Cryptocurrencies Could Be Worth $200 Trillion One Day

This post Cryptocurrencies Could Be Worth $200 Trillion One Day appeared first on Daily Reckoning.

I’m not exaggerating when I say cryptocurrencies are the biggest innovation since the internet. We’re on the ground floor of an enormous trend that’s going to change the world.

Cryptocurrencies are currencies with no government in the middle. No bank in the middle. No organizations in the middle keeping track of all your payments, or taking advantage of your spending so they can invade your privacy, and on and on.

Cryptocurrencies solve trillions of dollars’ worth of problems, which is why they will be worth trillions of dollars one day.

Consider the potential:

There is currently $200 trillion in cash, money and precious metals used as currencies in the world. Meanwhile, there’s only $200 billion in cryptocurrencies. Cryptocurrencies are eventually replacing traditional currencies.

So that $200 billion will eventually rise to the level of currencies. And probably sooner than we can imagine.

Fortunes have been made in cryptocurrencies and many more will be made in the future. But just like the Internet boom in the 90s, there will be a lot of scams. Let me say it right now: 95% of cryptocurrencies are scams.

But with the total number of cryptocurrencies now exceeding 1,000, that means at least 50 legitimate cryptos out there right now. That’s a lot more than one or two or three.

My job is to research, study, and use my connections to avoid the scams. I’m dedicated to finding the tiny portion of cryptocurrencies, that remaining 5% that will turn that $200 billion into $200 trillion.

I hate to use big numbers like that. But those numbers are facts.

If, and only if you avoid the scams, you’ll find the cryptocurrencies that actually solve major problems of prior currencies. Also, avoiding the scams lets you closely follow closely the people who are doing the research and have the credibility in this space.

What qualifies me for this role?

Basically, I’ve been here before. I started one of the first Internet companies back in 1995. I created the first websites for AmericanExpress. com,,, etc etc.

I was there. I did it. I rode the boom. I also rode the bust. So I’ve been here before and know what to avoid and I trust my ability to predict. The next time I was “here” was when Facebook was getting bigger.

Facebook was private at the time and hard to invest in. So I invested in every Facebook ad agency I could find. Then Microsoft offered to buy Facebook for a billion dollars. I went on CNBC and said Facebook was worth at least $100 billion. I also wrote it in The Financial Times. CNBC laughed at me. Nobody took me seriously. The day Facebook went public they had me on again.

It’s first value after it went public: $101 billion. Now it’s worth well over $400 billion.

I was a seed investor in one of those ad agencies I mentioned, Buddy Media, when it was worth just $4 million. It was later sold to …read more

Gandhi, Bitcoin and Russia

This post Gandhi, Bitcoin and Russia appeared first on Daily Reckoning.

“First they ignore you,” began Gandhi.

“Then they laugh at you, then they fight you, then you win.”

If “you” happen to be cryptocurrencies, old Gandhi may have been a prophet…

Russia, for example, ignored cryptocurrencies for years.

Then it laughed at them…

In August, the Russian deputy finance minister chuckled:

“[It is] hard to argue cryptocurrency is not a pyramid scheme.”

“We are very skeptical,” snickered the first deputy governor of the Russian central bank.

“Gold fever” was the Russian central bank governor’s mocking term for the cryptocurrency moment.

Then Russia fought cryptocurrencies…

The Russian central bank:

Concerning the use of cryptocurrency… the official currency of the Russian Federation is the ruble. The issue of monetary surrogates in the territory of the Russian Federation is not allowed.

The first deputy governor of the central bank:

“We cannot give direct and easy access to such dubious instruments for retail [investors].”

Vladimir Putin himself said cryptocurrencies were the coin of crime, of vice, of terrorism; a cutthroat’s money.

Then cryptocurrencies won…

Russia’s finance minister conceded last week that “cryptocurrencies are a fact of life.”

Better to join them if you can’t beat them, says the Russian communications minister:

We will run [a cryptocurrency] for one simple reason: If we do not, then in two months, our neighbors in the Eurasian Economic Community will do it.

