This Week in Barrons – 9-2-2018:
A Bachelor of Science in Bitcoin:
The colleges in the above graphic are now offering cryptocurrency related courses.
It’s clear, if you want to learn about crypto, Stanfordis the university for you. A Ph.D. in bitcoin or blockchain may soon be a reality as interest in cryptocurrencies and their underlying technology has become more mainstream. This groundswell of interest has prompted more college campuses across the globe to promise courses on the subject – with one major exception: Carnegie Mellon University. When looking down the top 10 computer science schools in the world – Carnegie Mellon has perennially been #1. However, it is conspicuously absent from any cryptocurrency related courses. Qriosly and Coinbase found that, nearly half of the world’s top 50 universities (as ranked by U.S. News & World Report) are now offering crypto or blockchain related classes. “In the last couple of years all students want to hear about is cryptocurrencies,” said Aleh Tsyvinski – a professor of economics at Yale University, who teaches Introductory Macroeconomics. The Yale professor’s class is the largest in the economics department, and “has gone from the most boring class to the most interesting because of crypto.” Coinbase also found that most universities are forming research centers, and unfurling more crypto-related courses to meet rising demand. They now see cryptocurrency as an area worthy of serious academic study. Factually, one in four students want to take a cryptocurrency course, and nearly one in five own cryptocurrencies.
Using bitcoin and blockchain to drive student enrollment in colleges is controversial to say the least. These virtual assets didn’t exist until 2009. Still, the intrigue surrounding ‘crypto’ and their distributed-ledger underpinnings underscore its evolution from obscurity to part of the conversation in less than a decade. In the U.S., Stanford University may be referred to as the epicenter of crypto courses, offering 10 blockchain and crypto-related courses, followed closely by Cornell with nine, and the University of Pennsylvania with six crypto in their curriculum. Yale doesn’t offer a specific cryptocurrency or blockchain related course, but Prof. Tsyvinski is hoping to get a specialized paper into the syllabus in the next two years. At that rate, Yale and CMU may both end up well behind the curve. Dr. Harvey (Prof. of International Business at Duke University) said: “Despite prices of bitcoin losing over 60% of their value since December of 2017, the continued maturation and adoption of blockchain and cryptocurrency by businesses, has made it a clear winner in the: Most Potential for Wide-ranging Impact category.”
I attended CMU when Pres. Richard Cyert had the vision of robotics, machine learning, and Ai. He took a chance – and it paid off over the next 50 years. It will be interesting to see if Stanford and Cornell’s crypto-embrace propels them for the next 50.
As an aside, a sincere thank you to all that responded to my Case Studies pre-booklet. The idea for the Case Study booklet was fostered by a case I studied: The George Mueller Case – and its outgrowth of Color Kinetics. It was a ‘live’ case that offered all of its readers and participants the ability to correspond with the employees, prospects, principals, and investors. They published everyone’s contact information, and offered their readers and students the ability to ask why they did certain things. Did they realize that these conditions existed prior to investing? How do they feel now that all of this is out in the open? What was the net effect on …? It was a transformative case for me and many of my classmates in terms of: (a) knowledge transfer, (b) ethical behavior, and (c) the underpinnings of the venture capital / entrepreneur relationship. It is that same magic, passion and unveiling that I hope to bring to my Case Studies booklet. Thanks again for your over-whelming support.
The Market:
The Lawyers are coming…
Much of Donald Trump’s power comes from setting up bogeymen for his base, and then railing against them. Trump tweeted Wednesday that Google was messing with its search results in order to highly rank mainly negative stories about him in response to search queries. Trump’s claim of bias fuels a fire that was already burning. This week a survey by the Media Research Center showed that 65% believe social media companies like Facebook, Twitter, and YouTube are “purposely censoring conservatives and conservative ideas from their platforms.” For the record, Google stated: “Search is not used to set a political agenda, and we don’t bias our results toward any political ideology.” But since Google will never make public its search algorithm – speculation of bias will live on.
