Employment of the Future Revisited

In 2015 I projected ahead rapid change in employment, which also included impact from autonomous cars in the post Employment in the Future .

From the post quote " Already this year (2015) Nevada is allowing trucks to run on highways that drive themselves.  At the moment a truck driver must be in the driver seat available to take over. But how long until its proven to be safer than a person?  2 years? 5? not 10! "

In 2021 , Walmart will begin replacing drivers with robotic driven trucks.  I stand by what I wrote in 2015, and in a little under 6 years later driverless trucks have arrived.   I had friends who said I was way too aggressive, that it would take 20 years or more before driverless trucks would be allowed.  Extending the prediction made in 2015, I think by May 2026, about 80% of the long haul trucks will be driverless, 10 years after that post.  If I am correct, the next 4 years will start to see escalating adoption.  Its true that local truck driving is next, but I'll raise this question, once long hail trucks are 80% driverless, how long until local trucks start to become 50% automated?  2 years? 5? not 10!.
So yes, severe impact all drivers may take 10-15 years from the 2015 post, but not 20+ years as others suggested.  And in 2021 there will be LESS truck driver jobs due to automation, and it will escalate.

In 2020, it should be apparent the dramatic change in our economy that was in progress in 2015 has been accelerated.   Due to COVID, we will see more automation, (robots don't get sick), more change (work from home using technology) and all of this will be a depression on the service economy.     There will be less gas stations, motels, fast food (servicing trucks or people going to work).

Consider going back and re-reading the 2015 post Employment in the Future .  It still applies, but the visibility should be more apparent for the decade ahead.  This country has structural problems that need addressing in 2017, and even more so in 2021.  I am hoping that America creates initiatives to find a way to save the lower 80% of Americans from a lower economic future.

Low interest rates, high market valuation, and the road ahead.

 Hedge fund investor Hussman is one of my favorite hedge fund managers.  In his most recent post he summed up the financial market situation quite well:

"In the high interest rate, low valuation situation, investors face outstanding prospects for long-term returns. In the low interest rate, high-valuation situation, investors face dismal prospects all around."

To learn more I urge you to read his posts every month, it is one of the best sources of a reality based view.  Of course fantasy views can last years, but eventually the truth manifests but not always the way it is expected.

His blog is at: https://www.hussmanfunds.com/comment/

Crypto, taking a closer look

Recap
On March 30th I posted Net Long.   Unfortunately I didn't play big Zoom and sold early, but I did catch most of the upside in other stocks, including GDX/GDXJ.

GDX went from 16 to 45 in  August.
Then I switched to Crypto in the post in July, What Next Gold, Crypto or Both?.
Crypto near term gains.

HVBTF was .60 , recently hit 2.40, (I sold most of my position in this. )
RIOT was 2.19, today its trading at 12.06
HUMTF was 0.80, today its trading at 2.96
GBTC was at 10.39 and today its at 31.61 (largest current position)
Bitcoin was at below 11k, trading today above 23k.

Obviously, all good trades, congrats if you participated.

However, I am concerned about a market correction as market valuations are at levels YEARS out.  This is attributed that if a stock may get 2% ROI over the next 10 years, its better than a 10 year treasury note.   The issue is, at some point, all of this excess will be priced into the market.  All that is required is the 'wrong' piece of news to spook the market and putting capital hoping for 2% ROI over 10 years in a stock seems like high risk vs 1% in a 10 year bond.  To read more of my concerns read 'Resuming the march decline ahead'. 

Cash maybe the right play in the next 6 months.    But 'irrational exuberance' can sustain much longer than anyone thought.  It's impossible to know when the top is, to sell and avoid the downside risk.  So I do think its a good time to be in very conservative plays.  But I caution do NOT invest in old companies like EXXON or IBM, Casinos,  but into the future.  Stay away from hype stocks like TESLA. This is a list of stocks I am looking at:

Crypto direct investing

Bitcoin direct, with smaller positions in Ethereum,  Lite Coin, Bitcoin Cash, and Compound.
if you consider buying some bitcoin, I recommend coin base, use this link to sign up.
https://www.coinbase.com/join/murphy_b9f

Bitcoin I think is being positioned as the new gold alternative.  It is starting to take hold into mainstream investing, and Bitcoin I think is a 'no brainer' to hit 100K, cases can be made it will go to 400K, and I do think briefly it could hit 1 million a coin.  To be clear, Bitcoin is like gold, its value is as a buy and hold 'ponzi' like scheme.  The biggest downside to Bitcoin is the same as Gold, its a collectible, like a baseball card or rare whisky.    It has no intrinsic value or money creation like a business such as Amazon or Apple.    So it is a terrible 10-30 year investment, but I do think the transition of moving into public ownership is a good investment bet.  I strongly recommend having a target to actually sell at.

Crypto Stocks

Grayscale is a company that is PRIVATELY owned, I would really like to be able to invest in the company.  They take only large scale investors like Guggenheim or Mass Mutual to the tune of up to 500Million for a buy in.

There are several ETF's Grayscale offers.

GBTC - its an ETF proxy to buy actual Bitcoin - Word of caution - it will trade HIGHER than the underlying intrinsic value, to see the chart click here.

