TradeSmith Daily

October 2020

The Tech Juggernauts Face Rising Political and Regulatory Risk

October 8, 2020John Banks

The stock market has benefited handsomely from the performance of technology juggernauts. For 2020 year to date, Amazon, Apple, Facebook, and Google have helped the NYSE FANG+ index generate a better than 122% return from the March 18 lows through the Oct. 7 close. But valuation multiples don’t grow to the sky, and 2021 may not be as kind to the tech juggernauts. Regulatory risk and political risk are rising threats, and could cut into revenues and profits for the

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The U.S. Government’s BitMEX Crackdown Shows Bitcoin’s Resilience

October 6, 2020John Banks

Last week saw so many head-spinning developments, it felt like the space-time continuum might implode as the speed and density of the political news cycle collapsed into a black hole. So it’s understandable a major crypto-world development got lost in the shuffle. The U.S. government came down like a ton of bricks on BitMEX, the world’s second-largest cryptocurrency derivatives exchange. The charges, both civil and criminal, were as serious as it gets. The three BitMEX founders, along with the exchange’s

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Markets are Increasingly Anticipating a “Biden Sweep”

October 5, 2020John Banks

When news of the president’s COVID-19 diagnosis hit, in the wee hours of Friday morning, overnight markets reacted with shock and fear. By the end of the day on Friday, though, the Dow Jones Industrial Average and S&P 500 had mostly recovered, with small caps (via the Russell 2000 index) even turning positive on the day. In Monday’s premarket session, meanwhile, the major indexes were green, if only slightly. This might seem strange, given the level of uncertainty the country

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Indoor Drones and Clouds Beneath the Ocean: Welcome to the Information Age

October 1, 2020John Banks

As if 2020 didn’t have enough going on, there is a fourth age of human civilization rushing toward us. The prior three ages were the Stone Age, the Agrarian Age, and the Industrial Age. In the Stone Age, humans discovered language, fire, and the use of sophisticated stone tools. This enabled group cooperation and the birth of art and culture. In the Agrarian Age, humans learned to grow crops and develop permanent settlements. This led to the rise of towns,

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September 2020

In Both Investing and Poker, sometimes a Weak Hand Beats a Strong One

September 28, 2020John Banks

Say you have an investment choice between two gold mining companies. They are similar except for a single variable, the average production cost per ounce. One miner produces gold at an average production cost of $900 per ounce; the other does so at $1,800 per ounce. Which miner is the better investment, in terms of 12-month price appreciation? It’s actually a trick question. The answer depends on the price of gold, the price action history for both companies, and what

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Echoing the Roman Financial Crisis of 33 A.D.

September 24, 2020John Banks

The markets of today are the same as markets not just hundreds of years ago, but thousands of years ago. This is possible because human nature has not changed. The technology is different, but human nature is the same. The basic mechanisms of financial markets — regarding things like credit and lending, speculation, government intervention, and even quantitative easing — are also ancient. The first known instance of quantitative easing (QE) is ancient, too. We explained this week how an

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The U.S. and China are Falling into the Thucydides Trap

September 21, 2020John Banks

In 2015, Harvard professor Graham T. Allison argued that the United States and China could be at war within a decade. Five years later — and with five years left to go — Allison’s prediction is slowly coming true. We aren’t there yet, but the story is unfolding in a warlike direction. Military conflict between the United States and China is conceivable by 2025, if not before then. Here and now, in 2020, U.S.-China tensions are approaching a boiling point.

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Bitcoin’s Future is Not Outside the Banking System

September 11, 2020John Banks

Imagine losing $16 million to hackers because you installed the wrong program on your computer. This actually happened to someone, according to a recent post on GitHub, a popular software development platform and message board. The poster reportedly had 1,400 Bitcoin — worth more than $16 million at the time — stolen from their Electrum crypto wallet after installing a “security update” from a malicious source. The problem was that, for older versions of Electrum wallet software, hackers had figured

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