Imposing regulations on the way tech platforms present content would be a very sticky business. “What this amounts to is the digital-age equivalent of telling a street merchant what magazines he has to put on the front row of his newsstand,” says Dan Hays, who leads PwC’s global tech, media, and telecom industry practice. “There hasn’t been any government agency in the U.S. that has had the authority to regulate the placement of media stories. Such regulation is incredibly dangerous. If you’re going to regulate the presentation of online content, wouldn’t that naturally mean regulating TV, radio, and newspaper content as well?” And as New York Times’s Kara Swisher pointed out on Wednesday: “Wouldn’t Trump clamping down on big tech be biting the hand that feeds him? After all, Trump flourishes on Twitter and Facebook.” As Dan Hays reminds us: “An antitrust case would be the one viable way that the White House or Congress could act against Google and other huge platforms like Facebook.” Google and antitrust are not strangers. Their reach and search market domination make it a target. But in order for the FTC or the DOJ to act, they would have to have clear evidence that a law has been broken – and that’s a tall order. After all, there is no groundswell of support in Congress behind placing new restrictions on Google and its search algorithms.
The Google search flap is likely to dominate during next week’s Senate intelligence committee hearings which were supposed to focus on the responses of big social media companies on attempts by foreign actors to influence U.S. elections. Twitter’s CEO Jack Dorsey will be there. Facebook’s COO Sheryl Sandberg will be there. The CEO of Google’s parent Alphabet was invited, but has not accepted the invitation.
Info-Bits:
- The Fate of NAFTA: Trade negotiations between the U.S. and Canada were running late after a Friday deadline to come up with a modernized version of NAFTA expired without agreement. However, the U.S. and Mexico DID resolve their differences and reached a common ground earlier in the week.
- Berkshire Hathaway buys more Apple: And now owns 252m shares.
- Apple (AAPL) buys a lens maker: Akonia Holographics – a startup focused on making lenses for augmented reality glasses. The purchase is an indication that the tech giant has plans to make a wearable device that would superimpose digital information on the real world.
- Coca-Cola (KO) buys Costa coffee: For$5.1B. Coke continues to expand its portfolio beyond sugary drinks.
- A Cure for Hiccups: Involves a glass, a stainless steel butter knife and a pitcher of water. Pour the cool water into a glass. Put the handle of a stainless dinner knife into the water. A few inches of the dull blade should be sticking out of the glass. Raise the glass to your mouth, and make sure the knife is actually in contact with your cheek. Slowly sip the water. The knife must be in constant contact with your skin, and do NOT guzzle the water. Taking slow sips allows the ‘electrical signals’ of the knife to calm the hiccups.
Crypto-Bytes:
- ICO Fund Raising this Summer: has shown a lower total raise and fewer funded projects month-over-month. According to ICOdata:
o June: $912.9m was raised from 49 projects ($19m / project),
o July: $446.0m was raised from 42 projects ($11m / project), and
o August: $191.2mfrom 7 projects ($27m / project).
- Why the dropoff? Look no further than ETH. The token has been getting ‘rag-dolled’ for months and suffered nearly a 40% decline in August. Odds are that this discouraged a wave of projects from going to market as companies don't want to start underwater. Unfortunately, throughout entrepreneurial history it’s been proven that companies holding onto their final cup of Ramen noodles – run faster and smarter than the ones living in luxury. Then there’s the idea that most of these projects will never make money. And finally we need to acknowledge that the majority of these projects had bogus whitepapers and no product.
- What’s barring blockchain adoption? PwC asked 600 executives that very question and the main answers were: Regulatory Uncertainty and Lack of Trust.
Last Week:
Despite dropping on Thursday and Friday, the main U.S. stock market benchmarks closed with historic highs in August. For the week, the Dow Jones climbed 0.7% while the S&P 500 climbed 0.9%. For the month, the Dow added 2.2%, and the S&P 500 gained 3%. Meanwhile, the Nasdaq posted a weekly gain of 2.1% and climbed 5.7% for the month. The tech-heavy index booked its best August since 2000.
Small Biotech Breakout just beginning:
Affimed NV (AFMD): A small biotech signed a lucrative licensing deal with pharma heavyweight Roche Holdings (RHHBY). Instantly, the deal sent the shares of Affimed up a jaw-dropping +246.87% from $1.60 to $5.55 on Tuesday. AFMD jumped again on Wednesday to $6.15 before profit takers cashed in on Friday. Analysts are now looking at a price target of $15.00 or a +175.2% rise for AFMD before the end of the year. A promising partnership like this could generate $5B in milestone and royalty payments.
