Free eLetters

September 2020

Why the FANG Stocks Will Start Trading Like Commodities or Currencies, for Years to Come

September 18, 2020John Banks

Imagine a child’s favorite food is birthday cake. He loves it so much that his fondest wish is to eat birthday cake for every single meal. Then, in some Twilight Zone version of reality, his wish is granted. He gets nothing but birthday cake, for every single meal. Morning, noon, and night. At first this would be great. The kid would be ecstatic. Eventually though, he would get sick of it. After a long-enough period, he would be sick of

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In Conditions Like These, You Don’t Need Fear to See a Big Market Decline

September 17, 2020John Banks

We recently explained why stocks could retest the March lows before the year is out. This made some readers upset. Some of the feedback we received was along the lines of, “There is no way we could revisit the fear of the March lows.” The idea of replicating the fear conditions that existed in March seems impossible. To which we say, yes and no. It is a bit more complicated than that. First off, as we said when explaining the

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Mastercard Sees the Central Bank Digital Currency (CBDC) Future That is Coming

September 16, 2020John Banks

The Bank of International Settlements, or BIS for short, is known as the central bank for other central banks. In January 2020, the BIS published a new research paper — not its first one — on central bank digital currencies (CBDCs). Eight months ago, the BIS found that 80% of all the central banks they surveyed were investigating CBDCs, and 40% had moved from the research stage to the concept and design stage. Meanwhile the U.S. Federal Reserve and European

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“No Deal Brexit” Looks Likely Again, and No One Can Figure Out Johnson’s Strategy

September 15, 2020John Banks

Over the past two weeks or so, the British pound has seen a sharp decline against all major currency pairs. For the month of September 2020, thus far, the pound is down notably against the dollar, the euro, the yen, and the Swiss franc. Relative to the euro, the British pound is the weakest it has been in years. If the move accelerates, the U.K. will have reason to worry. Unfortunately, this could easily happen, as the phrase back on

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Stocks Could Retest the March Lows — Here’s Why

September 14, 2020John Banks

Believe it or not, there is a plausible scenario where the stock market sees a retest of the March lows before 2020 ends. It isn’t a far-fetched scenario, either. Though not the base case, another 30% or greater drop in the S&P 500 — and the Nasdaq — could happen before the year is out. If that sounds bizarre, well, that’s because it is. Remember, though, that all of 2020 has been bizarre, and the year isn’t over yet. We

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Bitcoin’s Future is Not Outside the Banking System

September 11, 2020John Banks

Imagine losing $16 million to hackers because you installed the wrong program on your computer. This actually happened to someone, according to a recent post on GitHub, a popular software development platform and message board. The poster reportedly had 1,400 Bitcoin — worth more than $16 million at the time — stolen from their Electrum crypto wallet after installing a “security update” from a malicious source. The problem was that, for older versions of Electrum wallet software, hackers had figured

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Germany’s Expanding Debt Footprint is Bullish for Europe (and Bearish for the Dollar)

September 10, 2020John Banks

Germany is taking a historic step toward issuing more debt. This is long-term bullish for Europe, and the euro, and long-term bearish for the U.S. dollar. That, in turn, makes it a bullish development for precious metals, and base metals in general, to the extent commodities will benefit from a multi-year dollar decline. Why would Germany’s debt issuance be bullish for Europe and bearish for the dollar? It sounds strange, until we connect the dots between supply and demand issues

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Did a “Nasdaq Whale ” Manipulate the Market, or Was a Giant School of Minnows to Blame?

September 9, 2020John Banks

On Sept. 2 we explained why Tesla is not only a bubble, but likely a hyper-bubble. We also explained why, even with four quarters of consecutive profit on the books, Tesla was not likely to make it into the S&P 500 — even though bulls considered that a sure thing. As it turns out, our Sept. 2 piece was one day removed from the all-time high. And on Sept. 4, just 48 hours later, the S&P 500 announced three new

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How Weimar Germany Got Hyperinflation — and How America Could, Too

September 8, 2020John Banks

The Weimar Germany period is a recurring historical topic. It seems to pop up every few years. But when historians and columnists refer to Weimar Germany, they are usually focused on the years of 1930-33, when Germany experienced crushing deflation (as did most of the world, after the Crash of 1929, the Smoot-Hawley Tariffs, and the Great Depression) and the Nazis prepared to seize power. In thinking about hyperinflation, we are interested in events from a full decade earlier, as

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Hyperinflation Lessons from Weimar Germany

September 4, 2020John Banks

In a rampant monetary inflation, the rich can become super-rich, and wealthy industrialists can become out-of-this-world rich, like Greek gods living atop a financial Mount Olympus. If you sit atop an industrial empire when runaway inflation comes, and if you deploy the right strategies, you can find ways to grow your horde of treasure by 10X to 100X, or maybe even 1,000X. The opportunities in a runaway monetary inflation episode are so great, in fact, that some participants will actually

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Publicly Held Debt-to-GDP Made Headlines This Week, But Another Chart Matters More

September 3, 2020John Banks

The U.S. national debt made headlines this week, with federal debt held by the public expected to be worth more than 100% of gross domestic product (GDP) next year. This hasn’t happened since the mid-1940s, in the aftermath of World War II. According to new analysis from the nonpartisan Congressional Budget Office (CBO), the total amount of U.S. federal debt held by the public will amount to 98% of gross domestic product (GDP) for the 2020 fiscal year, and exceed

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The Meaning of Tesla

September 2, 2020John Banks

Tesla (TSLA) is a stock for the ages. But not in the way some would want. Our hunch is that, 30 years from now, Tesla will be remembered like the South Sea Company, if not something worse (think Enron). In Tesla, we are witnessing one of the greatest single-stock bubbles of all time, against a backdrop of speculative global frenzy. It is far from just Tesla, of course. Whole sections of the market are going straight up, thanks to what

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