TradeSmith Daily

November 2020

The Mechanics of Negative Interest Rates

November 27, 2020John Banks

Editor’s Note: One of the strangest things about the modern financial era is the dawn of negative interest rates. Who knew such a thing was even possible? And why do they exist in the first place? In today’s “best of” piece, originally published in May, we revisit the mechanics of negative interest rates and explain how they work. — JCL Earlier this week we discussed the bond market’s ominous message, while emphasizing a forecast for negative U.S. interest rates. Scott

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Privacy Concerns are Not an Existential Threat to Bitcoin

November 30, 2020John Banks

On Nov. 24 we asked, “When will Bitcoin have a meaningful correction?” The very next day, a concerning piece of news triggered a correction-worthy sell-off into the Thanksgiving holiday (crypto markets never close). But the Bitcoin correction then self-corrected, almost wholly reversing over the weekend that followed. At the worst point of the correction — or perhaps call it a crypto flash-crash — Bitcoin in U.S. dollar terms (BTC/USD) was down close to 16% from its pre-Thanksgiving high. But as

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December 2020

Revisiting the Great British Bicycle Bubble of 1896

December 4, 2020John Banks

In 1890s Britain, the bicycle represented a social and environmental breakthrough. Public enthusiasm for bicycles — and for the shares of publicly traded bicycle manufacturers — then fueled the Great British Bicycle Bubble of 1896. The bubble inflated quickly, with share prices in British bicycle companies tripling in the space of months in 1896, even as the number of bicycle companies expanded more than five-fold. But then a flood of low-cost American bikes invaded the market, and the mood soured.

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The Dollar Smile Puts Investors in a Happy Place

December 8, 2020John Banks

As a general rule, the U.S. dollar is strong under two conditions. If the dollar is strong, either the economic outlook is exceptional for the United States alone, or the outlook is bad — possibly crisis-level bad — for the rest of the world (and potentially for the United States, too). These conditional extremes — where the dollar is strong either in times of notable U.S. strength or notable global distress — create a phenomenon known as “the dollar smile.”

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The Tech IPO Mania of 2020 Has Matched if Not Exceeded 1999-2000

December 14, 2020John Banks

On their Vitalogy album, the 1990s megaband Pearl Jam has a track titled “This is Not For You.” It would make a good theme song for initial public offerings (IPOs), as in: When you see a hot initial public offering and feel tempted to buy it, remember: “This is not for you.” Hot tech IPOs are liquidity events for the venture capital firms that built huge stakes for pennies on the dollar years earlier, and payday bonanzas for connected Wall

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Bitcoin is a Natural Digital Monopoly

December 16, 2020John Banks

Bitcoin is a natural digital monopoly. It doesn’t have real competition. Some people wrongly assume that it does, but it doesn’t. There is nothing else that does what Bitcoin does, in the same way it does it. The use case Bitcoin fulfills is incredibly valuable and important — and there is no other asset with the same profile. At the same time, there is no real prospect for a competitor to step up. Bitcoin is a natural digital monopoly here

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The Stars Are Aligning for Inflation’s Grand Return — and Bitcoin’s Dominance as an Inflation Hedge

December 17, 2020John Banks

The stars are aligning for the return of inflation in 2021. Not fake inflation either, but the real stuff. Inflation’s return could thus fuel a migration into tangible, short-duration assets, which would be a major shift from the dominant market configuration of the past few years. Before we get into what that means (which may actually require a follow-up piece), let us address the world’s premier inflation hedge: Bitcoin. As of this writing, Bitcoin has surged to new all-time highs

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More on Short-Duration Tangible Assets and the 2021 Outlook

December 18, 2020John Banks

What are some solid ways to make a lot of money in 2021? Where will the major trading and investing gains be made? What will the themes be that potentially drive large profits? In answering these questions, a phrase to remember could be “short-duration tangible assets.” We’ll explain what that means in a moment. First, to quickly look back on 2020, the TradeSmith Decoder got a number of big things right. For the Decoder model portfolio — on which subscribers

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