This Week in Barrons – 2-18-2018:
Thoughts:
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the outdated educational techniques being used to teach it to today’s students.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.
The Market:
Factually:
-
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.
Tips:
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),
Options:
-
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
-
DASH
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!
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:
Sales = https://youtu.be/blKw0zb6SZk
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.
Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.
R.F. Culbertson