GDLC - It  is an ETF proxy to a variety of crypto currencies including bitcoin, rebalanced every quarter.  Again, it can trade ahead of its intrinsic value. (click)

Grayscale offers ETF's for specific cryptos , click here to see current list.  Some notables is ETHE or LTCN .

Crypto Miners

All of these miners are very high risk, none make any material profits.  They are all only short-term plays and should be sold after a good rally.

HUTMF - Reported gross Revenue of 63M in 2019, posted a profit of  28M.  Doing best in this sector.

HVBTC - They report annual gross revenue of 30M into March 2020, they posted a 7m profit.  Compared to most other miners they are doing well.

RIOT - On the plus side, most self directed 401k's let you purchase, on the downside, its turns a razor thin profit.  Total Revenue in 2019 was under 7M

Crytpo ETF's and other stocks

SI - Silvergate - Provides banking services that include Crypto. Earned 25M on 81M gross in 2019.

BLOK - invests in blockchain companies 

MARA - Mara Patent Group - 1 Million in revenue,  1 million in losses.

BRPHF -  Galaxy Digital Holdings -  An asset management firm, operates in the digital assets and blockchain technology industry.  No reported financials. Earnings.

Gold Miners

GDX   - Gold Miner ETF - Wide array of gold miners, decent play to protect purchasing power of your USD assets relative to the world.

GDXJ - Smaller Gold Miners with some silver ETF - Wide array of smaller gold miners, decent play to protect purchasing power of your USD assets relative to the world.

GOLD - Barrack Gold based in USA - A well run Gold mining company, even Warren Buffet has invested in it.

Betting on the future - BIOTECH - 10 year horizon

If I had to pick one non-crazy investment (crypto/gold, etc) its Biotech.  Big Data & AI mixed with evolving technologies supporting medical advancements (DNA, etc) is a recipe for huge win in solving many medical challenges.  Its not if, but when.  So for a 10 year hold, no brainer, this is a winning sector.  Click here for list of ETFs.

Stay away from 3x ETFs like LABU, unless the market has corrected and you are buying near a bottom.

IBB - iShares Nasdaq Biotech, today at 157  (10 billion invested)

GNOM - Global investing ETF in Biotech , Today its at 25.

XBI - SPDR Nasdaq Biotech , today at 150  (8 billion invested)

Insane high risk - Shorting

Just a note, as of today I am short TESLA, NIO, WYNN, DVA, have puts against the DJIA, and I am buying SPXS as a counter play to my longs.  These positions are small compared to my other plays.

Resuming the March Decline ahead

The Past 

What a year!  Back on January 30th I posted "ACT NOW!, Sell the market!", on Feb 4th President Trump asserted America's economy is stronger than ever and the future is blazing bright and the years of economic decay are over!   Please keep in mind in 2019 the deficit was 984 Billion dollars.  The deficit in 2016 was 585  billion.  Therefore at the greatest economy ever, our debt spending as materially higher than the new administration took over.   

Note: We now know that the President was briefed on the impending pandemic, which makes sense he would know if I knew.

The market rallied a bit more before the decline.  Shortly after the President addressed the nation, the USD dollar was valued at 99 against other fiat currencies. The SPX market top was shy of 3,400, for this post lets call it 3,375.   I then went net long March 30th.

The SPX closed at 3,669 today, but the USD is valued at 91.  So to adjust the current market to the world, the close to the valuation of the USD back in February we are at 3,375.  So today isn't a new high, but a little under the high in February.

The USD has been declining, and we may continue to see the USD fall.  The USD was valued at 149 in 1985, and achieved a low of 72 in June 2008.   So we have room for the dollar to continue to fall and the market to appear to rally.  However things don't usually go in a straight line so I expect the dollar to rally, that means fear is ahead.

The Present

We still have record unemployment, record deficit spending, an estimated 100,000 businesses have failed, 12% unemployment, and potentially 19 million people losing their homes in January.  the US Federal Reserve created 3 trillion dollars circumventing the money creation process in place since 1913, by simply giving itself 3 trillion dollars with no bond collateral.  The US government has spent in 2020 2 trillion with COVID relief programs, on top of the already high deficit spending, forecasted at 1 trillion before the pandemic.  In 2020 we are adding 18% to our debt to GDP and forecasted 10% in 2021 before any new COVID relief plan is passed.  It is expected the Federal Reserve Bank to buy up about one third all home mortgages before the year is out.  When normal returns we expect material shifts in human behavior including commuting, which will affect commercial real estate and commerce.

The current forecast of ROI on the stock market over the next 10 years is -1.7%.  Yes, you read that correct, if you keep your money in the market based on the last 100 years of stock history, you should see your ROI be negative over the next 10 years.  (Full article here)

The stock market valuation does NOT reflect the health of the nation, rather the froth of the money creation give away.

The Future

Lets assume Trump doesn't have a coupe and end democracy, but rather Biden does take office.  There is a material number of Americans who view the Democrats as stealers of the election, are communists and/or running a pedophile ring.   When Biden takes office the assault of conspiracy theories will continue.  Trump will continue to tweet, and do everything in his power to make Biden fail, along with loyal Trump Republicans.   There is a possibility Trump is prosecuted and the negative emotions escalate even more. The Democrats must convince Republicans to double the deficit annually over the next four years to 2 trillion a year even after COVID ends to match the deficit spending increase during the best economy ever between 2016-2020, in addition to trillions more to soften COVID impact.   If they can't, the economy will solidify its downturn for years to come.  Raising taxes into a downturn is suicide, we should have been saving 'in the greatest economy ever' instead we doubled down on debt.

