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HEALTH, WEALTH, AND HAPPINESS |
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If you were forwarded this newsletter by a friend, you have excellent taste in friends. You can sign up here. |
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Have you noticed how green everything is?
One of the many benefits of the pandemic is this heightened clarity of nature. A few weeks ago, I was taking a run with my dog in the early evening. The sunlight was exquisite: golden beams filtering through the trees, and through the dog’s fur, like a Pixar film in 8K. I was suddenly gobsmacked by the beauty of nature, which had kicked into HD. Everything seemed so alive.
I thought perhaps it was my imagination, that all the time in quarantine had just given me a renewed appreciation for the outdoors. But when I shared this experience on social media, many people told me they were experiencing the same thing. As one of my friends said, “Nature is happy.”
Nature is not the only thing growing. At the beginning of the U.S. pandemic – way back on March 15, 2020, a lifetime ago – we put together “The Health and Wealth Portfolio,” a collection of traditional stocks that our research suggested might grow during the pandemic. |
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Those four companies – Amazon, Clorox, Netflix, and Zoom – seem obvious now, but they weren’t at the time. Three months seems like ages ago, but try to remember the widespread agreement that any quarantine would be temporary, that we’d stay home for a couple of days and then it would all be over.
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And so did the growth of our Health and Wealth Portfolio.
- The stock price of Zoom (ZM) has more than doubled, as its videoconference software became the default way we communicate with each other. (To “Zoom” is now a verb.)
- The stock price of The Clorox Company (CLX) has nearly doubled, with its disinfectant products becoming essential items for homes, businesses, and schools.
- The stock price of Amazon (AMZN), already high before the pandemic, has grown 42% as the company has successfully navigated what Jeff Bezos called “the hardest time we’ve ever faced.” (And as I discussed in another blog post, Bezos is back at the wheel.)
- The stock price of Netflix (NFLX), which had also been on a growth tear since fall 2019, has surged an additional 33%, as it added a record number of paid subscribers.
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This is all great news for those who invested in these companies when we highlighted them in mid-March. (Full disclaimer: I bought these stocks, too. I put my money where my mouth is.) But what’s the takeaway for blockchain investors?
Let’s start with the big question.
WTF is Happening with the Stock Market?
I mean, this makes no sense, right?
Unemployment is at record highs. Bankrupticies are rampant. The IMF predicts a new Great Depression (let's call this the "Greater Depression"). So why do investors keep plowing money into the stock market? |
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I’ve spent a lot of time thinking about this. Like a good investor, I’ve read a lot from reliable experts, and I’ve talked it over with other smart people. I have a few theories:
- Many governments also deferred income tax payments, which (in the U.S.) are scheduled to become due on July 15. This will hurt.
- Most people are still under the illusion that the virus is temporary: because they see people back out in public without masks, they think the worst is behind us. This is unlikely.
- Most people do not understand how the economy works. They do not understand the “lag factor” by which economic results (like corporate earnings reports) are delayed. This will be a rude awakening.
- Options for gambling were limited during lockdown (no casinos, no sports), so many gamblers have entered the stock market instead. This will be a crash course in investing.
While the economy is incredibly complex (even economists don’t understand it, which makes you question the name of their profession), these are some of the factors that might be continuing to buoy the market … not to mention a steady drumbeat of cheery, government-sponsored news.
I’m not a financial adviser, just an ordinary investor like you. However, I do have a privileged position of talking with a lot of companies and investors in my day job, and I’ve noticed a lot of worrying changes since March.
In addition to the reliable sources above, consider these my anecdotal impressions:
- People are distracted. This is understandable, as they’ve been thrown into the deep end of the pool, having to work from home while dealing with kids, pets, and the overall world craziness.
- People are desperate. As soon as they can get out, they’re going back to restaurants, pools, beaches, and hair salons, just to regain a sense of normalcy: the way things “used to be.”
- People are depressed. I have noticed a growing sense of lethargy, that many of our clients are literally “phoning it in” (e.g., showing up on Zoom with no video). People are tired.
