This Week in Barrons – 12-24-2017:
Just last week Christmas became ‘personal’ in many ways:
-
A U.S. Appeals Court judge said that he was stepping down after 15 women accused
him of sexual misconduct. They said he ‘personally’
did things like grope them and show them porn.
-
South Korean investigators said that North Korea was responsible
for hacking one of their
country's bitcoin exchanges (again), shutting them down, and forcing them into
bankruptcy. North Korea remarked that
they were taking the new U.S. sanctions – very ‘personally’.
-
Coinbase, a U.S. crypto-exchange, is examining it’s ‘personnel’ over
possible insider trading. It seems that
earlier last week, it added the Bitcoin Cash coin to its exchange. But hours before it officially hit the exchange,
the currency's price spiked higher - hinting that someone leaked their upcoming
action.
-
Last week Apple admitted to something we already knew – it had been
purposely slowing down people’s older model iPhones. People took it ‘personally’, and at least 4 major
class-action lawsuits have been filed.
-
John Schnatter (‘Papa John’ of Papa John's) announced that he was
saying g-bye. After founding the pizza
chain over a decade ago, he raised eyebrows by criticizing the NFL's handling
of the #TakeAKnee protests. He's leaving
the CEO seat to pursue new passions – just NOT the ‘personal’ pizza kind.
-
Last week Spain received the worst kind of personalized Christmas
gift. Catalonia (the semi-autonomous
region that includes Barcelona) voted FOR a new, pro-independence government. That is exactly opposite what Spain had
hoped would happen. A few months ago
Catalans voted for their own independence, but Spain called their vote unconstitutional,
sacked the locals, and demanded new elections. It seems Catalans made it ‘personal’ by
getting a record number of voters to go to the polls, and deliver yet another pro-independence
vote.
-
Finally,
Amazon made it ‘personal’ last week when it filed to trademark: ‘AmazonTube’. This comes weeks after Google pulled ‘YouTube’ (which it
owns) off of any Amazon device. And that
came weeks after Amazon refused to sell any of Google’s products on its website.
To both organizations – this has gone
far beyond business.
And if
you’re still looking for a Christmas present for that certain someone, how
about a couple shares in Long Island Iced Tea – LTEA.
This company
makes teas. But suddenly they had a
genius idea to change their name to: Long Island BLOCKCHAIN. This is not a joke. Their stock price spiked 289% (from $2.44 to
$9.49 per share) after the unprofitable Hicksville, New York-based
company rebranded itself as: Long Island Blockchain Corp. After all, Long
Island Blockchain, whose business had been selling non-alcoholic beverages, said
that it will now seek to partner with or invest in companies that develop decentralized
ledgers – the technology that underpins bitcoin. Scott Nations (author
of ‘A History of the United States in Five Crashes’) said: “This is so reminiscent of what happened in
the late 1990s, when a company that had nothing to do with the Internet would
put out a press release saying that they were going to become an Internet
company, and their stock would explode higher.” Naturally, LTEA has no agreements with any
blockchain firms, and can give no assurances that any definitive agreements or other
elements will be entered into or ultimately consummated. In fact, as of last week, LTEA had a year-to-date net loss of $11.6m
on sales of $3.9m.
But at least this past week I finally
figured out whether Bitcoin is a currency or a store of value. Bitcoin has gained over 1,500% in the
past year. But the week of June 10th
its price slid 34%, fell 35% the week of September 1st, and tumbled
22% the week of November 8th.
And
let us not forget: ‘Bitcoin Pizza Day’. Legend has it that on May 22nd 2010,
Laszlo Hanyecz agreed to pay 10,000
bitcoins for 2 large Papa John's delivered pizzas. At the time, the bitcoins were worth $41, and
the pizzas just over $25.
Seven years later, those 10,000 bitcoins are now
worth about $150m. Hanyecz will be
remembered as the Ronald Wayne of the cryptocurrency world. It was Ronald Wayne who sold his 10% stake in
Apple for $800 in 1976 – now worth over $75B.
Bitcoin carries with it great rewards, as long as you understand and appreciate the risks. The idea of bitcoin being a currency (with the current volatility) is misguided. A useful currency cannot gain 100% in a month, nor lose 35% in a week. Using bitcoin or any other crypto to purchase anything – is foolish because you are giving up more than you receive. And if you've sold something in exchange for bitcoin – you are a genius. That is NOT a successful model for a currency, but a terrific model for an investment.
Bitcoin carries with it great rewards, as long as you understand and appreciate the risks. The idea of bitcoin being a currency (with the current volatility) is misguided. A useful currency cannot gain 100% in a month, nor lose 35% in a week. Using bitcoin or any other crypto to purchase anything – is foolish because you are giving up more than you receive. And if you've sold something in exchange for bitcoin – you are a genius. That is NOT a successful model for a currency, but a terrific model for an investment.