What looks ahead is pretty grim, and there really isn't any low risk options.  Bonds are yielding 1% for a 10 year, and with a backdrop of the USD falling 10 ~ 30% more it isn't a great option.  Stocks with a historical norm of -1.7% ROI in the next 10 years isn't great.  This will cause problems with pension failures and other groups relying on ROI.  The only option I can see is to divest from the USA, but other countries are really not a great investment either.

Anther option is to print our way out of all debts, which will risk a dollar collapse and to lose world reserve currency status we have enjoyed  since WW2.    In this scenario the market may advance as the dollar continues to devalue, but I would expect inflation to cripple most of the American economy.

The middle ground is to have the FED continue to destroy capitalism by privatizing all assets with the banking system with 'granting' itself trillions of dollars.  Japan has done this for 30 years and still hasn't hit a new high in the market.  The Japanese Central bank owns about 80% of all ETF's. (article from 2018 at 77%)

The easy button is create new bubbles.  I have been planning for this easy button dating dating back to 2014.  Granted I was way too early on this call , but here we are.   GDX has moved from 18 bucks in 2018 to 45 in the summer.  I expect it to resume the rally and may hit GDX 100.   It also, shouldn't move in a straight line, but future looks bright in the near term.  It should fall if the market falls but at a lower percent.  Recently I have written about how 2020 is the year Crypto currency came to age, and since then Bitcoin has taken off.  My favorite stock GBTC has moved from 10 to 23 in the last few months.  I would not be shocked to see GBTC move to $1000 a share in the next 10 years.

What to do?

At anytime President Trump could initiate a war either via attack (like this assassination) or by troop withdrawal, or some other act to send the markets down.   Even if he doesn't, I expect between now and February the market to decline materially from the high (unlikely the day I am writing this is the high, but who knows!)  The setup for next year is not good.  The market will need to lose 40-60% of its valuation to be a good buy once again, and will likely take years to play out and fully recover. (a decade? 30 years like Japan?) 

This is excluding the print our way out option as I expect Republicans to enforce fiscal discipline much more than they did with in 2016-2020 during 'good times'.  With a crippled economy they will double down the pain in hopes of winning elections.  The easy money train will end in January, unless Democrats takes the senate in Georgia.

I think hedging out of the market and fixed income in the next 6 months is lower risk than dollar devaluation in the near term.  If you hear a new FED bazooka, like now printing 6 trillion dollars, then that maybe the end of bonds and cash as a safe haven.

Paying off debts is paramount, lowest risk with highest secured ROI.  Individual companies like Amazon are good bets, as their competition fails.  Companies like Exxon are bad  borrowing huge sums to pay their dividends, as Democrats won't like oil and companies, I expect Exxon to fail in the next 10 years.  So be careful to not buy historically good companies but instead forward looking companies.

I do think diversifying into GDX now at 36 and GBTC now at 23 is a way to hedge out of USD and the US overall market.  I don't think GDX has a 10 year bright future as crypto will win. (disclosure my primary play is stock GOLD/GDX (miners), Cryptos are second)   

If the government decides to resume mailing checks directly to Americans, then all best are off, the stock market will be fine and the economy recovers in record time.  I really doubt Republicans will let this happen.

IMPORTANT!

PLEASE don't invest blindly in what I said here, I am an IT guy, not a financial advisor.  Use it to prompt understanding that inaction is actually an action, a choice to remain invest in the most over-valued market in US history.   Instead look at your finances, pay down debts, take a conservative stance, and invest a little (10-20%?) in alternate plays (cryptos, gold, global ETF's)

Good luck,  it will be a wild wild ride into and through early 2021.

The Crypto Rocket

 Crypto is on a tear, and I don't expect it to slow down soon.  I think we may see Crypto start to outperform gold in the years ahead.  The reason is simple, the world of finance is adopting crypto.  The US government is passing milestone after milestone decision to make crypto legitimate.  The IMF is starting to discuss how to incorporate crypto in global finance.

Countries like India area also getting in on the crypto bandwagon.  Individual transactions are now hitting over 1 billion dollars per transaction, quite impressive.

Crypto IS the future, gold is not.  Gold I still think does OK, but crypto will steal the show over the next decade.  I still think GDX may 100 a share , up from 16 bucks in March in the years ahead.  HOWEVER Gold is no longer 'the play' and therefore GDX may never reach that level. The issue with gold is....its just a shiny rock.  Crypto is evolutionary, movement of a billion dollars in seconds.  Try that with gold bars.  

But Gold will get capped, simply because its not a favored winner of the future.  With Crypto hype, the world banks can start to create their own crypto and extend their relevance in world finance, perhaps for another 50 years.    Also please consider true diversification out of pure USD assets.

 The stock I really really like is GTBC, it was 11, now 15, it could hit a 1000 a share in a few years.  They are one of the largest holders of bitcoin, so buying it is a proxy for bitcoin proxy.  As previously mentioned they are also bringing stock symbols to market to make it easier to trade in crypto between stocks and crypto.  They are trying to figure out how to be 'the play' for movement from USD based finance to a crypto-USD based finance.

