This Week in Barrons – 1-21-2018:
“At the N.A. Bitcoin
Conference, you either get on board – or get out of the way”
… courtesy of JT
The above picture of a Lamborghini being
sold ONLY for digital currency should not come as a shock. Every decade we go through a paradigm shift,
and this one is focused on production and currency. Right now, nothing in those 2 arenas is
normal, and as SF points out – how can it be?
-
One of America's richest cities (Seattle) is the site of 400 unauthorized
homeless camps.
-
78% of the U.S. population lives without savings – paycheck to paycheck.
-
The wealthiest 10% of all Americans own 75% of the nation's wealth
– a level not seen since the 1930’s.
-
Low income wage earners make LESS than they did in 1980.
-
Middle income wage earners make just 6% more than they did in
1980.
-
U.S. consumers have nearly $13T in total debt – the highest total
ever.
-
73% of Americans die being an average of $60,000 in debt.
Why
– because our wages are no longer connected to gains in productivity.
You'll
notice from the graph above, that the divergence began around 1971 – the year
President Nixon removed the U.S. dollar from the gold standard. Why is
this important? Because the minute paper money started to be printed out
of thin air – at the whim of governments and CBs – the barbell society was
born. So, it should not come as a shock
when we see crypto’esque thinking embracing more and more of our life. For example, we have Vladmir Putin – ‘Putin’
on the Ruble’
Let’s eat strudel, As we clean
the kit-n-caboodle, Off everything from Chernobyl
… Putin
on the Ruble.
Looking
for approval, As we continue our removal,
Of everything from Chernobyl
… Putin on the Ruble.
Mr. Putin and Russia have been working on
their crypto counterpart to the ruble for some time now. July 2018, is when the first presentation is
due, and I expect they’ll be: ‘Putin on
the Ruble’. Unfortunately, the underpinnings
of the crypto-ruble go against the fundamental crypto-philosophy because: (a) the
crypto-ruble remains under full control of the government, and (b) it’s centralized
design risks a single point of failure. Our
future clearly holds more government-issued digital currencies, and for countries
like Russia, Venezuela and China, cryptocurrencies provide a means of circumventing
U.S. sanctions. With these digital
currencies right around the corner, it’s only natural that Russia, Venezuela
and China embrace their decentralized crypto-cousins – that drove the crypto-buzz in
the first place.
And by-the-way,
the U.S. dollar ain’t lookin’ so good these days. Recently, the U.S. Dollar index closed at a
three-year low against other currencies, and total shorts almost doubled to $4.6B since last week. If the ‘old
greenback’ continues to decline, then holding U.S. dollars effectively means
that you’re losing money. Cryptocurrencies
offer a natural hedge to offset this continued dollar downfall. Combine this with China, Russia, and Venezuela
pursuing their own cryptocurrencies, the demand for petro-dollars will see even
further declines.
Yes, the crypto market suffered a correction
last week, and it was THEN that I remembered the opening scene from ‘Boiler Room’ (a movie – circa
2000): “Microsoft once employed more millionaire secretaries than any company
in the world. They took stock options over Christmas bonuses. There
was this photograph of one of the
grounds-keepers next to his Ferrari. You see stuff like that and it makes
you think that anything’s possible – if you just get in early.” A friend of mine wrote me with an interesting theory on the
correction. The cause of last week's crypto-chaos was potentially due to large hedge
funds using expiring Bitcoin (BTC) futures contracts as safety nets to exploit
the only sure-thing in this market – a large amount of new and overextended
investors who are easily moved to panic sells during a correction.
On December 10, BTC futures trading went
live, with the first set of those contracts expiring last week. If you were a large hedge fund evaluating the
crypto market, making a large bet on either the ‘long’ or ‘short’ side is
extremely risky – since the expiration price of BTC could very easily be $50,000
or $500. However, hedge funds know that
crypto is still an emerging market with a large number of new investors / ‘dumb
money’. Given their ‘deep pockets’,
they could have made large bets on BOTH sides to gain risk-free leverage, and use
that leverage to manufacture market chaos. Here’s how it could have gone down:
-
First on Dec. 10th, they sell a large number of BTC
futures (at the current price of $15k each) – agreeing to pay them back a month
later. So, they are hoping that the
price falls so that they can buyback BTC at a cheaper price to make good on
their contract.
-
Secondly on Dec. 10th, they also buy an equal amount of
BTC at the market price of $15k/BTC. This
effectively cancels out their ‘short’ risk.
