The big players are piling into cryptocurrencies From $12.48 to $25 billion in two decades A Luddite’s guide to the future
By Shae Russell in Albert Park The billionaires have discovered bitcoin. Or, at the very least, they’re only now telling the world about it. Perhaps it was the 587% bitcoin price rise this year that did it. Or maybe it was the fact that major international stock exchanges are working out how to trade the technology that drives bitcoin. ‘The institutionalisation of this space is coming. It’s coming quick.’ That’s Mike Novogratz’s assessment of the crypto space. Some know Novogratz as the ‘legendary’ hedge fund manager of Fortress Investment Group. Novogratz retired from Fortress having endured a rough couple of years. These days, he heads up Galaxy Investment Partners — a company making its coin betting on cryptos and other related businesses. Novogratz isn’t just another billionaire championing the prospects of an industry he’s heavily involved in. If you think bitcoin is mainstream now, just wait until you see what the big boys of industry have in store. ..............................Advertisement..............................
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UK fund management firm Man Group has its sights on cryptos as well. Man Group plans to look at bitcoin and its ilk more closely when there are tradable bitcoin futures. Which is handy, given that CME Group is about to ‘institutionalise’ bitcoin. The world’s largest futures and derivatives exchange announced that it would have a bitcoin futures by-product by the end of the year. Bitcoin has gone from being a novelty in the dark corners of the web to a viable money freeing many from the tyranny of central banks. Make no mistake, bitcoin and other cryptocurrencies are going to challenge the monetary system as we know it. Of course, there’s still the odd banker not buying into the hype. JPMorgan CEO Jamie Dimon claims that bitcoin is fraudulent. At a recent conference, Dimon called it ‘worse than tulip bulbs’, saying that he would fire any employee trading bitcoin simply for being ‘so stupid’. Since then, the bitcoin price has risen 65%. From US$4,148.27 (AU$5,467) to today’s US$6,849.79 (AU$9,028). I’m sure Dimon’s clients would’ve have liked that return in as little as two months. If Dimon isn’t careful, he’ll find himself left behind in the 20th Century. Unlike Dimon, I’m a huge supporter of anything that gets your wealth out of the existing financial system. Bitcoin may hog all the headlines. Insane price rises will do that. But there’s something far more important driving it. Behind the gloss of a decentralised monetary system is a revolutionary piece of technology that is poised to drastically alter the way we share information. Blockchain is more important than bitcoin The big money may be falling over itself to get into bitcoin. Yet it’s not just because the value keeps skyrocketing. What the big players truly find important is the technology that makes all cryptocurrencies tick. And that’s the blockchain. The blockchain is simply the process of moving one piece of information from one ‘block’ to another. Each block moves along the chain, maintaining all stored data. When new data comes along, it creates a new block and stores it. The block then closes. This process repeats whenever there is new data to add to the blockchain. Basically, the blockchain is simply a collection of information that moves in real-time. You can’t alter or tweak it, making it extremely secure. It sounds simple, but it happens at incredible speeds. And it will completely shake up how companies analyse massive reams of data. We are now witnessing the emergence of a very disruptive technology. The blockchain is to the digital revolution what the steam engine was to the industrial revolution. We are on the precipice of blockchain becoming the biggest tech disruptor so far this century. However, tracking the value of blockchain technology is difficult for an investor. You can’t see it. You can’t touch it. You merely know it’s working. For this reason, the NASDAQ has buddied up with Reality Shares, which focuses on dividend growth investing. They plan on launching an index that tracks companies working with blockchain. Calling it the Reality Shares NASDAQ Blockchain Economy Index, it will comprise of internal and external research, as well as a propriety ‘blockchain score’ ranking system. Shortly after the launch of this index, Reality Shares will kick off an exchange-traded fund to track the index. For the first time, investors will now have a tangible way to track the growth of blockchain. However, for Aussie investors, accessing a US-based ETF can be difficult. Which is why Exponential Stock Investor editor Ryan Dinse launched a newsletter dedicated to investing in the blockchain industry. He’s quickly amassed a portfolio of companies that could potentially provide early investors with massive returns in the future. But you have to be quick. Click here to find out more about this once-in-a-generation technological revolution. Kind regards, Shae Russell, Editor, Markets & Money ..............................Advertisement..............................