For valuation, nothing will beat Bitcoin, it is the new gold.  Bitcoin I don' think will ever become a currency, newer blockchain innovations ahead will be.  But I do think Bitcoin moves from 13K to 250K a coin, maybe even 1 million.    Bitcoin is a Ponzi scheme, but so is gold, I'll ride this wave as far as it can go.  

Other cryptos I like are Ethereum,   I think Compound at $115 right now is a buy, but consider dumping if it falls below 94. And taking some profits at $225.  Click here to understand the kick off reinventing global finance with DEFI .

I have about 1/3rd of my savings directly into cryptos, and a 1/5th in crypto stocks, I'd like to move that to 1/2 in crypto stocks.  Its quite hard to drop some existing positions. So I am taking this stuff seriously.  I'll reconsider my positioning post January 2021.

I am not a financial advisor, but consider starting to read some of my past posts and do your own research to get onto the Crypto Rocket

Crypto Education Links

 A friend from my high school has been an entrepreneur in the crypto world. I asked him to read my last post, and he gave me a list of links he recommends.

I am sharing them here, and will read/watch them myself.

https://www.youtube.com/watch?v=2wxtiNgXBaU&feature=youtu.be

https://medium.com/message/you-are-not-late-b3d76f963142

https://nav.al/the-fifth-protocol

https://onezero.medium.com/why-decentralization-matters-5e3f79f7638e

https://hackernoon.com/wtf-is-ethereum-c65e0d67ac09

https://blog.coinbase.com/the-playful-paradigm-shift-4bf35d9d1d11

https://www.theslowhunch.net/2018/zombies-eating-kitties/

In discussions with my friend John, I have asserted I think the central banks will setup a new money exchange system based on cryptos between central banks.  The banks will try to co-opt the crypto revolution by re-inventing the monetary system.   I do think this will help.

I ran across a good video painting picture of what may lay ahead:

Reinventing Global Finance - DEFI

We are in the early stages of the largest financial revolution in human history, and few are noticing. Our world operates on an underlying foundation operating with same mechanics established in 1913.  The world is prime for a technological disruption. World finance accounts about $25,000,000,000,000.00 GDP per year!

This is where DEFI comes in, and it will transform every aspect of human finance.

Before I get into what it is, you need to understand the building blocks in DEFI.

Blockchain

A technology that allows a 'digital general ledger' to be publicly maintained by everyone, but changes can be done only by the persons who have authority to make a change.  For example, if I own entry 1234567890 in this general ledger, ownership is recorded as mine using a digital key I know. To change who owns this entry, only *I* can initiate a change of ownership. It is un-hackable by anyone else in the world to do so. - Anyone in the world can look at this entry and see it exists, and who owns it, but cannot 'steal' it. To learn more watch this. 

Cryptocurrency - a valued asset (cash/collectible)

The first implementation of Blockchain to represent a 'digital asset' was Bitcoin. If you own 1 Bitcoin as of 10/2020, you own a digital entry that is worth about $11,000. (Bitcoin) - Meaning, if you want one Bitcoin, the market price to buy one would take $11,000 dollars to exchange for one entry in the "Bitcoin Blockchain" by a person who possesses one of them.  To learn more watch this. 

Important Cryptos to be aware of

Bitcoin - the new digital gold, valued on scarcity and the premium collectable coin, learn more.

DAI - stablecoin, the value stays very close to $1.00, pays 2% APY

PAX or DGX - Gold backed crypto, click here to learn more 

Digital Wallet  - (Coinbase)  - replaces savings account

With advent of bitcoin, the question is how do you store your digital keys in a safe place, and make it easy to spend it on demand?  You could spend the time to learn the complexity of bitcoin, and its software, and keys to manually make an exchange for goods or money.  Or you could trust a vendor to manage your keys and make it very simple to use Crypto Currencies. CoinBase.com is the largest generally most trusted Digital Wallet. This is in effect the new "Bank Savings account". To learn more watch this.   To sign up for Coinbase please use this link that gives me credit. (click).  After you create your account, you can apply for Day trading services are available here.

Smart Contracts

By using technology you can tie a digital asset (cryptocurrency) to the execution of exchanging assets. (Ethereum v2.0) - For example, I could setup a 'bet' on who wins the super bowl, once the winner is determined, an automated execution is triggered to transfer the 'bet' to the winner'. This concept is essential for everything going on in 2020, to learn more watch this. 

Smart contracts have been going through extensive evolution, figuring out the 'fee cost' to execute a contract and limits to that cost. (called 'Gas Cost') DEFI is 'decentralized finance'. However what I will be describing is a mixed bag of 'decentralized financing' and the creation of a new world financial system mixed with private and decentralized finance (DEFI) components. 

Please do not read on unless you grasp above concepts. Watch this video for basics of DEFI before reading on.

Decentralized Exchange of Tokens - (UNISWAP / UNI coin) - Replace Global Currency Exchanges. 

The concept is built upon smart contracts, with only purpose is to provide an automated very low cost way of exchanging between crypto currencies.  This is replacing the centralized global currency markets. Using this coin, you can move money between the supported crypto currencies some mentioned above. This is a complicated evolution, with the latest released in September 2020. The liquidity market for this has shot up to over 2 billion dollars. - To learn more, watch here. 