Now Vladimir Putin has officially called for a Russian cryptocurrency — the “cryptoruble.”

Ignored, ridiculed, resisted, at last embraced… Gandhi’s cycle of victory appears complete.

As we noted last week, we’ve been keeping two sets of books on cryptocurrencies.

The first set of books reveals a vision of 17th-century tulips. The second a vision of 21st-century gold.

Does Russia’s surrender mean we heave the first set into the fire?

Or maybe Russia’s “surrender” isn’t a surrender at all, but a feint… a flanking maneuver so cunning you could stick a tail on it… and call it a weasel.

Chess is the Russian national sport, after all.

Cryptocurrencies’ distinguishing birthmark is their decentralized, borderless nature.

They put out their tongues at centralized control… and spit defiance in the face of authority.

Cryptocurrencies war against the largest monopoly in the world — the state monopoly on money.

Why would Russia sign on that dotted line?

Jim Rickards whiffs a rat:

Governments have been patiently watching blockchain technology (the technology behind cryptocurrencies) develop and grow outside their control for the past eight years. Libertarian supporters of blockchain celebrate this lack of government control. Yet I believe their celebration is premature and their belief in the sustainability of powerful systems outside government control is naïve.

Governments don’t like competition, especially when it comes to money. Governments know they cannot stop blockchain — in fact, they don’t want to. What they want is to control it using powers of regulation, taxation and investigation and ultimately more coercive powers, including arrest and imprisonment of individuals who refuse to obey government mandates.

Maybe Russia’s launching its own cryptocurrency to clear the field of competitors.

Jim Rickards is not the only one to suspect a deep game of chess …read more

Here’s What’s Next for Retail

This post Here’s What’s Next for Retail appeared first on Daily Reckoning.

Let me offer a quick scenario.

You walk into a store at your local mall. They’re holding a 40%-off sale.

You have questions but there’s not a salesperson in sight. The clothing displays are a mess and you can’t tell what’s 40% off and what isn’t.

You look around for assistance, but after two laps and no help, you’re too frustrated and leave.

Sounds like a normal shopping experience right?

That scenario may be true today, but in all likelihood, it won’t be true for long.

Now imagine in the near future, you’re interacting with a personal shopping assistant, an AI powered automaton, rather than leaving a store in frustration.

The notion is hardly far-fetched.

The artificial intelligence revolution has already taken hold of industries like manufacturing, transportation and finance.

Now AI tech is being applied to brick-and-mortar retail operations. The impact it will have is mind blowing.

“We Are Braindead”

Last week the retail conference Shoptalk, a veritable “who’s who” list of retail execs and industry experts, was held in Copenhagen, Sweden.

The hands-down dominating consensus coming out of the conference was that artificial intelligence will play an integral role in traditional retail’s future success.

“The clear takeaway is adapt or die….”, remarked one Shoptalk attendee.

That point is not to be taken lightly.

A recent Gartner industry report projects that by 2020, 85% of all customer interactions will be managed with AI software and 30% of all companies will employ AI in at least one sales process.

The writing’s on the wall and retailers refusing to adapt will suffer the consequences.

EBay’s chief product officer put it like this…

“It’s bigger than the web and the mobile revolution combined. By 2020 if we’re not engaged with this technology and making it a meaningful part of our businesses – we are braindead.”

Many traditional retailers are already investing heavily in AI. Companies like Levi, Burberry, Neiman Marcus, North Face, and Urban Outfitters (to name a few) all know how high the stakes are. To compete with a thriving ecommerce market, AI is a “must have” for traditional retailers.

Three Ways AI Will Change The Face of Retail

Big data needs are a huge driving force behind the recent AI push. Today’s brick-and-mortar retailers are inundated with information.

They have tons of actionable customer data at their fingertips, and no idea how to use it!

AI solves this problem by making sense of all that info, offering a cheaper, faster way to conduct complex analytics.