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From $12.48 to $25 billion in Two Decades Ryan Dinse, Editor, Exponential Stock Investor Here’s a question I bet you don’t know the answer to: What was the first ever item bought online? Groceries? Pizza? Marijuana? Nope. It’s actually a hard question to answer. But luckily e-commerce software company Shopify recently gave it a go. The trail starts with the ARPANET. This was an early version of the internet, set up by the US Department of Defense in the 1960s. Later, Ivy League universities started experimenting with the ARPANET too. The result was, of course, typical student shenanigans… In 1971 a bunch of computer scientist students at Stanford and MIT used the ARPANET to arrange a meet-up to buy some pot. Not exactly Nobel prize-winning stuff. But was it the first internet purchase? No. Technically it doesn’t count as online shopping. No money changed hands online. Only the meet up details. That leads us to contender number two… In 1984 a 74-year-old British Grandmother used Videotex — basically a TV connected to the phone lines — to order margarine, eggs and cornflakes from her local shop. A mundane order of everyday staples was humanity’s introduction to the world of e-commerce, then? Again, no. Like all good Grannies, she paid the bill from cash in her purse. She probably made the deliveryman a cup of tea and some biscuits too! So not exactly e-commerce, but a decent contender all the same. The first true e-commerce transaction actually took place in 1994. 11 August 1994, to be exact. Dan Kohn was a 21-year-old entrepreneur who ran a website called NetMarket. On that fateful day he sold a Sting album to a friend. This time both the purchase and the payment were all online. It was one small purchase for Dan’s friend. But one giant leap into the world of e-commerce for mankind. A US$12.48 plus shipping costs leap. As always with technology, the real innovation is in the unseen. You see, it was a completely encrypted transaction. Kohn told Peter Lewis of The New York Times in an article the following day, ‘Even if the NSA was listening in, they couldn’t get his credit card number.’ 23 years later, e-commerce is huge. And it’s still growing. Some figures out this week are truly staggering. What’s love got to do with it? On Saturday, Chinese shoppers celebrated ‘Singles’ Day’. This is a uniquely Chinese phenomenon that started in the 90s. Students at Nanjing University decided to celebrate being single. The date chosen, 11/11, was symbolic. The solitary ‘1’ of the individual. And what better way to celebrate being single than by buying yourself a little treat? Chinese e-commerce sites have jumped on the bandwagon in recent years. Big time. It’s now a money-making extravaganza. Lured by discounts and deals, Chinese shoppers have fallen in love instead with online shopping. And Singles’ Day is the biggest online shopping day of the year. This year online e-tailer Alibaba Group Holding Ltd [NYSE:BABA] sold over US$25 billion worth of goods. At one point it got over 325,000 orders per second. To explain how huge that is, take Amazon.com, Inc. [NASDAQ:AMZN] as a comparison. Singles’ Day this year was 25 TIMES bigger than Amazon’s equivalent, Prime Day. Prime Day brought in a ‘paltry’ US$1 billion. Once again, the scale of the Chinese opportunity is evident. Which begs the question… Are we witnessing the start of a transfer of power? A shift away from American consumers to Chinese consumers becoming the engine behind the world economy? Not yet. But, within the next decade or two, it’s certainly a possibility. With this battle raging on, it makes Amazon’s foray into Australia look like small potatoes in comparison. Its forthcoming Aussie ‘invasion’ looks more like a minor skirmish. But the press is eagerly talking it up. Every day there’s a new story faithfully reporting on a part of Amazon’s huge PR drive. Headlines scream every move, every executive thought bubble, and every press release. Yesterday, analysts from Citibank said they expect a launch date of 24 November. This will coincide with the Black Friday sales day. I expect to see wall-to-wall coverage. Look, I’ll admit Amazon will stir the pot a bit in Australia’s retail landscape. And I’ve no doubt the initial buzz will generate strong short-term interest. Retailers like JB Hi-Fi Ltd [ASX:JBH] and Harvey Norman Holdings Ltd [ASX:HVN] are right to be anxious. It will be very interesting to see how it all plays out. But, from an investment point of view, I think the talking heads are focusing on the wrong areas. Let me explain… Think outside the box Whether or not Amazon disrupts the local retail scene as much as they have elsewhere remains to be seen. But there’s no doubt now that they’re here, they will give it a good nudge. Maybe instead of worrying over how JB Hi-Fi will fare, the smart thing to do is to look at who Amazon needs to compete with? As big as Amazon is, it will still need help from on-the-ground partners. Australian partners. Whether this is labour hire companies, couriers, drone companies, online advertisers, logistics partners, or technology partners… My colleague Sam Volkering thinks he has identified an ASX-listed company that will be key to Amazon’s success in Australia. In fact, he states that they are almost essential to Amazon’s operations. And not just here. You’ve probably never heard of this company. If you want to try and potentially make some serious money from Amazon’s arrival, you must read this report today. Details here. Good investing, Ryan Dinse, Editor, Exponential Stock Investor Editor’s Note: This article was originally published in Money Morning. ..............................Advertisement..............................