This protocol will be the conduit for trillions to move from FIAT currencies to Crypto Currencies. 

Liquidity Pool - (Curve / Balancer) - Replace money market funds

There are new crypto currencies that provide value (money/crypto) to be used as part of a smart contract or other very low risk lending.   This provides market liquidity to be used in financial transactions (see Flash Loans below) Moving value between assets is slow on cryptos, as a single trade may take 20-60 seconds to complete. There is also cost to move between cryptos (fees, gas cost). A liquidity pool provides trading services at a lower cost than executing on the underlying target technology using its own private pool to capture the lower cost to execute the smart contract. Typically a fee of 0.3% fee. - To learn more about liquidity pools, watch this. 

Yield coins  -  (DAI/COMPOUND/AAVE) - Replace fixed income investments

There are new crypto's that pay an APY between 1% and upwards of 9% for you to deposit funds. This is pretty impressive when 30 year bond pays about 1.5%!  Depending on the crypto coin , you do have the added benefit/risk of the coin valuation changing.  If you want to avoid these coin changes, choose a stable coin like DAI giving 2% APY.  If you want to take on more risk, an aggressive token called COMPOUND promise 8% APY or more. The money is used in secured 'flash loans' (described next), and other market maker activities in the crypto markets. (margin loans, arbitrage, etc).  Watch this to learn more on AAVE, LEND click here for COMPOUND 

These products have resulted in some investors becoming a Yield Farmer (click)

Flash Loans - (AAVE , dYdX) - Replaces finance Market Makers  

The ability to borrow money for arbitrage, swapping collateral, and self liquidation.  The money is borrowed and repaid in the same transaction scope of one smart contract. There is a fee paid for borrowing money in this near zero risk transaction. Some of the yield coins mentioned above derive their yields from providing liquidity for flash loans. Flash loans are hitting on the millions per transaction as of October 2020, its only matter of time Billions will be used in a single transaction. To learn more, watch this. 

NFT - Unique identification of digital content to represent ownership

(Added 5/26/2021)
A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files.

This can eventually represent ownership of any document, such as a home title.  In this example, a home title could be printed, scanned, and create an NFT that is issued through your town, state, or federal government.  The mechanism of creating the NFT could become a legally binding representation of the government document.  Once created ownership can be controlled by who owns the NFT using their credentials to control ownership, rather than using manual processes to execute ownership transitions or to verify ownership.   The record of ownership would be distributed world wide, rather than in your local township that may have a catastrophic loss of records. The efficiency gain across the legal and financial system is compelling. 

I expect things to explode and continue to get complicated, with new standards, new coins, and yes, failures.  On the other side is a very bright future for humanity, and a likely leveling of the wealth gap that we see today in the transition!

The Top and the Bottom

So I am 60% confident the top is in. We could make a new, 'spike top' if Trump wins the election without any drama/uncertainty combined with a vaccine announcement. That would be THE top if that happens.
If we can't get a double punch of great market news of that magnitude, the top is in, so what is the bottom?

I think we will have a volitile but wiggle market with an overall trend down, straight through to 2028. The bottom I think is in 2028-2029. This is for OVERALL market. The top 30 tech companies should continue do to well and become bigger buying companies along the way. I have a hard time seeing these companies retreating over the next 8 years. (Amazon primarily in mind).

I use the S and P 500 and not DOW 30 as to me it is a better representation of the US economy. The recent high of 3,508 I think could retreat to 1000. The charts indicate as low as 500. I have a real hard time believing we can hit 1,000 or pass it materially.

The global banking system will simply print endlessly and would rather see a hamburger at mcdonalds cost 20 bucks than a market that retreats below 1,000. So in real purchasing power, I do think hitting 500 is in the cards.

But this isn't about real purchasing power, its about a better place for money to ensure relative wealth in the market vs individual companies vs bonds vs gold vs cryptos.
Over the next 8 years, staying in CASH IS TRASH, this includes bonds. Investing will be about every 6 months assessing which asset has greater chance of doing better. Cash has retreated by 10% in purchasing power since March. Now its the markets turn to take a hit. At some point it will be cash's turn again, and repeat. The overall wealth of the nation will need to be re-aligned to the world wealth.

Good luck!

COVID-19 confusion

 I decided to go back, and look at the posts I did about COVID-19, and analyze what I projected vs what occurred, and then using that data update a view of what may happen and what could happen.

Fun stuff? Lets go!

On January 26th, 2020 I posted "Potential Pandemic Precautions" and I asserted 2.7 Million American may die.  At that time I did not share the math I used to come up with that number.  That was in error, as it wasn't believable.  So I started to post the math, which I wonder if anyone who questioned my 26th post even read my math! :)

On March 5th 2020, I posted "Humans don't know exponentials COVID-19"  I posted the math. The key is using the math at the time, I extrapolated the infection count and death counts based on what we knew then.  Key items are 3.44% mortality rate, and USA death count projected by 3/19 to hit 44, and 11.K dead by 5/4, with 180K dead by 5/28.

On March 19th 2020 I posted "COVID-19 Updated statistics", the death count hit 218, causing me to revise the 11K death to cross before 4/24 and mortality rate to be 1.5%.  I suspect the mortality rate was artificially low due to infected rose rapidly and death follows later.  The deaths are FAST than 3/5 projections.  I also stated clearly:

I also think the infection rate will slow down dramatically in three weeks, when USA 'stay at home' efforts help and large scale testing identifies the sick.