AI allows retailers to understand their customer data more intelligently. It’s used to predict consumer style preferences and changes to those preferences instantaneously, saving you time and money.

The predictive powers of AI are also a unique way traditional retailers can use cutting-edge tech to stay ahead of consumer preferences.

Some retailers are using AI to trawl thousands of e-commerce sites to pinpoint exactly which products are being viewed most, day in and day out.

This allows them to get in front of the consumer wants and needs, and ensures you have the latest and greatest product …read more

The Rich Life Part II: Confessions of a sixth-grade stock picker

This post The Rich Life Part II: Confessions of a sixth-grade stock picker appeared first on Daily Reckoning.

When your name is Nilus Lawrence Mattive III, people automatically expect you to have a silver spoon in your mouth.

But I never did. Nobody in my family ever started a company, patented an invention, or wrote a movie script.

My odd first name was the ONLY thing handed down from generation to generation in my family. No inheritances or trust funds to speak of here.

As I explained in Part I, I was just a lower-middle-class sixth grader living in northeastern Pennsylvania.

My dad was the first person to go to college on either side of the family. He worked in the human resources department at a state mental health facility. He also had a second gig at the YMCA. And my mom? After spending a few years taking care of me, she got a part-time job at a small credit union.

My parents’ investments were limited to passbook savings accounts and maybe a CD or two.

That’s why they were so surprised when I said I wanted to start investing in stocks on my own.

Sure, I had always been interested in money – coin collecting, piling up cash in my dresser drawer, even looking at stock market quotes in our local newspaper.

But this was a whole new deal!

Luckily, my parents encouraged me. They allowed me to take several hundred dollars from my savings and put it into the market.

I searched under “stock broker” in the yellow pages, and made a few phone calls. When I found one who took me seriously, my dad helped me set up an account.

That was around 1987. The movie Wall Street had just come out. I was watching shows like “Family Ties,” where the young Alex Keaton character was carrying his briefcase to school and talking about investing in blue chips. Meanwhile, I picked up a personal computer from my local Sears, an antique by today’s standards.

I knew what I wanted to do…

I decided to buy five shares of IBM.

I didn’t make a killing but it was great experience. I also ended up with some Disney stock that performed nicely.

Later, in high school, I started putting more money into the market.

And that’s when I learned my first real lesson.

Up to that point, my broker had merely followed the instructions I gave him.

But then he told me he had a great investment I should consider – a small mining company his research department said was ready to soar.

As I quickly discovered, it’s possible to have a high IQ and still be a complete idiot…

That trade was a disaster. I lost my shirt.

I also learned that “boring” stocks like IBM and Disney could outperform smaller, more exciting plays.

Of course, that didn’t prevent me from some spectacular wins as the ensuing …read more

Revenge of the Tech IPO: New Stocks are Heating Up

This post Revenge of the Tech IPO: New Stocks are Heating Up appeared first on Daily Reckoning.

The formula has remained the same for decades.

Wall Street cashes out. Retail investors get burned.

Market hucksters have force-fed mom and pop investors useless new stocks for years. The initial public offering always manages to capture the herd’s collective imagination. But it rarely translates into immediate profits.

As you’ve probably already figured out, most IPOs are just cash grabs for up-and-coming companies and underwriters. This is especially true when it comes to trendy sectors and industries. Unless you’re looking to flush money down the toilet, placing a huge bet on a brand-new stock with no price history is probably a bad idea.

But after a rocky start to the year, the IPO market is starting to attract some new speculators — especially in the tech space. Fact is, some of these new stocks are actually going up. At least for now.

I’ll reveal these new names and how to play ‘em in just a minute. First, you need to see what happens when an ill-advised IPO gets whacked. As you’ve probably guessed, we’ve seen our fair share of duds this year…

The best of the worst has to be Blue Apron Holdings (NYSE:APRN). The company is one of a few prominent “meal in a box” subscription services that sends subscribers ingredients and recipes for healthy food they can cook from scratch.

But if you want to cook up some gains, you’ll have to look elsewhere.

