TradeSmith Daily

January 2020

Never, Ever Attend this Crypto Conference

January 17, 2020TradeSmith Research Team

There is a big crypto conference from Feb. 22 through 29. No matter how much you like cryptocurrency, you shouldn’t attend. Why? Because if you’re American, and you show up at this conference, it could land you 20 years in jail. North Korea is holding its annual blockchain and cryptocurrency conference toward the end of February. Sanctions experts from the United Nations are putting out an obvious warning: Don’t go, because you’ll probably get in trouble if you do. A

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Jeff Bezos Wants to Read Your Palm

January 21, 2020TradeSmith Research Team

Jeff Bezos, the founder of Amazon, wants to read your palm. He doesn’t want to tell your fortune though. He wants to make it easier to buy stuff. The most profitable technologies are so easily and frequently used, they almost become invisible. Like smartphones, for example: The typical smartphone is within its users’ reach almost 24 hours a day: On the nightstand while sleeping, next to the sink while showering, in the middle console while driving. The smartphone is always

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Interest Rates Have Been Falling for 700 Years

January 22, 2020TradeSmith Research Team

Here is a finding that will bake your noodle: Interest rates have been falling for 700 years. From the early 1300s onward, the long-term trend of interest rates has been lower. If the data supporting this finding is correct, we are talking about one of the biggest trends in history: Bigger than any nation or human migration pattern; bigger than central banking; bigger than all wars and treaties; bigger than the industrial revolution. The implications are staggering. For example, it

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Three Signs Market Sentiment Has Reached Dangerous Extremes

January 24, 2020TradeSmith Research Team

Investors are starting to believe — to really and truly believe — in the power of the Federal Reserve. This is centered around a cluster of assertions: The Federal Reserve will not raise interest rates. The Fed will not let the market go down. Nothing will keep stocks from continuing to rise. Holding equities is as safe as holding cash. As the major indices hit all-time highs, various “crowded trades” have almost gone vertical. Multiple FANG names, for example, have

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Reality isn’t a Simulation, but the Simulations are Coming

January 27, 2020TradeSmith Research Team

Is reality actually real? What if it’s all just a simulation? For technology enthusiasts and science fiction fans, the question is fun to debate just for kicks. At the 2016 Isaac Asimov Memorial Debate — an event hosted by the American Museum of Natural History — “Is the Universe a Simulation?” was the grand debate topic, with physicists, astrophysicists, and philosophers all weighing in. Astrophysicist Dr. Neil DeGrasse Tyson argues it is “very likely” the universe is a simulation, mainly

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Bitcoin’s Volatility is a Red Herring

January 28, 2020TradeSmith Research Team

Deutsche Bank has a new report out on digital payments, covering the long-term migration of payment mechanisms from cash to cryptocurrencies. The report is titled: The Future of Payments: Part I. Cash: the Dinosaur Will Survive … For Now. Most of the report is fine. And yet, in an interesting way, they misunderstand the nature of Bitcoin entirely — and they also get wrong what “store of value” means. Within the report, Deutsche Bank states the following: “Bitcoin is too

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Real Estate, Reflexivity, and Second-Order Effects

January 29, 2020TradeSmith Research Team

“Reflexivity” is a strange word. For investors, it’s important to know what it means. This is because markets are reflexive — that is to say, markets show reflexivity — which creates both danger and opportunity at bullish or bearish extremes. What does it mean to say the market shows reflexivity? To put it simply, the market observes itself and then responds to itself. This observe-respond dynamic, which endlessly repeats, will sometimes create a feedback loop, like sound waves oscillating at

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February 2020

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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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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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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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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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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