TradeSmith Daily

December 2020

Where Does Inflation Come From?

December 29, 2020John Banks

Editor’s Note: When we explained the concept of money earlier this year, we immediately received a thoughtful follow-up question on inflation. That inquiry led to the next “best of” piece in our lookback series, “Where does inflation come from?” The short answer is that inflation is an emergent property, born of a complex adaptive system. For the longer answer, read on. –JCL A reader asked a great question about inflation. Here it is, slightly edited for clarity: Your article, Money

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Money is a Social Protocol, Built on a Network, Enabled by Technology

December 28, 2020John Banks

Editor’s Note: What is money exactly? In today’s “best of review,” we answer that question by explaining that money is a social protocol, built on a network, and enabled by technology. Ah, but what does that mean? Read on and we’ll explain, hopefully giving you a clearer sense of what the abstract notion of “money” really means. –JCL Money is a social protocol, built on a network, with technology enabling the network. This goes for all forms of money, even

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Bitcoin Doesn’t Need Aircraft Carriers

December 24, 2020John Banks

Editor’s Note: In today’s “best of” lookback, we revisit why Bitcoin, as a digital store of value, has no need for aircraft carriers. Up until 10 years ago or so, sovereign currencies were associated with governments that had assets to protect and borders to defend. Store-of-value assets like gold, meanwhile, had to be locked in physical vaults, or even protected by armed guards. But now, through a mechanism of global consensus, Bitcoin establishes its own kind of sovereignty — and

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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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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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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 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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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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