This comes into play after my next update.

On April 6th was my last update in "COVID-19 Update'.  This post is a little under my 3 week projection to dramatically slow down infections and death.  Lets see what we find:

I projected by April 6th about 1,750 dead in the USA and this update shows dead to be at 10,876!

The US infection was to be at 114,392, and instead we came in at 367,85.    The mortality rate is at 2.961% .

I attribute this distortion to several things including accurate reporting and inadequate testing.

The projections showed dead at 195K by about 5/2/20, but we stand today at 195K, so what changed?

Well perhaps that actually taking precautions dramatically slowed down the death as forecasted on 3/19.  Some may say that immunity kicked in.  Lets take a look at the infection and death rate to spot check this.

USA has increased testing, and supposedly that is 'driving up numbers' unfairly.  Meaning, we didnt test as much and now we are showing people having COVID we didnt before.  

If this is true, then what I would expect is that the number of people reported infected would be high, and relative to that number a much lower mortality rate. (the dead is not rising as quickly as testing.)

Today we have 6,548,503 infected.  using the mortality rate of 2.961%

COVID-19, Mortality rate April, now and the future

I welcome to learn how my logic is flawed.

Posts referenced in video are linked below:

Jan 26

March 5th

March 19th

April 6th

Latest COVID stats

Nothing goes in a straight line

 I expect a short term bounce here, maybe a week?

I am buying GOLD (Barrick gold) since it held up so well, and Warren Buffet is a buyer.

Also TGB, it rose during this downturn, so I am a buyer

Also buying back into crypto miners (a little) of GBTC, HTBX, HUTMF.

Adding to TSLA short if it hits 390, and WYNN if it hits 92.

Good luck!

True Diversification

 Over the last 50 years, diversification of investments has been defined as a mix of bonds, stocks, cash, and sometimes natural resources. 

A USD diversified portfolio will lose value as USD depreciates, taking away wealth from stocks, bonds, and cash.

The alternatives for true diversification is natural resources, international investing, or alternative currencies.

Natural resources will likely go down in demand if there is a deflationary economy.  Gold may do better , but unless there is a financial system crisis it won't explode in value.  However, I do expect it to do well as it is an alternative to USD.  (stocks GDX, GDXJ, GOLD, RGLD, and SLV)

Other currencies may do well, but I would expect turmoil if USD is devaluing.  Some countries, like Norway, currency did very well in 2008, and you could buy stocks in that country as a hedge of both currency and income.  Most investors are not sophisticated enough to purchase foreign companies, but some are available on US stock market.  It is a viable option for true diversification.

The problem is very complicated, as I shared in post "The world needs to move past a 'reserve currency'.

What we need is a new solution that currencies around the world can remain stable and 'fair'.  The closest thing to a new innovation in currencies is Crypto currencies.  

Therefore a truly diversified portfolio would be stocks, bonds, natural resources, foreign companies, crypto currencies, and cash.

I am a big believer in Crypto's for the next stage of the unfolding economic crisis, however I am hoping gold is a big winner first.  

Consider opening an account to purchase Crypto's now and get setup, buy $100 bucks of cryptos and start to learn.  Crypto's right now are not a perfect storage of value, but it does have advantages over gold.  First and foremost, it is the likely future of the world's currency challenges.  By setting it up now, you have a new lever for moving wealth.

Use the link below, and I'll get $10 bucks for opening an account.

https://www.coinbase.com/join/murphy_b9f

Consider trying out Bitcoin (as its the 'gold' standard).  Although a coin is worth about $11K, you can buy $100 worth (a fraction of a coin).

Consider Bitcoin Cash and Lite coin Trust as they will be listed as a trade-able stock ticker (BCHG & LTCN.  I expect easy access to drive prices up.  (click to read)  

Ether and XRP are two crypto’s entering into mainstream currency trading in Japan on 8/31/20. ( click to read )

If you want to move money to any currency, any country, and buy any stock in local currency, I highly recommend https://www1.interactivebrokers.com/ , however it takes quite a bit of work to understand AND avoid pitfalls that will cost you dearly.

As always, consult a professional financial advisor!

Good luck!

Additional thoughts

Historically when stocks go up, bond rates go down, and when stocks plummet interest rates (cost to borrow) goes up.   This diversification worked well through 2008.   Since then the Federal Reserve bank has been actively suppressing interest rates both at federal and now commercial level.  The result is rates that are at historic lows with the Federal Reserve promising to force rates lower.

That has forced money to seek returns, which is heavier into stocks.  But what if stocks start a new down trend, where to put money?   The answer 100 years ago was flight to safety, gold.  Back then gold was tied to money so the 'value' of each dollar was preserved as there is a shortage of dollars in a deflationary period.

There is still some truth to this, but not as reliable.   

Many will chose to remain in bonds even with near zero interest rates as not losing value is better than gambling on stocks or resources.   But even this is a choice, what if USD devalues?

Since March of 2020, the USD has depreciated by 10% compared to other currencies.  USD denominated debt, including 'derivatives' is about 500 trillion.  The US stock market is total valued of US stock market is about 35 trillion.   I am sharing these numbers to illustrate the impact of USD valuation has on the world economy, and why the USD has been so strong for so long.