The smoke was already billowing from Blue Apron’s kitchen before the stock’s first day on the NYSE. Management cut its IPO range buy a few bucks due to soft institutional demand. It ended up opening at $10 on the nose in late June.

Of course, the $3 billion valuation was pricey for a company that sends overpriced food and recipes through the mail. When APRN first hit the market, I couldn’t quite wrap my head around why anyone would want to buy shares.

Not much has changed. Blue Apron shares have tanked almost 50% since their June debut.

If you’re frantically feeling for a floor in Blue Apron shares, it might be time to call off the search. Just a few months after going public, Blue Apron management is already laying off hundreds of employees. I doubt we’ll hear much celebrating during APRN’s upcoming earnings call.

“The company is an example of a complex business that can face significant challenges acquiring and retaining customers,” Tech Crunch notes, “as well as one that faces an existential threat from Amazon.”

Of course, this is just a polite way of telling us that Blue Apron’s IPO is a total dud.

But not every new stock is hitting the skids these days. In fact, some tech IPOs are booming.

Database software upstart MongoDB (NASDAQ:MDB) jumped 33% during its market debut on Thursday. It’s success comes on the heels of Roku Inc. (NASDAQ:ROKU) sustaining its day-one IPO gains of more than 65%. And even though it has drifted lower, Switch Inc. (NYSE:SWCH) is retaining a …read more

The Next Fed Chairman

Janet Yellen

This post The Next Fed Chairman appeared first on Daily Reckoning.

President Trump has a big decision to make. One that will affect you and the retirement plans for millions of Americans. One that could alter the landscape of our economy (for good or for bad) for generations to come.

I’m not talking about the tax bill or changes to the Affordable Care Act.

I’m not talking about military decisions with Kim Jong-Un or any other geopolitical flashpoints on his desk.

No, I’m talking about Trump’s decision on who to appoint as the next Chairman for the Federal Reserve.

Because while the other issues are certainly important, this one appointment could make the difference between millions of retirees on food stamps and other welfare programs, or a population of retirees who can generate the cash needed to pay for their retirement dreams.

The bad news is that I expect Trump to make a decision that will ultimately hurt retirees. That’s unfortunate and it will cause a lot of pain down the road.

But the good news is that you don’t have to give up your retirement dreams just yet. Because regardless of what Trump decides, you can still take control of your retirement and find new ways to generate income.

Let me explain…

Don’t Expect Rates to Rise Much Any Time Soon

There’s been a lot of talk lately about the Fed raising rates at its upcoming December meeting. At this point, the markets are pricing in an 80% probability of another quarter-point hike. So let me ask you this…

Are you looking forward to higher interest rates to help pad your retirement account?

Don’t hold your breath!

Despite the likely 0.25% hike in December, a growing pile of evidence is pointing to another year (or two or three years) of exceptionally low interest rates.

If you’re planning to finance a large real estate purchase or dealing with a significant amount of debt with variable interest rates, this may be a good thing for you. After all, low interest rates will allow Americans to borrow money and enjoy lower monthly payments.

If, on the other hand, you’ve worked hard to save for retirement and you’re now counting on your nest egg to pay for day-to-day expenses, the prospect of low interest rates is troubling.

That’s because you can’t earn much — even from a very large retirement fund — if you park your account in traditional savings accounts or Treasury bonds.

Why am I so sure interest rates will stay low for years to come?

Just look at the candidates President Trump is considering for the Fed chair position.

Trump’s Candidates Unlikely to Aggressively Hike Rates

Fed Chair Janet Yellen was appointed to a four-year term that started on Feb. 3, 2014, and will end on Feb. 3, 2018.1 It is up to President Trump to nominate a new Fed chair and up to Congress to confirm the candidate.

Trump is expected to make his nomination by the end of this month, in order to give time for Congress to question and ultimately confirm the new chair.

Unfortunately …read more

Crypto Is a MAJOR Bubble Right Now

This post Crypto Is a MAJOR Bubble Right Now appeared first on Daily Reckoning.