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A Luddite’s Guide to the Future Bill Bonner in Baltimore, Maryland We were disappointed to see the pedestal…naked…forlorn…its statue gone…its purpose defunct. For more than a century, the bronze statue of Supreme Court Justice Roger B Taney — gravely pondering the weighty issues of the mid-19th Century — graced the park. Now he is gone. Justice Taney’s statue in Baltimore has been hauled off [Click to enlarge] No decision necessary Now we are much better people. Because now we have so many rules, regulations, and protocols, we have no choice in the matter. We no longer have to be wise, clever, or good. No pondering necessary. We just have to obey! For example, you have thousands of choices about which drugs to take. Many of them will kill you, but you don’t want to go to the grave after taking an ‘illegal’ drug. Better to take a doctor’s prescription; then your grieving spouse can sue somebody. No fanny pinching without prior consent! If your wife tells you it’s OK, tell her to put it in writing. And consult a lawyer. Unless, of course, you are famous or powerful; then, the President of the United States of America says you can do whatever you want. And no tax avoidance…unless it is specifically authorised in one of the 71,689 pages of the US tax code. Or perhaps in the 459-page Senate tax reform proposal. That is progress! Everything is carefully laid out for us. ‘Take off your shoes…take out your laptops…’ The SEC gives us 80 years of rulings to guide our investment morality. And if the impulse to say something hateful to your neighbour comes over you, you’re saved: It’s against the law. Discrimination is unlawful, too. And according to a full-page warning in yesterday’s Wall Street Journal, it is against the law even to ‘steer’ people to neighbourhoods where you think they will be more at home (that is, where other people like them live). And now, there is no longer any need to separate the deserving poor from the layabouts; the feds are in charge of charity. Old people? Cripples? Half-wits? The feds will take care of them, too. That’s the great advantage of living in a degenerate civilisation; the authorities will make the decisions for you. Robot butlers If only Roger Taney had had access to the internet. Surely, he would have come down on the right side of that Dred Scott decision, and he’d still have his place in the park. And now that we have electronic brains in abundance, there will be no more errors. No more moral failures. No more accidents. And no more ‘Oh, I didn’t know that’ replies when you are caught breaking one of the 10,000 commandments that govern our lives. Our cars will be self-driving. And robot butlers will bring us our clothes in the morning. (No more mixing plaids…no more clashing colours.) Yes, dear reader, here is where it starts to get interesting. Back in the summer, Morgan Stanley predicted that quantum computing would soon lead to ‘exponential acceleration’ in the ability of computers to think. Pretty soon, computers will be smarter than we are. They can decide what pants we wear. Speaking for ourselves, we are neither surprised nor impressed. Computers have been getting smarter all the time; humans, on the other hand, have been getting dumber. They were bound to meet somewhere. Now, according to the experts, these smarter computers will do all the work that used to be done by bipeds. This thought has delighted both central planners and cabbage people. Zombie paradise The former are busy figuring out how to keep control over the machines…and use them to create the perfect societies they’ve always wanted. The latter are planning full-time retirement. Where the two come together is in a Guaranteed Basic Income. From a post at Medium: ‘As long as we force each other to work for money in order to live, automation will work against us instead of for us. It is a civilizational imperative that we decouple income from work so as to create economic freedom for all. ‘Without an unconditional basic income, the future is a very dark place. With unconditional basic income, especially one that rises as productivity rises as a rightful share of an increasingly automating economy, the future is finally a place for humanity.’ We don’t know where humanity has been all these years! But finally, the future we’ve all be waiting for. A zombie paradise. No work. No thinking. Which just illustrates why it will be so easy for machine intelligence to overtake the organic kind. More to come… Regards, Bill Bonner, For Markets & Money ..............................Advertisement..............................
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