The
Markets:
Back
in 1972 comedian George Carlin listed 7 dirty words that you couldn’t say on
TV. It was an amazingly funny, classic
bit. Recently, the Trump administration
listed 7 dirty words you can’t use if you work for the nation’s top public
health agency – the CDC. They are: evidence-based, science-based, vulnerable,
entitlement, diversity, transgender, and fetus.
It also became an instant comedy classic. So,
I decided to join the party and do the same for finance. From here on out I don’t think our traditional
financial media can use the following 7 dirty financial words and phrases:
overbought, crash, sell stocks, sell bitcoin, take profits, raise cash, and
limited upside. Our markets have become
both comical and scary. There’s no
reason to sell in 2017 anymore, but there are at least 3 reasons to
worry about 2018:
-
#1 Loan
Delinquencies: Delinquency
rates on consumer loans, C&I loans (mainly energy related), and others have
been quietly rising since 2015 – as credit growth slows. Rising delinquencies in these areas have historically
preceded recessions, and to make matters worse U.S. bank loan growth appears to
have peaked right around the same time. Increasing
delinquencies combined with FED tightening will discourage banks from future lending. Combine that with corporate debt being at 13-year
highs (due to their stock buy-back programs) and you could have a recipe for
disaster.
-
#2 The
Yield Curve and Money Supply: Stocks
and bonds continue to paint a different picture of the same economy. Our strong stock market continues to indicate favorable
economic conditions, while the flattening bond yield curve is predicting a
slowdown ahead. On average, the yield
curve inverts 16 months prior to an economic recession, and 13 months before a meaningful
stock-market correction.
- #3 The Repeal of Net Neutrality: Recently the FCC voted to repeal their
enforcement of net neutrality. That
means that service providers are now free to charge differently for varying forms of Internet
data. It allows Internet Service
Providers (ISPs) to slow down or block access to competing sites. And despite FCC Chairmen Ajit Pai’s
patronizing assurances, ISPs have a history of: providing substandard Internet
to certain sites, censoring information, and forcing people to pay expensive
rates for their favorite sites. The
reality is that 51% of Americans only have one ISP to choose from. Most cryptocurrency transactions occur via
exchanges, and ISPs could target exchanges, slowing them down or banning them
altogether. On the other hand, net
neutrality could push adoption of blockchain as an alternative to ISP
monopolies. Ethereum and other
blockchain networks could enable a large-scale mesh network. Mesh networks are essentially where users
connect directly to each other – creating a network. Ethereum and other blockchain platforms are
perfect for implementing this and sidestepping the ISPs. Blockchain’s main use case revolves around
disrupting centralized corporations such as banks and financial institutions,
but net neutrality demonstrates that ISPs are yet another important target for
disruption.
In 2018, it’s going to be important to
‘Follow the Money’. In January, Coinbase
(Gdax - the largest U.S. crypto-currency exchange) is expected to add coins to
its platform. This is a BIG DEAL because
Bitcoin Cash quintupled in value within the first hour of trading on the
Coinbase exchange. In November, Coinbase
published their list of exchange requirements that included: (a) Are you a
secure open source environment, with a tested and documented peer review? (b) Are
you run by a qualified team, with good community interaction, and a strong
venture capital or hedge fund backing? (c) Are you scalable? (d) Do you solve
real world problems? (e) Are you globally traded in a liquid environment? And
(f) Do you comply with the Anti-Money Laundering guidelines? Notice it does not specify a working product
and does not exempt ICO’s – but liquidity is a must. This gives me the impression that they want
variety, and not just a bunch of Litecoin types. My descending order of expected introduction is:
(a) Ripple – XRP a no brainer, (b) DASH, (c) IOTA – they recently sent their
software to MIT for testing for a reason, (d) QTUM – note the move in price, (e)
OMG – great team & VCs, and (f) NEO – another great team. My ‘spec’ plays are: ZEC, XLM, ADA, STEEM and
LSK.
The week played out with crude oil moving lower but quickly reversing itself for the remainder of the week. The U.S. Dollar continued to move sideways while Treasuries reversed lower early in the week and then found support. Volatility remained in a narrow range – keeping the bias higher for equities. The SPY had started a very small pullback but caught itself to end the week with two inside range days. Its price action brought it closer to its 20-day SMA, easing one overbought indicator, and I’m looking for some consolidation into year end. But the weekly SPY chart shows no sign of letting up – just a steady march higher. Historically, Christmas week has equities looking to the upside along with gold and crude oil. Volatility looks to remain low keeping the bias higher for the equity index ETFs: SPY, IWM and QQQ. Their charts agree, especially in the longer timeframe, but may have a quiet week in the short run.
The week played out with crude oil moving lower but quickly reversing itself for the remainder of the week. The U.S. Dollar continued to move sideways while Treasuries reversed lower early in the week and then found support. Volatility remained in a narrow range – keeping the bias higher for equities. The SPY had started a very small pullback but caught itself to end the week with two inside range days. Its price action brought it closer to its 20-day SMA, easing one overbought indicator, and I’m looking for some consolidation into year end. But the weekly SPY chart shows no sign of letting up – just a steady march higher. Historically, Christmas week has equities looking to the upside along with gold and crude oil. Volatility looks to remain low keeping the bias higher for the equity index ETFs: SPY, IWM and QQQ. Their charts agree, especially in the longer timeframe, but may have a quiet week in the short run.