Yes, cryptocurrencies are in a major bubble.

But don’t let that word scare you away.

Crypto opportunities are NEVER going away, and generational wealth WILL be made.

I’m telling you the opportunity here is immense. Think, “internet 1994” — a lot of people got very rich before that bubble burst.

One day soon, “B.C.” will stand for “before crypto” and “A.C.” will stand for “after crypto.”

Right now we’re living in early years of “A.C.”

It’s time to get ready… the world is about to change.

Cryptos ARE The Natural Evolution of Currency

First it was the land you owned and the resources you developed on that land (wheat, grains, etc.).

Then it was metals. Gold, silver, etc. You traveled with it by fashioning it into jewelry. Too much gold equals harder to travel.

Paper currency. Backed first by gold but then… by faith in God (“in God we trust”) or government. (Or a pyramid… with an eye in it???)

Electronic currency. Easily transportable. But transaction fees all over the system. Zero privacy.

Now we have cryptocurrencies. Easily transportable, zero transaction fees, no human intervention between payer and payee, high anonymity and strong functionality.

Money evolves like anything else and the natural evolution of money is always as a store of value that is easier to move, more secure and more private.

Cryptos also make transactions easier. Transactions have the same history and the same issues. How can you transact across a large geographic area with fewer fees, fewer costs, less chance for human error, higher security and privacy?

Cryptocurrencies ARE the natural evolution of money.

Here’s the BAD Part

With bitcoin, for example, a list of transactions is sent out to the network in the form of a “block.” Miners, who are slowly paid in more bitcoin up to a maximum of 21 million, validate a transaction.

Problem 1: If a transaction doesn’t make it into a block (on bitcoin), it waits a certain period of time to get into the next block. This means it might take more time.

Problem 2: Another problem is that everyone can “see” the transaction on what is called the blockchain. They can’t see who made it, but they can see the size and other details.

The good news is these are problems that can be eliminated.

But until then, many cryptocurrencies are a big risk and can lead to a lot of overvalued coins.

That’s setting the stage for a perfect bubble situation.

Surviving The Burst

Uncertainty breeds volatility. Cryptocurrencies are going to be volatile for a while.

But why does volatility create opportunity?

Because it’s rare that intrinsic value changes much day to day.

If you can identify the cryptocurrencies that are legitimate (have strong intrinsic value), then you can make a lot of money playing off the volatile situation in crypto.

And that’s where I come in…

I want to help the many people who have been scammed by all sorts of schemes duping people into buying or trading “bad” crypto.

My solution is simple.

Research, diversification and building a network of intelligence …read more

The Rich Life Part I: What does it mean to be rich? And are you?

This post The Rich Life Part I: What does it mean to be rich? And are you? appeared first on Daily Reckoning.

Nilus Mattive here. I’m the editor of The Rich Life Roadmap.

The Rich Life Roadmap e-letter has one mission: to steer you towards greater health, wealth and happiness.

After all, it’s not enough to have wealth alone if your health or personal life suffer.

But right now you might be wondering who I am, and what qualifies me to give you advice on anything, much less how to lead the Rich Life.

It’s a perfectly legitimate question, and you’re right to ask it.

So I’d like to introduce myself to you, and explain how I can help you achieve your income and retirement goals…

My journey to the Rich Life started with three words:

Surfing. Sushi. Stocks.

Most kids in my elementary school didn’t care about any of these things.

Who could blame them?

We lived in a drab, worn-out coal-mining town under the shadow of Pennsylvania’s Pocono Mountains.

The ocean was 150 miles away. Japan was on the other side of the world. Wall Street might as well have been on the moon!

But for whatever reason – and it certainly wasn’t due to any type of family interest or background – those were the kind of ideas that grabbed my attention.

By sixth grade, I was investing on my own.

Straight-A report cards were celebrated at the sushi joint 20 miles away from our house.

Later, when I could drive, I went to the beach and bought an old board to paddle out on.