The Top?

Three views to put this time into context

To read more on expected next 12 year returns, click here

A Must read article

 An EXCELLENT summary of US current extremes compared through history back to 1929.

I highly recommend everyone read.  We are all Bull market participants right now.

https://www.hussmanfunds.com/comment/mc200901/

Who wins in the next leg down....or hyper up?

The market has been on a tear, providing you only look at top 30 companies and ignore the rest.  The part is going strong until the music stops.  The FED hasn't indicated any willingness to stop creating free money, and has even go so far as to change the definition of Inflation.

I can't say of the market will decline 25-50% from here, if the FED wasn't printing unlimited new free money to be used through a shell company to circumvent law, pretty sure it would .  And my guess is so does the FED, hence their unusual (legal?) activities to 'save' the economy.

What I do know, with equal conviction I had in January about the impending market decline, is that there will be consequences.    The FED doesn't give money directly to individuals so they can climb out of debt or pay bills.  If they did then the economy would have much less distortions.

Instead its through the financial companies, and they can't micro-manage how the money moves through the economy.  Therefore the free money will find places to go.   I still think Gold, Silver and mining companies will continue to benefit.  GDX moved from 16 dollars to 45.78.   I expect GDX to hit 100 if not higher, I would get nervous once GDX hits 160-200 as a potential all time top.

The problem with Gold is of course, that its physical and subject to countries import/export taxes or restrictions, as well as governments putting restrictions on it.

We have seen that Crypto has faces similar issues as governments tax or block the use of it.  However, being virtual if you can connect to the 'blockchain', you can move your resources in spite of government restrictions.

I believe that if the market falls, everything will go down, just some things not as far as others.  In 2009, GDX did not fall nearly as much as the market, and I expect the same thing as 'smart money' continues to move into the sector. 

I think the same for Crypto currencies and to a lesser degree cyrpto miners miners.  I am in substantially into these Cryptos:

Bitcoin ($11.5K) - It is the premium crypto, that is the main reason.

Ether ($400) and XRP ($0.275) are two crypto’s entering into mainstream currency trading in Japan on 8/31/20. ( click to read )

Bitcoin Cash ($270)  and Lite coin Trust  ($58)  to be listed as a trade able stock ticker (BCHG & LTCN) , and it has passed its first hurdle. (click to read)  

The reason I chose these Crypto's is they are set to be pioneering into trading on currency exchanges or as a stock ticker.  This is a game changer, as you can move into Cryptos in a manner that many more people are already familiar with.

I am hoping for 2x-10x resturns on BCHG, LTCN, Ether and XRP.  Bitcoin I think is an easy 3x before this is over.  Its possible for 10x, but 'easy money' may go to other faster moving Cryptos.

Bitcoin miners I like are GBTC, RIOT,  HUTMF, and HVBTF. (in that order)

I highly recommend Coinbase for your consideration into cryptos.

For Gold miners, GDX, GDXJ aer still best bets.

For miners, GOLD (miner stock symbol) is now being purchased by Warren Buffet.  Mr. Buffet has historically said investing in Gold or miners is 'stupid'.  Apparently things have changed. 

For other miner picks, see the list I created in May.  Everything exploded and did very well since then.

I can't say if the market will fall simply due to FED interference.  I  believe that something will shift with 14 million continuing to be out of work, massive layoffs ahead , IRS projecting a decade to return to pre-COVID employment levels, the USD plummeting almost 10% in about 6 months, Gold skyrocketing 37% since March to all time highs, a highly charged election in USA with potential a sitting president refuses to step down, COVID quite likely to surge into flu season, and various global tensions continuing to rise quickly.

Good Luck!

The world needs to move past a 'reserve currency'

When nations began trading extensively, the world order settled on a world reserve currency.For context, a brief history lesson.

USD 1920 to 2020 (100 years)
UK 1815 to 1920 (105 years)
France 1720-1815 (95 years)
Netherlands 1642 to 1720 (78 years)
Spain 1530 to 1641 (111 years)
Portugal 1450 to 1530 (80 years)

Using history as a guide, the US is due to end the USD reserve status.
But I do think this time is different, the world does not need to depend on China, Russia, Europe, or US for a reserve currency, we need a better system.

First, lets cover money and the way its created and how the world checks and balances work through economic trade pressures.   FIAT currency we use today is based on scarcity and 'faith' in the currency.  Part of the strength to currency is each country will only allow government (taxes and payments) to be done in the local currency, creating a demand.   Some countries operate solely on the national currency, while others may accept local or a foreign currency (typically USD) for purchases.

Oil for example, until recently was settles only in USD in all oil supplying countries, creating yet another demand mechanism for USD trade.

The leader in world trade becomes the defacto reserve currency.  Other countries once economically tied to the reserve currency nation has incentives to ensure their currency maintains an exchange rate favorable to that nation.

For example, if the Euro moves from a 1 to 1 USD changes to a 1 to 2 USD ratio, products bought in the USA from Europe will raise significantly in price.  For simplicity if we assume a direct relationship, a BMW that costs 50,000 will move to 100,000 USD if made in Europe and shipped to the USA.

World trading systems have been hedging by putting assembly plants in the target country to reduce import or currency variations. This system has historically maintained a relative stability compared to world history.

