TradeSmith Daily

February 2020

Markets are Underestimating Supply Chain Risk

February 27, 2020TradeSmith Research Team

The S&P 500 index is having its worst week since 2008 and has entered “correction” territory, defined by a 10% decline from the highs. Some will argue this is an overreaction. It is not. The coronavirus threat is still being underestimated — not just to human beings, but to businesses and corporate earnings, and the global economy on the whole. The Johns Hopkins University Global Cases dashboard is still showing an alarmingly high death rate. If you divide the total

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As Silicon Valley Faces “The End,” Venture Capital Firms are Raising Money as Fast as They Can

February 25, 2020TradeSmith Research Team

In the natural resource industry, they have a saying: “When the ducks quack, feed ’em.” Demand for natural resources — precious and base metals, energy, timber, and so on — tends to be highly cyclical. There are boom periods and bust periods. After the boom, the inevitable bust comes. And then, over a period of years, the pendulum swings back again. “When the ducks quack, feed ’em” refers to the appetite of the public for speculative natural resource ventures. Like

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How a Surprising Power Struggle Could Sink the British Pound

February 18, 2020TradeSmith Research Team

Bruce Kovner, a retired billionaire currency trader profiled in the book “Market Wizards,” once said he made most of his money from “stupid governments.” Kovner did not mean individual policymakers are dumb. The idea is that high-IQ people can make collectively dumb decisions as a result of political pressure and groupthink. When the bad decision is obvious, central banks and treasury departments can help make currency traders rich — or in Kovner’s case, help the rich get richer. Sometimes a

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Why Great Investment Ideas are like Independent Films

February 13, 2020TradeSmith Research Team

The 92nd Academy Awards ceremony, also known as The Oscars, was held on Feb. 9, and this year something new happened. For the first time ever, the Academy Award for Best Picture went to a film not in the English language. “Parasite,” a dark comedy from Korean director Bong Joon Ho, won big, and the entire country of South Korea celebrated. But a small group of investors had even more reason to celebrate: A tiny South Korean hedge fund had

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The Most Successful “Crypto” Company in History was a CIA Front

February 12, 2020TradeSmith Research Team

In return-on-investment terms, the most successful “crypto” company in all of history — likely never to be rivaled — was called Crypto AG and was based in Switzerland. Crypto AG started out building code-making machines and encryption devices in World War II, with the U.S. military as its first client. Over the following 50-plus years, Crypto AG sold its world-class encryption technology to more than 120 countries. It even sold equipment to the Vatican. And yet, while Crypto AG reaped

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Tesla’s Parabolic Stock Move is Dangerous (to Bulls and Bears Alike)

February 5, 2020TradeSmith Research Team

When a stock goes “parabolic,” the trajectory becomes so steep so fast that the chart starts to look like the right side of a parabola. A parabolic price increase also bears resemblance to a rocket ship taking off. The analogy makes sense in more ways than one. Consider how a rocket behaves: To escape the gravity of earth, a rocket must travel almost straight up with tremendous force. If it escapes gravity, the rocket leaves the atmosphere and travels to

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Why Stocks in 2020 Could “Melt Up” Like 1999

February 4, 2020TradeSmith Research Team

The dot-com boom, bubble, and bust of 20-plus years ago wasn’t just driven by tech stocks. It was also driven by monetary rocket fuel from the Federal Reserve — the world’s most powerful central bank. Technology provided a great story, which served as the engine of the boom. But engines need fuel. In 1998 and 1999, the Federal Reserve provided not just regular fuel to Wall Street, but rocket fuel in the form of interest rate cuts and liquidity injections.

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The Pros and Cons of a Digital Surveillance State

February 3, 2020TradeSmith Research Team

If you had the choice, would you live in a digital surveillance state? Stated so flatly, the instinctive answer is “no.” All-encompassing surveillance sounds awful and privacy-destroying, if not soul-destroying. And then there are Benjamin Franklin’s famous words: “Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety.” In reality, the answer isn’t so clear-cut. There are benefits to a digital surveillance state, which is why various countries are running experiments. It’s

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