To me, these anecdotal signs are even more concerning, because when employees are less productive, companies are less productive. People already have less money to spend because they’re out of work, so businesses hold off on future investment, which means the economy moves slower and slower.
This is a lot of bad news to digest, and I know you already have a stomachful. So let me give you a healthy dose of optimism: you can’t control the future, but you can control your response to it. |
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5 Ways to Prepare for the Future
1. Don’t panic. You’ll remember the science fiction comedy novel Hitch-Hikers Guide to the Galaxy, where the first rule when traveling the unexplored reaches of the universe is DON’T PANIC. No matter what happens—from complete financial meltdown to nothing at all—don’t panic.
To make money, you’ve got to sometimes zig when everyone else is zagging. You’ve got to zag when everyone else is zigging. To beat the market, you’ve got to bet against the market. That means keeping your head when everyone else is screaming and running for the hills. No matter how bad things get. ...
2. Invest in yourself. Early in my career, during the dot-com downturn, I was considering graduate school, and I asked my financial adviser whether it was worth the expense. He said, “An investment in yourself is worth it.” During this time—especially this summer, especially now—invest in yourself.
Invest in your skills (especially digital skills). Invest in that certification (especially professional certifications). Invest some time and money in learning something new (especially new career skills). Technology and digital companies will do well in the months ahead; you’ll do well to build these skills.
Invest in great businesses. No matter how the stock market tanks, understand that companies provide real value. They provide real goods and services, which help the wheels of society turn. If they do this with a well-run “machine” that’s sustainable for the long term, good companies are still a good bet.
For example, I bought the four stocks in our Health and Wealth Portfolio because I really believed in those companies. I did the research, and I thought they were well-run businesses. Many people say they’re undervalued or overvalued, but I’m in this for the long term. Our mantra: “Get rich slowly.”
3. Be prepared for massive change. I am concerned about financial systems the world over. I am concerned that governments are essentially “printing money” in the form of stimulus payments, and this might render traditional money worthless. Even as a blockchain investor, I don’t look forward to this outcome.
“Hope for the best, but prepare for the worst.” I don’t mean stock up on toilet paper and canned tuna, but prepare yourself for financial and political turbulence in the months ahead. Like a plane that is going through turbulence, hold the hands of your fellow passengers and trust that you’re going to land safely.
4. Consider digital assets (as part of a balanced breakfast). Traditionally during turbulent times, investors flee to “safe” assets like gold. In this new world – where even “reliable” assets like bonds might tank – you’ll be tempted to take your money and hide it under an air mattress, which might also deflate.
In such an environment, I think it’s likely we’ll see a new “bitcoin boom,” as investors flee the traditional market and into digital assets of all kinds. In that case, we’ll have the opposite problem: the massive overvaluation of digital assets, as we saw in 2017.
5. Gird yourself with optimism. Humans are resilient. We get through crisis. It’s kind of what we do. No matter how bad things get, we’ve made it through much worse. Tough times generally lead to big benefits: increased cooperation, better governance, and a more peaceful planet.
After you’ve been through World War I, it’s no longer radical to give women the right to vote. After you’ve been through World War II, people are hungry for a United Nations. After we’re through this time in history—the “Great Lockdown,” the CoronaCrisis, whatever we’ll call it—we’ll end up better, faster, stronger.
Much of what I write today is educated estimations, but of this I am confident: we will come through this crisis stronger on the other side—both as humans, and as a human species. This growth is just the beginning. |
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Health, wealth, and happiness, |
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John Hargrave Publisher Bitcoin Market Journal |
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Hi Everyone,
How in the world do you just lose €2 billion?
This Wirecard story has been at the top of the news cycle for nearly 24 hours already, and it still seems that nobody knows where the money went. Is it foul play or negligence? It's not at all clear at this point.
What is clear is that many investors aren't staying around long enough to find out. Shares in the popular German payment processor crashed yesterday. |
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One concern could be the spillover effect that this might have on Wirecard's many customers, several of which, like crypto.com and TenX, are acting in the crypto-space, but something tells me they'll be fine. Wirecard itself, on the other hand, might have a difficult time surviving after the loss of 25% of its total balance sheet.