Merry
Christmas to everyone. Enjoy your families
and friends, and remember the reason for the season.
Tips:
Mike Novogratz
was one of the early investors in Bitcoin and Ethereum, buying Bitcoins when
the price was $50 and Ethereum during its initial crowd-sale for 30 cents. He has been selling Bitcoin and Ether
periodically and is estimated to have made $250m by liquidating a portion of
his holdings in 2017. Despite his
earlier bullishness, he now believes that Bitcoin could plunge to $8,000 and
take a while to recover. He predicts
that the price will stabilize between $10,000 and $16,000. The crypto rally in 2017 has enthused many
neophyte digital currency investors; however, when veterans like Novogratz
begin to call for caution – it might be wise to listen.
I was talking about
crypto to one of the smartest people I know the other day and his response went
something like this: “All
major empires historically have expanded indefinitely because of greed, and
have all fallen because of some lack of knowledge. The same can be said of the world's greatest
businesses, leaders, and politicians. In
crypto, the situation is no different. If
you hook and indoctrinate a populate on something they don't fully understand, they
become addicted and susceptible to the most basic of human emotions – confusion. Confusion most often expresses itself as
fear. Then comes the 4 stages of grief:
anger, bargaining, depression and acceptance. I view acceptance as more of an understanding
of the technology (the knowledge part of the equation). Acceptance is the part of the cycle that we
have entered, and I don't know how long it will last – because it always seems
to stretch longer than I anticipate.”
In terms of what to buy now – one element is
caution. But if the fever grabs you:
-
XRP
is topping my list – as everyone knows it will be added to GDAX in January.
-
QTUM
and Ethereum (ETH) also look good to me here.
-
ZEC
and BCH look to be buyable on a pullback.
-
And
NEO’s chart is tugging at my sleeve as we speak.
Equity Recommendations:
Bullish: (Sell PCS = Sell a Put Credit Spread)
-
Aurora – ACBFF (5.92) – Long Stock from $2 /
share,
-
GST (1.04) – Long Stock from $1 / share,
-
LYB (107.14) – Sell PCS – Jan 19th:
- 105 / +100, $1.30,
- MARA (5.74) – Sell PCS – Jan 19th: -2.50
/ +1, $.20,
-
MU (43.21) – Sell PCS – Jan 19th:
- 45 / + 40, $2.30,
-
NFLX (188.54) – Sell PCS – Jan 19th:
- 180 / + 175, $2.00,
-
OSTK (68.35) – Sell PCS – Jan 19th:
- 25 / +20, $0.15,
-
SVXY (127.36) – Sell PCS – Jan 19: -27.5 /
+25, $0.16,
-
RIOT (28.5) – Sell PCS – Jan 19: -10 / +7.5,
$0.35,
To follow me on StockTwits.com to get my daily thoughts
and trades – my handle is: taylorpamm.
Please be safe out there!
Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and
free weekly economic newsletter, are those of noted entrepreneur, professor and
author, R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your subscription
by visiting:
Please write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <http://rfcfinancialnews.blogspot.com/>.
If you'd like to view RF's actual stock trades - and see more of his
thoughts - please feel free to sign up as a StockTwits follower - "taylorpamm" is the handle.
If you'd like to see RF in action - teaching people about investing -
please feel free to view the TED talk that he gave on Fearless Investing:
Creativity = https://youtu.be/n2QiPSe_dKk
Investing = https://youtu.be/zIIlk6DlSOM
Marketing = https://youtu.be/p0wWGdOfYXI
Sales = https://youtu.be/blKw0zb6SZk
Startup Incinerator = https://youtu.be/ieR6vzCFldI
To unsubscribe please refer to the bottom of the email.
Views expressed are provided for information purposes only and should
not be construed in any way as an offer, an endorsement, or inducement to
invest and is not in any way a testimony of, or associated with Mr. Culbertson's
other firms or associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Please make sure to review important
disclosures at the end of each article.
Note: Joining BARRONS REPORT is not an offering for any investment. It
represents only the opinions of RF Culbertson and Associates.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS
AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.
Alternative investment performance can be volatile. An investor could
lose all or a substantial amount of his or her investment. Often, alternative
investment fund and account managers have total trading authority over their
funds or accounts; the use of a single advisor applying generally similar
trading programs could mean lack of diversification and, consequently, higher
risk. There is often no secondary market for an investor's interest in
alternative investments, and none is expected to develop.
All material presented herein is believed to be reliable but we cannot
attest to its accuracy. Opinions expressed in these reports may change without
prior notice. Culbertson and/or the staff may or may not have investments in
any funds cited above.
Until next week – be safe. Until next week – be safe.
R.F. Culbertson
