Free eLetters

March 2021

The Crypto Asset Adoption Path is in the ‘Knee of the Curve’ — as Visa Newly Confirms

March 30, 2021John Banks

Bitcoin continues to follow its own narrative, and the broader cryptocurrency space along with it. (We note with amusement that, at the time of this writing, Bitcoin continues to press against all-time highs in the $60,000 area, even as tech stocks turn red and the broader market finds itself gripped by a new market structure event — the fallout from which is not over yet.) Bitcoin’s increasing ability to ignore market-moving headlines of the bearish variety comes not because crypto-oriented

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Last Week’s Market Structure Event Was One of the First Popcorn Kernels to Pop

March 29, 2021John Banks

On Feb. 26 — less than a month ago — we explained why risk levels were elevated for a “Market Structure” related meltdown event. A few weeks on, the danger has only grown. As we said in the piece: A market structure event is major price dislocation — like a meltdown or a flash crash — that happens for reasons unrelated to investor sentiment or a long-term fundamental outlook. Market structure is a reference to the way investors are positioned:

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The Suez Canal Jam-Up is More Fuel to the Fire for the Bullish USD Outlook

March 26, 2021John Banks

One of the world’s largest container ships, greater in length than the height of the Eiffel Tower, is stuck in a narrow canal. It is stuck because the ship ran aground on the sides of the canal. High winds blew the ship off course, causing it to drift sideways until its ends were firmly lodged in the sides of the canal. As a result of this, the canal waterway has been blocked. The blockage means that, until the ship is

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The Saudis are Underestimating U.S. Shale — For the Second Time in Less Than a Decade

March 25, 2021John Banks

In early December 2020, TradeSmith Decoder turned aggressively bullish on energy stocks. We bought a sizable basket of fossil-fuel-related energy names at that time — eight in all — anticipating a recovery-fueled share price surge as a result of resurgent oil demand. That overall basket did quite well, providing multiple instances of either triple-digit gains or close to triple-digit gains, in the space of less than three months. But we recently took partial profits across the board on that energy

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The Time is Right for the U.S. to Aggressively Confront China

March 24, 2021John Banks

A general tone of conflict with China is escalating now — not just in respect to China versus the United States, but China versus Western allies as a group (with the United States at the forefront). This is ominous news for Western companies with significant business exposure to China (like Apple and Tesla). It is ominous news for countries with significant supply chain exposure to China (there are far too many to list). Plus, it is bad news for emerging

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ARK’s Latest Tesla Target is Completely Nuts (With Zero Incentive to Be Rational)

March 23, 2021John Banks

Tesla’s share price — which closed 24% off its highs yesterday — saw a nice little bounce (though still down 24%) after ARK Investment management released its latest Tesla price targets for 2025. The targets are not just unrealistic, they are laugh-out-loud unrealistic, almost to the point of being nonsensical. They offer three levels: “Bear case”: TSLA reaches $1,500 by 2025 (123% gain from the March 22 close). “Expected value”: TSLA reaches $3,000 by 2025 (348% gain from March 22

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Confrontation Between the U.S. and China is Beginning to Heat Up

March 22, 2021John Banks

Relations between the United States and China are on a downward slope, and tensions are on an upward slope. This has been true for a while now, enough so to fuel talk of a “new Cold War” between the U.S. and China, alternately known as “Cold War 2.0.” The original Cold War played out between the United States and the Soviet Union, beginning shortly after the end of World War II and lasting until the Soviet Union’s collapse in 1991.

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Breaking Down the ‘Big Market Delusion’ in EV Stocks

March 19, 2021John Banks

Wild and weird developments continue to unfold in the electric vehicle (EV) space. For instance, Elon Musk gave himself a new official title this week: “Technoking of Tesla.” Zach Kirkhorn, the Chief Financial Officer of Tesla, was also given a new title: “Master of Coin.” It sounds like a joke, but it isn’t. Or rather, Musk’s actions might be a joke — played on his own shareholders — but the titles were actually filed with the Securities and Exchange Commission

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Imagining Bitcoin as a FANG Stock

March 18, 2021John Banks

In the TradeSmith Daily for Oct. 12, 2020, we wrote: If you haven’t bought Bitcoin for the first time yet, the odds are good that you will. The question is whether you will do it sooner — and be glad that you did — or do it later and wish you had acted much earlier. Bitcoin as priced in U.S. dollars (BTC/USD) closed at $11,563 the day those words were broadcast. As we write today on March 18, 2021 —

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Europe is Facing a New COVID Nightmare (With Negative Implications for EUR/USD)

March 17, 2021John Banks

On Feb. 17, we said America is Winning the Vaccine Race. A month later that assessment has proven spot-on. While the United States administers more than 2 million shots per day, nearing 3 million, Europe is descending into a new COVID-19 nightmare. The situation looks dire in Europe, with a “third wave” of COVID now sweeping the continent. Italy has entered a third national lockdown. Poland — the EU’s fifth-largest nation by population — is considering a new lockdown as

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Food-Price Inflation Could Trigger the Next Global Crisis

March 16, 2021John Banks

If we had to identify a likely cause for the next global crisis, it would be food-price inflation — particularly in emerging markets and developing world countries. The current situation looks dangerous and could easily become dire. When stock markets crash, people get upset. But when food prices become unsustainable, people starve — and then they riot, and even seek to overthrow governments. A global food crisis unfolded in 2007-2008, related to falling world-food stockpiles and sky-high oil prices (the

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R.I.P Bond Bull Market , 1981-2021

March 15, 2021John Banks

Something momentous happened on Friday of last week. The greatest bull market in history likely came to its end. We are not talking about the U.S. stock market, but the U.S. treasury bond market. Before discussing what happened, let’s quickly revisit why the bond market is so important, and the way that interest rates work. Stock market valuations and price-to-earnings multiples are largely a function of interest rates. When interest rates are falling over time, multiples tend to expand as

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