only way that CVS is going to make its earnings projections is
by re-purchasing a lot of their own stock and thereby reducing the number of
shares outstanding. I’m guessing that
CVS will sell corporate debt to fund a massive stock buy-back program, boosting
earnings per share, while incurring a huge debt liability during a time of
rising interest rates. Who does this
benefit again – oh yeah – the current executive team.
Market-wise, the 3 major U.S. stock
benchmarks ended the week on a bright note despite the twin hurricanes. Unfortunately, the devastation brought about
by Harvey and Irma in succession will have a negative impact on the
U.S. economy. The early estimates
indicate that the effects will have a downward impact on third-quarter growth. According to economists, the damage by Harvey
could reach $160B – which should earn it the notorious distinction of being one
of the costliest storms on record.
There is an FOMC meeting this coming
week. The good news for the meeting is that
the U.S. dollar is being ‘crushed’ as of late, and that increases the
probability of higher inflation going forward.
The markets are not anticipating anything coming out of the meeting, and
expect the meeting to have a more-dovish stance than normal given the storms.
What has me worried for this coming week is the SKEW. The SKEW measures the value of the out-of-the-money
puts against the out-of-the-money calls.
The SKEW is currently extremely high (sitting around 1.45) and is saying
that more investors are buying out of the money puts (hedging against stocks
going down) than calls. It’s also
telling me that the experts are looking for the market to move in larger
increments this coming week. So, when the
pros tell me that this ‘wild market ride’ is going to continue a while longer –
I’d best listen.
Tips:
Recommendations:
Bullish: (Sell PCS = Sell
a Put Credit Spread):
-
Applied OptoElec (AAOI = 58.3) – Sell PCS – Sept 22: +53/-53.5
-
Gold Miners
(DUST) – Sell PCS – Sept 22: +20.5 / -21.5
-
First Solar (FSLR = 50.45) – Sell PCS – Sept 22: +44/-45
-
Gold Miners Bear (JDST = 49.38) – Sell PCS – Sept 22: +45/-46
-
Lumentum Hldgs (LITE = 57.25) – Sell PCS – Sept 22: +52.5/-53
-
Restoration Hdwr (RH = 73.3) – Sell PCS – Sept 22: +68.5/-69
-
Shopify (SHOP = 120.26) – Sell PCS – Sept 22: +109/-110
-
SPX Futures (SVXY = 86.04) – Sell PCS – Sept 22: +75/-76
-
UltraBull QQQ = (TQQQ = 115.11) – Sell PCS – Sept 22: +110/-111
-
Wayfair (W = 79.76) – Sell PCS – Sept 22: +73.5/-74.5 for $0.15
-
DBV Technologies (DBVT = 43.46) – Sell PCS – Oct 20: +10 / -15
-
Axovant Sciences
(AXON) – Sell Iron Condor – Oct 20: +5 / -15 to -22.50 / +40 // and Buy a Call
Debit Spread – Oct 20: +20 / -40
My Crypto-Currency Holdings
Include:
-
Ethereum (ETH),
Litecoin (LTC), Dash (DASH), Digix (DGD), MaidSafeCoin (MAID), Metal (MTL), OmiseGo
(OMG), PIVX (PIVX), Patientory (PTOY), Steem (STEEM), and NEM (XEM).
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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