Free eLetters

October 2020

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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The Coronavirus Just Triggered a National Security Crisis

October 2, 2020John Banks

The president and the first lady of the United States have tested positive for COVID-19. This is earth-shaking news on multiple fronts. The U.S. now faces a national security crisis. According to the Centers for Disease Control and Prevention (CDC), eight out of 10 COVID-related fatalities in the U.S. were in patients 65 years or older. President Trump is 74 years old, clinically obese, and is a self-described insomniac, sleeping only four hours per night. These factors put the president

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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

Financial Conditions are Tight, and Markets Are Vulnerable

September 30, 2020John Banks

Financial conditions are tighter right now than they’ve been in years. That might sound surprising. After all, the Federal Reserve, and the U.S. government, have taken unprecedented measures in 2020. The Federal Reserve has expanded its balance sheet by trillions, made a promise to support the corporate bond market, and said interest rates will stay near zero until 2023. The U.S. government, meanwhile, has spent trillions of dollars on fiscal relief. And yet, financial conditions are still tight. We can

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Why Corporate Treasury Departments Will Come to Embrace Bitcoin

September 29, 2020John Banks

MicroStrategy, a Nasdaq-listed company with a roughly $1.5 billion market cap, is the first publicly traded entity to embrace Bitcoin as a corporate treasury asset. But it won’t be the last. As of Sept. 15, 2020, MicroStrategy (MSTR) revealed it had purchased 38,250 Bitcoins at an aggregate price of $425 million, including fees and expenses. MicroStrategy had originally purchased $250 million worth of Bitcoin in August 2020, and then added $175 million more. “This investment reflects our belief that Bitcoin,

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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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2020 Election Q&A and the Benefits of ““Go Anywhere” ” in a Macro-Dominant World

September 25, 2020John Banks

We’ve received some interesting questions about the election, and about TradeSmith Decoder as a service. We’ll answer a few of those today. As a quick note regarding questions, the mailbag is always open: You can reach us via [email protected]. We always enjoy hearing from readers — and if your question is a common one, we may answer it directly in a future TradeSmith Daily. Q. Some think “gridlock” is bullish for markets, as it has been in the past. Why

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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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Is Nikola the Theranos of Electric Vehicle Start-Ups?

September 23, 2020John Banks

You may remember Theranos, the blood-testing startup run by Elizabeth Holmes. Theranos was a fraud, but the company reached a multi-billion-dollar valuation by suckering some of the most powerful people in Silicon Valley and Washington, D.C. Theranos had an “all-star” board of directors that was almost cartoonish in its weight and stature. At various points along the way, the Theranos board included two former U.S. Secretaries of Defense; a former U.S. Secretary of State; two former U.S. senators; a former

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A Supreme Court Battle Lowers the Odds of Vital Fiscal Support

September 22, 2020John Banks

A U.S. Senate battle royale over who gets to fill a U.S. Supreme Court seat is bearish for markets. That is a key reason why bearish feeling has intensified this week, with asset prices dropping across the board. The cause-and-effect mechanism here is not direct, but indirect. It has to do with fiscal support. The real U.S. economy – meaning Main Street rather than Wall Street – is still in danger of collapse due to ongoing pandemic fallout. In the

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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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