Looking back, I always had my own definition of what it meant to be “rich” – it was as much about unique experiences and a quality life as it was about money.

That worldview is what originally took me to New York City to work on Wall Street. It’s also what eventually compelled me to move back out of there.

Today, I live in Santa Barbara, California.

I still follow the investment markets each and every day. I still eat lots of sushi. And I spend my weekends surfing up and down the California coast with my 10-year-old daughter.

It’s safe to say I have a very rich life.

Of course, your journey has begun at its own unique coordinates. Your hopes and dreams are almost certainly different than mine.

That doesn’t really matter.

My goal with this new e-letter is to help you get closer to your own “rich life” wherever (or whatever) it is.

So take a second to think about what that looks like.

It doesn’t have to be anything exotic.

Maybe it’s simply getting out of debt …

Generating another $10,000 a year in retirement income …

Or finding five extra hours a week to spend with family.

Whatever it is, the first step is defining it.

From there, things will actually get much easier!

But let’s agree that living a …read more

“Kill the Bulls”

This post “Kill the Bulls” appeared first on Daily Reckoning.

Some bearish investors were looking for excuses to “kill the bulls”.

That’s what strategist Kenny Wen told Bloomberg in the wee hours of the morning as stocks in Hong Kong experienced their biggest one-day drop of 2017.

Hong Kong’s Hang Seng dropped 2% overnight. Leading the drop were some of the year’s biggest winners from the red-hot index, which was up more than 30% year-to-date before today’s slide.

It’s safe to say that the Hang Seng’s drop was an eerie way to kick off the 30th anniversary of Black Monday. And while a 2% slide isn’t anything close to a trend-breaker, we’re seeing a wave of red overtake the futures market in the western world right now. Heck, we might even see a legitimate pullback!

You see, Americans aren’t the only investors who have enjoyed historically calm market conditions this year. Emerging markets like China have also basked in a steady rally that has effectively lulled many investors to sleep.

Sure, U.S. stocks have been a great place for your trading dollars this year. But emerging markets are running laps around America’s major averages. That’s right – the same stocks that couldn’t attract any attention since the financial crisis are decimating U.S. stocks so far this year.

The iShares MSCI Emerging Markets ETF (NYSE:EEM) has rocketed to gains of more than 33% year-to-date. This performance puts all the U.S. major indexes to shame – even the red-hot Nasdaq Composite, which is up about 23% in 2017.

As we’ve mentioned many times recently, we’re experiencing a global economic rebound right now. But most of us are too fixated on what’s happening in the U.S. to see it unfold.

A quick peek overseas shows the strength of these emerging market rallies. India’s Nifty 50 Index is up 25% in 2017. Polish stocks are up more than 50%. Argentina is up a whopping 55% year-to-date. The list goes on and on…

While some investors are dipping their toes in emerging market funds, most folks are content to stay parked in U.S. stocks.

“U.S.-based stock investors may have pumped fresh funds into emerging markets after their recent outperformance, but they remain under-allocated by a key measure, as a combination of ‘home bias’ and lingering concern about volatility have restrained client interest,” Reuters notes.

That’s why we were so eager to jump into the iShares MSCI Emerging Markets ETF (NYSE:EEM) over the summer. EEM has doubled up the performance of the S&P 500 so far this year. This is a trend that has continued since we hopped onboard back in July. While the herd remains focused on the formidable FANNGs here in the states, the rest of the world is humming along at a pace we’ve not seen in a decade.

Up until the second quarter, U.S. money managers only had about 5% of assets allocated to emerging market stocks. Despite the incredible first-half performance of more than a handful of emerging markets, we didn’t see a big rush into these stocks like we …read more

Ain’t That Precious – OPEC Now Wants To Be Friends!

chart: oil prices

This post Ain’t That Precious – OPEC Now Wants To Be Friends! appeared first on Daily Reckoning.

Earlier this month, when discussing the fact that global oil inventories remain well above the five year historical average, OPEC’s General Secretary Mohammed Barkindo said this…

“We urge our friends in the shale basins of North America to take this shared responsibility with all seriousness it deserves.”