-
Last week (right before the futures contracts were due to expire),
they then sell their long BTC for $15k each – ALL at once. Like clockwork, that triggered stop-losses
and panic selling from the consumer BTC market, virtually guaranteeing BTC falling
well below their selling price.
-
Then they ‘ride the BTC dip’ that THEY created, buy back the BTC
that they owed at a much cheaper price ($10k/BTC), and use those contracts to
repay their original short position.
-
They sell the original contracts at $15k each, and buy them back
at $10k each; therefore, they make $5k on each of the contracts.
-
For hedge funds with access to enough capital to move the crypto
market, this play should be easy money. It
would also explain the series of huge dips (seemingly out of nowhere) that occurred
last week.
If this is correct, we should be able to
predict this action in February. The bad
news is that I don't know how this can be stopped as long as the prospect of
capitalizing off of market fear remains a huge carrot for the sharks in this
market. But, the way to profit off of it – is to do exactly what the
hedge funds are doing: ‘sell-the-rally (STFR)’ and ‘buy-the-dip (BTFD)’.
Finally, if you haven’t subscribed to: https://www.thedailybit.news for your
daily crypto update – you need to, and yes it’s free!
The
Markets:
“Always
look up, because if you’re looking down – you’ll end up there”…
Molly Bloom
There is
some really crazy stuff going on in the markets at this point. Coca-Cola
(KO), for example, is trading at 45 times earnings and 36 times cash flow –
even though revenues DROPPED 14.6% year-over-year. Merck (MRK), another
Dow Component and S&P heavy-weight, is trading at 56 times earnings and 39
times cash flow – despite 3-year average sales DECLINES of 3.3% per year. McDonalds (MCD) is trading at 25 times
earnings and almost 50 times cash flow – even with sales being DOWN 10.4% year-over-year. Between the Central Banksters buying
stock, and the hundreds of billions worth of corporate stock buy backs, this
market is at a point where all they can do is make excuses. If your revenues are falling year over year,
does it make sense for your stock to hit all-time highs? Of course not. So, we're in a melt up, and I don't have a
clue how long it will last.
That’s not to say that during the past two
weeks, this 8-year bull market has looked as strong as ever. The S&P
hasn’t suffered a pullback of 5% (even over multiple days) since June of 2016. The market has added $6.9T in market cap since
the election of Mr. Trump. And corporate America is
starting to see what a lower corporate tax rate means, and how it impacts the
bottom line. Apple
(for example) is expected to pay a one-time tax payment of $38B to repatriate
their overseas profits, and will open a new U.S. campus as part of a five-year
investment plan worth an additional $30B.
As I look across the canvas, a ‘weed’ stock like Kush Bottles (KSHB) pops
out at me. Kush Bottles continues
to grow and flourish in the cannabis industry based upon the legalization of
recreational marijuana in California. As
regulatory measures increase, so will the demand for compliant packaging
solutions. Kush is a cannabis packaging
company has started making its presence felt in the Nevada market and business
is booming – with revenues rising over 250% in 2017. They recently acquired CMP Wellness – a
vaporizer company. This is a clever move
because vaporizers are one of the fastest growing categories in the cannabis
market.
In terms of the Government Shutdown, I see ‘business as usual’ in the
financial markets on Monday. This market is so detached from any reality
that I'll be somewhat amused if there is even a ‘blip’. That being said, this market is running on
fumes. Gone is any semblance of normalcy. This market has nothing but pure momentum,
and Central bank printing to back it up. The problem that's lurking in the wings is that
the IMF (the Central Bankster to all of the Central Banks) has made it quite clear
that they want ALL Central Banks to start removing the stimulus that's been in
place for years. IF they do that (and
yes, that’s a big IF) – then it stands to reason that markets will fall. After all, if CB money sent the markets to
these levels, then removing some of it should result in a pull back. So, the question is: Are the CBs really going
to materially cut back, or is this nothing but cheer leading?
If you’re looking for a ‘tell’ in the
markets, you need look no further than auto sales. Even though Detroit automakers are
smiling from ear to ear after selling over 17m cars for the 3rd year
in a row, a look ‘under the hood’ suggests that the industry may be headed for choppier waters. Purchases by individual customers at
dealerships (considered the most accurate reflection of demand) declined in 2016
and 2017. The drop in retail sales has come even as manufacturers have
resorted to heftier discounts and incentives – which eat into profits. Sales incentives now comprise more than 11%
of an average vehicle sticker price. Other troubling signs include: (a) rising
interest rates, (b) younger buyers showing less interest in owning a car, and
(c) the supply of low-mileage used cars is growing – giving shoppers a viable
option over buying new. Mark Wakefield
of Alix Partners is forecasting a moderate drop in auto sales this year,
followed by steeper declines in 2019 and 2020. This will come despite
automakers like: BMW and Audi finishing new plants in Mexico, Volvo finishing
one in South Carolina, Toyota finishing one in Mexico and Alabama, and Fiat
Chrysler reigniting a truck plant in Michigan.