It's times like these where one can't help but bust out the old meme... |
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Well, maybe not all of it. Increased adoption of bitcoin and blockchain should help reduce these kinds of incidents. At the very least, they'd make it a lot easier for the auditors to do their job and trace the funds.
However, should the central banks themselves start switching fiat over to the blockchain, it could eliminate the need for payment processors like Wirecard altogether, along with many other commercial banking services.
If central banks start issuing their own fiat digital currencies, it could shake up the entire banking industry as we know it. |
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The One Percent
Stocks are up about a percent today on headlines of improved trade relationships between the U.S. and China. It's a fickle narrative, I know, but I'm just reporting what I'm seeing here.
In truth, all markets including stocks, currencies, commodities, and yes, even crypto, have been flat for nearly an entire month now, and today, we have had a one percent move in stocks hardly worthy of attributing any sort of real narrative to. Rather we should fall back to the two general narratives that have been driving this thing since the March lows, namely...
- Abundant Central Bank Stimulus
- Overwhelming retail participation
However, the fact that the monster rally has faded somewhat could be a sign that the influence these two factors are having on prices may be winding down.
Just this morning, we received a fresh round of £100 billion from the Bank of England, yet the U.K. FTSE stock index is hardly outperforming today. Here we can see its performance since the start of the month. It's a bit less than breathtaking. |
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Likewise, looking at Google Trends for the search term "day trading," we can surmise that more and more retail investors are entering the market, yet the impact of that new money does appear to be wearing off. |
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Of course, past performance does not indicate future results. Today's one percent move could easily turn into a breakout to the upside, which would almost certainly attract fresh buyers in this crazy market.
Alternatively, we could see this rally quickly reversed, causing a breakout to the downside, which could in turn trigger additional fear and more red days ahead.
The most likely scenario, however, is that we continue to consolidate and see more flat movement. I know this analysis of up, down, or flat isn't extremely helpful, but that's just the way things are right now.
For myself, I remain with a low exposure in my crypto portfolio and am still holding those three-month put options on the assumption that the U.S. election will cause further volatility soon. Overall though, my exposure is pretty low at this time. |
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BAR is Coming
This coming Monday, the week will start out with the release of the new Barcelona fan token from Chiliz, which I believe is a fairly significant step forward for the entire digital asset space. It won't necessarily be a vehicle for massive profits, but it certainly has the potential to hasten mass awareness and adoption.
FC Barcelona is one of the most adored sports teams on the planet, and has literally hundreds of millions of loyal fans. Of course, if this goes well, it will likely entice other teams to join the program.
Previous fan token launches have all more or less followed a similar pattern. As we can see on the Chiliz exchange, the price has a tendency to spike on day one, but then see a steady decline over the coming week or two. Here we can see an example of that on PSG token, the Paris football team, which was released last week. |
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We're still rather early in this project, but we can see that all the older tokens have managed to break the post-release slump and resume an upward trend within a few weeks. In this table, we can see all of the previous tokens, how long they've been trading, and performance to date. Notice Juventus, which is the oldest token, has a total 230% return, but the entire bunch is doing rather well. |
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As an advisor to the project, I did have a great conversation last night with Chiliz founder Alexander Dreyfus. My recommendation was to increase the supply as much as possible in order to meet demand.
A move like that should reduce the initial volatility, or at least minimize it. It seems he liked the idea, and this morning, he released the following blog, with an announcement that they'll be boosting the initial supply. |
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Of course, the exact amount of BAR tokens that will be purchased does require a bit of guess work, and it will be difficult to find the right balance between how many will be bought by sports fans and crypto fans, but I suppose we're all on a bit of a learning curve.
For everyone who took the time, thanks, as always, for reading. I look forward to any questions, comments, suggestions, insight. Sharing is caring. Have an amazing weekend!
Best regards, |
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Mati Greenspan Analysis, Advisory, Money Management |
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