TradeSmith Daily

April 2020

Have all the CEOs and Venture Capitalists Gone Crazy? (Spoiler Alert: No)

April 21, 2020John Banks

When it comes to re-opening the economy, Americans are cautious. A new poll of 900 registered voters, conducted April 13-15 by NBC News and the Wall Street Journal, shows that 58% of respondents were more concerned about the risks of re-opening too quickly, versus the costs of re-opening too slowly. Based on this poll, it seems a majority of Americans “get it.” They recognize that COVID-19 is a serious threat, that social distancing has saved lives, and that the current

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Bitcoin Doesn’t Need Aircraft Carriers

April 20, 2020John Banks

“How many divisions does the pope have?” The question (possibly apocryphal) was asked rhetorically by Joseph Stalin, the iron-fisted dictator, to emphasize the military might of the USSR. Stalin measured rivals by how many tanks and guns they had. He is long gone now, but people still think about currencies the same way. The value of a currency is backstopped by the power of the state; the more powerful the state, the more benefit the currency receives. The U.S. dollar,

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How the Oil Price Could Fall Below Zero

April 17, 2020John Banks

To get an idea of how through-the-looking-glass this environment is — and just how far gone “normal” is — think about the following data point: Netflix now has a larger market cap than Exxon Mobil. It seems impossible, but it’s true. As of this writing, Netflix Inc. (NFLX) is worth $195 billion. Exxon Mobil Corp. (XOM) is worth $166 billion. Let that sink in for a minute. A company that was stuffing DVD rentals into envelopes by hand 20 years

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The Problem With Starbucks, or, Why Retail Ain’t Bouncing Back

April 16, 2020John Banks

Complacent market bulls got mugged by data this week. It wasn’t pretty. But before we address the data, let’s back up a bit. Wall Street has a contingent of smug optimists who (still) expect everything to bounce back quickly. From where we stand, this viewpoint is almost bizarre. Its very presence inspires armchair psychology hypothesizing. Is it magical thinking? Data blindness? Devotion to Norman Vincent Peale gone wrong? Perhaps it’s a reliance on “gut feel” ill-served by novel developments (no

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Why the Big Airline and Hotel Companies (and Others) Should Be Allowed to Fail

April 15, 2020John Banks

It is conventional wisdom by now that the major players in the airline industry, the hotel industry, the gaming industry, and multiple other industries hit hard by the pandemic should be “rescued,” meaning, the government should send them tens of billions. But what if that logic is wrong-headed? What if a better path — with better results for the economy — would be letting them all fail? Chamath Palihapitiya, a billionaire venture capitalist known for blunt talk and controversial views,

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Simplistic Messaging is Making the J-Curve Worse

April 14, 2020John Banks

On March 5 we said, “America is Entering the Coronavirus J-Curve.” The J-Curve concept is used in economics, geopolitics, and venture capital. The basic message of the curve is that “sometimes, things have to get worse before they get better.” For a longer description with examples, you can revisit the original piece here. We are revisiting that piece because, just over a month later, the J-Curve is now in full effect. (When the original piece came out, there were 177

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The Federal Reserve Took Another Big Step Toward “Japanification” of the U.S. Economy

April 10, 2020John Banks

On Thursday of last week, the Federal Reserve made another surprise move. It caught markets by surprise, sent gold stocks through the roof, and accelerated the Japanification of the U.S. economy. What is “Japanification,” you ask? It’s the process by which the U.S. economy starts looking like Japan’s economy, which has been stuck in the mud for three decades. The Bank of Japan (BOJ) has thrown everything but the kitchen sink at the problem, and maybe the kitchen sink, too,

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A Pandemic Silver Lining: The Birth of a Whole New Monetary System

April 8, 2020John Banks

We’ll be the first to admit, TradeSmith Daily has not been cheerful lately. Our preferred style is blunt and straightforward. We aren’t big fans of making things soft. Because of that, we’ll never be mistaken for a baby squirrel drinking a dandelion smoothie in a sunbeam. With that said, it has indeed gotten grim around here — even for us. Some of you have asked, in a friendly way, if there are aspects of the current moment to feel excited

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