Seriously? He thinks we are friends?

If that is what Mr. Barkindo and his OPEC colleagues believe then they have a very strange way of showing it.

Remember, it wasn’t all that long ago that OPEC was acting in a manner that would suggest they viewed the U.S. shale industry more as enemies instead of friends.

In fact, it seemed pretty clear from its actions that OPEC’s intent was to drive the shale industry right out of business…

A Little Refresher – OPEC’s Intended Death Blow

Let me circle back for a moment so we can all be completely clear on what transpired.

For decades, OPEC (Saudi Arabia mainly) has always been willing to act as the balancing instrument for global oil prices.

Should oil prices get too low, we could count on OPEC to scale back production a help maintain a reasonable price for oil. When prices went too high, OPEC opened up their production to maximize their revenues which curbed demand.

That strategy made perfect sense, and was what the market learned to expect.

But then U.S. shale entered the picture…

In 2014, with shale production soaring and oil prices falling, OPEC convened for a meeting on Thanksgiving weekend. The market expected that as per usual, the Saudis would once again act to stabilize the market.

They didn’t.

In fact, they did the opposite. OPEC didn’t just decide not cut production, they subsequently increased their production by almost 3 million barrels per day into a falling oil price

Why would the Saudis have OPEC abandon a strategy that had worked perfectly well for decades?

There was one reason. This was a move aimed at destroying rapidly growing U.S. shale production. Why else would they choose to keep increasing production driving already low oil prices even lower?

The Saudis and OPEC clearly believed that low oil prices was the best cure for this shale nuisance, so they looked to deliver a death blow.

You Can Kill Companies, But You Can’t Make Oil Deposits Disappear

OPEC sought to destroy U.S. shale, and you can’t dispute the fact that they created some serious carnage.

At least 200 different oil and gas producers and service companies have filed for bankruptcy since 2014 OPEC Thanksgiving surprise.1

Thousands of people lost jobs and plenty of shareholders lost significant portions of their investments…

But getting back to the cause — Did it actually work? Did OPEC kill U.S. shale?

Not a chance. They didn’t even come close.

The entire logic of the OPEC plan was flawed. Yes, you can destroy individual companies with really low oil prices, but you can’t make the oil in the ground disappear.

In fact, OPEC only exacerbated their shale headache by creating three unintended consequences…

Unintended Consequence …read more

When the “Melt-up” Melts Down

This post When the “Melt-up” Melts Down appeared first on Daily Reckoning.

And so the moths speed to the flame…

Schwab says more clients opened brokerage accounts in the first half of 2017 than at any time since the dot-com fever:

New accounts are at levels we have not seen since the internet boom of the late 1990s, up 34% over the first half of last year.

Perhaps you recall what followed the internet boom of the late 1990s?

But you may not recall the bewitching flame that drew the moths to their fiery demise — the Nasdaq soared 200% over the 18 months before its 2000 high.

We’ve raised the possibility that today’s bull market has entered the same terminal “melt-up” phase…

When fear gives way… the bears give up… and the crowd gives in.

The same crowd ultimately gives back — royally — as it did when the dot-com melt-up melted down in 2001.

Now the all-important question:

If stocks have entered their final melt-up phase… when does the inevitable meltdown start?

Today, a clue… and a possible answer…

But first a premise, by way of Blackthorn Asset Management’s Terence Reilly:

When central banks add liquidity, asset prices will soon follow suit and rise with the newfound liquidity. When the Fed subtracts liquidity, the market will also soon follow in negative course. You cannot predict when or how far the market will move, but there is no point in fighting the Fed. Whatever it does, the market will do in time.

The Federal Reserve is in a “tightening” cycle.

Last month it also began draining a major source of liquidity — the behemoth $4.5 trillion balance sheet it inflated after the last crisis.

A mere $10 billion a month for now, that figure is expected to reach $50 billion a month by the end of next year.