Next Week:
Even with renewed fears on trade with China, the U.S. stock market benchmarks managed to reach record-setting levels this week. The S&P 500 Index surpassed 2,900 while the NASDAQ reached past the 8,000 mark for the first time. Revised GDP estimates show that our economy accelerated 4.2% in the second quarter. Solid fundamentals are likely to extend the record-long bull market but the cycle will soon mature. Thisweek the Manufacturing Purchasing Managers' Index is set to report on Tuesday, the factory and durable goods orders are on Thursday, and the highly anticipated August Jobs Report is due on Friday.
But it is September. While the biggest crashes have hit in October, history shows us that September is often the worst month of the year. Is this September going to break that mold? It could, but if it does it's probably not for the right reasons. Three trading sessions ago, the S&P put in a new all-time high, and then faded back about 15 points. Was that a ‘pause that refreshes’, or is the S&P getting us ready for a September swoon? It's hard to say, but we are a bit over-bought here. With earnings season over, and a FED rate hike in front of us – I’m getting the ‘sense’ that we could see a bit of backing and filling. If we add in the tariffs, and any of a dozen other ‘ills’ – I could see them taking a break here. So, don’t be shy about selling something if it looks like they're going to put in a profit taking fade. Remember that the market is closed for the Labor day holiday. Please spend it with friends and family and have a wonderful time.
Tips:
Top Equity Recommendations:
HODL’s:
- Amarin (AMRN = $3.16 / in @ $2.90),
- Canntrust Holdings (CNTTF = $7.99 / in @ $3.12), and
- Canopy Growth Corp (CGC = $45.60 / in @ 22.17),
- Ceco Environmental (CECE = $8.44 / in @ $7.55),
- Geron Pharma (GERN = $5.82 / in @ $3.75),
- Kala Pharmaceuticals (KALA = $13.51 / in @ $12.45), and
- Progenics Pharmaceuticals (PGXY = $7.83 / in @ $8.10).
Thoughts:
- Tilray (TLRY = $62.13): Tilray is the first cannabis company to list on the Nasdaq exchange. Its IPO price on July 18 was $17. On Wednesday it soared +20.64% to $62.13 after the company reported Q2 revenue that nearly doubled from the prior year. Two factors will work in Tilray’s favor: (a) legalization of recreational marijuana in Canada on October 17, and (b) signed supply agreements with seven provinces and territories.
Crypto:
- Bitcoin (BTC = $7,300) - $40,000 by end of year
- Thoughts:
- Bitcoin (BTC-USDT): This past week, the price of bitcoin broke a major resistance zone near the $6,775 level. The BTC/USD pair traded above $7,100 and later corrected back towards resistance at $6,775 – which acted as support. Later, there was a fresh upward move and the price is now well above the 100-day simple moving average on a 4-hour chart. During the rise, the price cleared the 76.4% Fib retracement level of the last decline from the $7,135 high to $6,778 low. That opened the doors for more gains above the previous $7,135 high. More importantly, it tested the 1.236 Fib extension level, which indicates that the price is now placed nicely in an uptrend above $7,000. On the downside, there is a major bullish trend line forming with support between $7,000 and $7,050.
- Ethereum (ETH-USDT): There was a good level of support formed near $270 for the ETH/USD pair. The pair started an upward move, and traded above the $280 and $290 resistance levels. The upside was cleared after the price broke the 61.8% Fib retracement level of the last decline from the $297 high to $270 low. The price gained traction and settled above the 100-day simple moving average on a 4-hour chart. It is currently consolidating near the $292 level. On the downside, there is a bullish trend line forming with support at $290 to $292. On the upside, the price may soon test the 1.236 Fib extension level of $304.08. Above this, the next target for buyers could be $314, which is the 1.618 Fib extension.
Options:
- Amgen (AMGN): Oct 19, +195 / -200 Call Debit Spread,
- Celgene (CELG): Sept 21, +92 / -95 Call Debit Spread,
- Netflix (NFLX): Sept 7, -370 / +365 Put Credit Spread, and
- VIX (VIX): Sept 21, +12.5 / -16 Call Debit Spread.
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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