Therefore, if Alix’s predictions are correct and there is a sales
downturn, it could not come at a worse time.
So, watch the consumer automobile sales numbers going forward – as a
‘tell’ to the economy.
Your best defense is agility. If things start to look sour, getting out
before the other guy becomes paramount.
I haven't seen anything telling me that
the run-up is over, but I’m not shy about booking profits either. Let's watch the reaction on Monday to the
Government shutdown, after all – it could be another ‘buy-the-dip’ (BTFD)
opportunity.
Tips:
I find trading the crypto-markets much
easier than trading the traditional equity markets – because there are no
Central Banksters in the background. My
opening trading approach would be the following:
-
1st – Open a free account on the crypto-charting
platform: www.tradingview.com
-
2nd – Dial-up your favorite crypto such as ETHUSDT
shown above.
-
3rd – Add a free momentum indicator to the chart such
as the ‘squeeze / momentum’ – red and green bars shown at the bottom.
-
4th – And then simply BUY when the bars are green, and SELL
when the bars are red.
-
5th – If you wish to add a little more ‘spice’ to your
trading, then download the free ‘Simpler Trading Propulsion Dots’ (shown in
purple above) – and then buy or sell a ‘little more’ whenever you see the
purple dots.
Top 5
Equity Recommendations:
-
Marijuana stocks:
o Aurora
(ACBFF),
o Cannimed
Therapeutics (CMMDF),
o Canntrust
Holdings (CNTTF), and
o GW
Pharmaceuticals (GWPH),
-
Energy Exploration stock:
o GAStar
Exploration (GST)
Top 5
Crypto Recommendations:
-
Ethereum (ETH),
-
Zcash (ZEC),
-
NEO (NEO),
-
Monero (XMR),
-
SaiCoin (SC), and
-
RaiBlock (XRB)
Here are some crypto-levels
for the majors:
The aggressive bulls jumped in this week and
bought at lower levels. However, unlike
on previous occasions, the buying was not as ferocious. This tells me that traders are not confident
of a huge rally from current prices, and over the next days expect a range
bound market in most of the top cryptos.
BTC/USD ($11737): Bitcoin overshot my expected pullback, and
fell to $9,300. The bulls are attempting a reversal, which is likely to
carry it to $13,202 – the neckline of the existing head and shoulders pattern.
From there it can go either way – back down to $9,300 or hold and continue the
uptrend. If you’re nimble, play the current
rise into $13k – otherwise wait for more clarity.
ETH/USD ($1,074): Last
week’s $940 support did not hold, and Ethereum fell to a low of $770. At
that point, the bulls bought the dip aggressively, which carried ETH back
towards its 50% Fibonacci retracement level of $1,097. I’m expecting a continuation move into $1,174
and $1,284. With a stop loss at $930,
the risk / reward is not in a trader’s favor – wait for resolution prior to
initiating new positions.
BCH/USD ($1,808): The $1,733
level didn’t hold last week, and Bitcoin Cash fell to a low of $1,364.
The current increase is likely to face resistance at the $2,072 level, which
was the support area for the previous range. If the $1,364 area of support breaks, then a
fall to $1,194 is likely. The bearish view will be invalidated if BCH can
sustain itself above the $2,072 level.
XRP/USD ($1.40): Ripple
fell all the way to its 78.6% retracement level ($0.91), which coincided with
the lower end of its descending channel. XRP has broken out of the
descending channel; however, the present increase is facing stiff resistance at
the $1.75 level – above which a move to $2.20 is likely. If XRP fails to break above the $1.75 level, bears
will attempt to resume its downward trend and test the $0.87 area.
LTC/USD ($193): I thought
that if Litecoin broke below $175.19, it would fall to $100 – but bears were unsuccessful
in holding prices down. If the bulls push the price above $205, a move to
$225 is likely – where many of the moving averages converge. This level will act as resistance, and I will
wait to trade it until after it clears that level.
XEM/USD ($1.06): NEM fell
close to its 78.6% retracement level of $0.48 last week. The bulls have commenced a buying spree and
an increase to $1.45 can’t be ruled out.
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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