But if the Fed is tightening, if it is draining kerosene from the system… how could stocks melt up?

Ah, but the Federal Reserve doesn’t run a corner on the world’s arsenous liquids…

The European Central Bank, Bank of England, Swiss National Bank, Bank of Japan and Bank of China all produce liquidity of their own.

And many of these foreign central banks are still soaking markets in combustible credit…

By April, Bank of America (BofA) noted that central banks around the world had already purchased $1 trillion in assets to that point of the year.

By the end of the year, it will be roughly $2 trillion… if our agents report the news accurately.

If you wish to explain the market’s recent highs — at least in part — perhaps you have your man.

“Even with the Federal Reserve telegraphing to the market that it intends to shrink its balance sheet,” affirms the aforesaid Reilly, “central bank balance sheets worldwide have still grown at 8% year over year.”

But what happens when those same balance sheets stop expanding?

The European Central Bank is expected to taper its bond purchases this month… as is the Bank of England.

These bond purchases continue — but at a lesser gait.

But at the projected rate, …read more

Why I Changed My Mind on Bitcoin

This post Why I Changed My Mind on Bitcoin appeared first on Daily Reckoning.

Friday of last week, I wrote about the enormous impact blockchain technology could have on retail transactions.

Verifications blockchain tech makes possible could end counterfeiting. It could end lost or stolen goods.

Plus, it could allow for immediate transactions and for goods to be shipped minutes after a confirmed purchase, as opposed to hours or days.

That’s just a quick look at consumer-focused applications.

Banks, brokers, money managers. There are blockchain tech implications for all those jobs too.

Instant stock transfers. Fee-free, immediate ledger reconciliation. The mind reels at the possibilities.

To date, we’re just scratching the surface of how blockchain tech could remove barriers, costs and complications.

Truly, no exaggeration, the long-term promise is a new era of commerce.

That’s blockchain. Blockchain isn’t bitcoin, however.

Before we float away on these rosy dreams, we need to look at the bitcoin/cryptocurrency landscape as it exists today.

Bitcoin’s Worth $94 Billion… and Counting

Initial coin offerings (ICOs) are all the rage right now. New tokens hit the airwaves near daily, sucking up investor interest and making their backers into millionaires.

Bitcoin, trading as I write at $5,696, is up $800 in the last week.

Ethereum trades for $334.

In January, you could get one for $9.62.

By total market cap, bitcoin’s now a $94 billion-plus enterprise.

Ethereum’s at $31.8 billion.

There are now 12 (12!) separate cryptocurrencies with market caps over $1 billion.

Smart money. Dumb money. Undecided money. Call it whatever you want.

There are now tens of billions of dollars invested in cryptocurrencies. Much of it from people who as recently as a year ago would’ve scoffed at the idea of putting money on the line for a digital currency.

This, rightly so, should give you pause. It should make you think of runaway real estate speculation, and tulip bulbs being exchanged for diamonds.

I fully admit as recently as a few months ago I shared that opinion. I’ve written to you about it many times.

Here’s the thing…

Every time bitcoin “forks” make news or the Chinese government “cracks down” on cryptocurrency trading or bitcoin prices suddenly dip and then recover…

… cryptos get a fresh injection of news-cycle energy. The mainstream financial media fall all over themselves to explain what happened and why.

Cryptocurrencies have a hold on the public consciousness right now like few assets in history have ever achieved. And yes, many of those that did achieve such news power were classic bubbles.

Return of the “Golden Geeks”

Dot-com stocks made headlines daily in the 1990s.

Netscape’s Marc Andreessen, for example, was on the cover of Time on Feb. 19, 1996, with the headline “The Golden Geeks” and the following text:

They invent. They start companies. And the stock market has made them INSTANTAIRES. Who are they? How do they live? And what do they mean for America’s future?

“Instantaires” was a popular buzzword at the time for folks who became millionaires or billionaires “instantly” after taking a new website public.

Sound familiar?

My point is the cryptocurrency bubble’s going to pop at some point.

In its aftermath, real …read more