TradeSmith Daily

December 2019

Crypto Investors Are Going to Hate Central Bank Digital Currencies

December 11, 2019TradeSmith Research Team

Central Bank Digital Currencies (CBDCs) are coming. They are inevitable now. And crypto investors are going to hate them. (Bond investors might wind up hating them, too — but that’s a different story.) China has been developing a central bank digital currency (CBDC) for years. Because of that head start, China will likely be the first country to get a CBDC to market. But other countries will follow quickly. There is already a routine string of news announcements along the

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The Man Who Broke The Back of Inflation

December 10, 2019TradeSmith Research Team

Interest rates in the United States have been falling for nearly four decades. That was largely due to one man, Paul Volcker, who died this week at age 92. The 10-year U.S. treasury yield, according to the St. Louis Fed, peaked in the vicinity of 16% in September 1981. As of this writing, the 10-year yield is below 2%. From a starting point of 16% to sub-2%, that is one heck of a slide. Some believe it will fall lower

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Everyone is Getting Pulled into the 2020 Vortex — Even the Quants

December 6, 2019TradeSmith Research Team

The year 2020 is going to be wild. Not only that, the entire decade will be wild. We’ve done a lot of research on this — and our conclusion is that the 2020s could look like a mix of the 1930s and the 1920s combined. In some ways, that’s a good thing. The 1920s saw a mind-blowing technology boom, and the 2020s will, too. But in other ways it’s a terrifying thing. The 1930s was one of the darkest decades

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Why “Unit Economics” are Silicon Valley Kryptonite

December 5, 2019TradeSmith Research Team

“Venture capitalists are pulling back from startups promising the rapid delivery of everything from groceries to dog walkers,” the Financial Times reported this week, “as the companies face pushback from workers and policymakers critical of their business models.” “What we’re seeing is an increased scrutiny on unit economics that’s being imposed by investors,” said the head of investments for a venture firm. When Silicon Valley investors start talking “unit economics,” you know the party’s over. It is like focusing on

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Inflation is Like the Cat in the Hat

December 3, 2019TradeSmith Research Team

Inflation is like the Cat in the Hat. It always comes back. There are periods, like the one we are in right now, where inflation has a long absence. And, at minimum there are periods where inflation is present, but doesn’t show up in the official government statistics. But inflation never goes away permanently. It always comes back. This is partly because governments make it come back. In a downturn or a recession — which is just a natural part

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November 2019

Best of: The Five Risks of Retirement

November 29, 2019TradeSmith Research Team

Editor’s Note: We hope you’re having an excellent holiday week. The below “best of” piece from May of this year, on the five risks of retirement, is one of the most important things we’ve written. Enjoy Black Friday and stay safe! “More return with less risk” is a key goal for TradeSmith. That is what our software is meant to help you achieve. This is really important, too — more important than ever, in fact — in the context of

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Best of: How stocks could rise another 50% by 2025

November 27, 2019TradeSmith Research Team

Editor’s Note: We wish all U.S. readers a wonderful Thanksgiving holiday, and a warm Season’s Greetings to readers worldwide. Today and Friday we will reach into the vault and share some “best of” pieces. The below piece ran in August of this year. It describes what could drive a slow motion “melt-up” type scenario over the next few years — and feels worth revisiting with the indexes powering to new highs. If this scenario comes to pass, the Dow could

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Macro Billionaire Ray Dalio’s Intriguing Non-Denial Denial

November 26, 2019TradeSmith Research Team

The Wall Street Journal posted a headline this week that made Ray Dalio upset. Dalio is a multi-billionaire and the 70-year-old founder of Bridgewater Associates LP, one of the largest macro hedge funds with $150 billion in assets under management. We can see why the WSJ headline made Dalio mad — even though the story appears accurate. (Dalio didn’t deny the substance of the article — he just challenged the optics.) The episode is worth unpacking because it touches on

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The Bitcoin to U.S. National Debt Ratio

November 25, 2019TradeSmith Research Team

Cryptocurrency can be complicated. But the case for Bitcoin is simple. It all comes down to one chart: The Bitcoin to US National Debt Ratio. The chart itself is simple too, as you can clearly see below. The chart is actually a little bit unfair — to Bitcoin. But even though the chart has an anti-Bitcoin bias (for reasons we’ll explain shortly), it does a good job of capturing the big picture. The chart presumes a total number of 21

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The Saudi Aramco IPO gets a Sad Trombone

November 21, 2019TradeSmith Research Team

Here is a pop quiz, or maybe a joke: Q. When is it bitterly disappointing to have an initial public offering (IPO) worth $1.7 trillion? A. When you were really hoping for $2 trillion, and you see it as a national embarrassment to have to take less, and your sense of money was already so distorted you paid $450 million for a possibly fake Da Vinci painting that lives on one of your yachts. We speak of the initial

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If they can shut down this man’s bank account, yours could be next…

November 20, 2019TradeSmith Research Team

Imagine getting the following notice from your bank, out of the blue, with no explanation: Your PERSONAL CHECKING / SAVINGS account ending in XXX will be restricted from use in 21 days, and permanently closed 30 days from the date of this notice. After a careful review of your banking relationship, we’ve made the decision to close your account above. As a reminder, your Deposit Account Agreement, which you received when you opened your account, allows either you or

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Cannabis Stocks are a Gateway Drug to Losses (For Now Anyway)

November 19, 2019TradeSmith Research Team

Cannabis investors have a message for Joe Biden: The 1990s called, they want their worldview back. Biden, a U.S. presidential candidate and front runner among Democrats, hurt pot stocks this week by expressing the view that marijuana is a “gateway drug” and shouldn’t be legalized for that reason. The irritated response from cannabis investors and marijuana enthusiasts — and even from a handful of politicians on both sides of the aisle — was to point out that the “gateway drug”

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