However the world economic model is increasingly becoming strained, and I believe the root cause is the rate of new money creation disparity that is required by each country.   It is also becoming strained due to world demographic challenges. When the USA has been the world leader in innovation and value creation, the US is creating dollars faster than other countries enabling it to expand.  Other countries through a combination of trade demand and their central bank money creation controls keep a balance of their money creation to maintain an equilibrium of value within reason.   

As long as the world reserve currency is the lead creator of wealth, the system remains stable as other countries are controlling currency valuations based on their economic 'catching up'.

The USD has seen extreme currency valuation strength on the world stage, and I believe because the world is increasing its value/money creation at a pace that is exceeding USD dollar creation.  In effect, the world WANTS to have more USD created than organically is being created by free market.

This enables the US to generate more and more debt accelerating quicker based on the model that functioned well when the US was the organic world value creator.

The issue is at some point, the US cannot keep up with demand for new USD in true value, and is in effect just 'creating dollars' based on the trading demand.  This is when it becomes materially dangerous for a world fiat currency.   If there is at any point, a drop in demand the debt machine will be materially large compared to true new value creation from the reserve currency country.

It could find itself in a position when the currency turns out of favor, and to create more debt will require more interest , collateral or trading value.  The easy debt machine becomes a drag that could last a generation.  This debt trap was avoided when countries used gold as the trade settlement between countries, as there really wasn't material debt in the system outside of the country.

I am NOT in favor of gold as a currency, its a terrible way to trade, but it did have the effect of avoiding the math trap of paper debt.

So what to do?  The problem is what benefit does China, Russia, or Europe bring to the table?  Does any one of those countries bring material NEW value to the work trade through innovation at a pace that exceeds world demand for FIAT currency trade for the next 100 years?

I think not.  The world economies are maturing.  Combined with demographic challenges  (see picture at bottom) we are seeing currency shifting from scarcity to abundance.  Each country is producing more value to the world stage than it did compared to leaders 25 years ago, the gap is closing.  Look back to India and China in 1995 to today, wow.  What a difference the last 25 years has made.

This is why a new currency valuation trade system is required, one not based off of a country.  There are other reasons, like currency abuse.  The US recently for the first time in history created 2 trillion dollars circumventing the bond market, and allowing the Federal Reserve Bank to purchase collateralize debt.  Further the FED setup a shell company to enable activity that it is bared from legally doing in the world of finance.

These games will help alleviate near term pressure without addressing the root problem, money creation imbalances.   At some point, 1 year? 10 years? I have a hard time believing 20 years the system will fail under this strain.  And does anyone think China, Russia, or Europe wouldn't do worse?

This is why Crypto Currencies are a critical part of our monetary evolution.  The models setup today are not valid for being a currency.  However the infrastructure to accept payments and store 'coins' is essential developments for the next non-nation based reserve currency.

So while we may stay on USD or our local currencies, I believe a crypto-based reserve currency is in our future.

On the way there, I expect Gold to get a resurgence as people will return to 'tried and true' international trade settlement only to find , yet again over the last 500 years, that gold is a terrible reserve currency.

This is why I own Crypto's and Gold miners, it is the only way out of a once in 100 year shift of world value.  When that shift occurs, I am not sure what the value of USD will be when the dust settles, and I am 65 years old.

Good luck!

Population Growth according to UN 2019.  We have increased wealthier humans, but less new people, a combination that is a problem for growth.

Why is our financial system failing us?

The currency reserve, US Dollar and international central banks and banking system has been sickly, for quite a while.

I listened to a podcast that does a great short summary of the mechanical issues with money creation process.   In short, banks are generating less credit since 2008 which results is not creating new wealth.   

The currency system in place is sick, and no one knows how to fix it.  The answer will be more radical central bank actions until the system becomes healthier, or it fails.   If it fails, crypto currencies will be the next big thing along with gold.

If failure happens I think it is 10-20 years off.  But I would expect continue increase in alternative value stores until then.

In any event consider listening to this podcast, and register to download the free report.

https://podplayer.net/?id=110413759

The root cause for market crazy

I am starting to think the market froth is due to millennial entering into the markets.  I have heard stories that Robin-hood app is disrupting the market, but then I ran across an article that really brought the market distortion into focus.

For the first time - ever - there is more option trading than the underlying stock trading.  That means high risk, high leverage is driving the market direction rather than actual stock purchasing as a primary driver.

That to me means that if at anytime there is market exhaustion, the shift maybe dramatic.  Further these market traders don't have the experience to know that the market makers will on an options expiration on a Friday let the market close, and co-incidentally explosive news hits with markets opening materially lower on Monday.  This enables the option expiration to settle in the market maker's favor.  I have seem dramatic gaps like this back in January 2008, and in the recent market descent in 2020.

My concern is with a market gap down, the many small traders will trigger a panic trade.

To read more on this odd event of option trading exceeding stocks, click here.

What Next Gold, Crypto, or Both?

Gold and Silver miners have done fantastic.  I had made recommendations on breakout price and all the stocks that hit it, are up substantially.  Link here.

While I have been an advocate for Gold/Silver miners for a WHILE, I wanted to call out Crypto as a competing future as the world reacts to future events.

I have been buying and selling crypto stocks, but I started edging more into crypto today.

Please be warned! I wouldn't be surprised if at this price crypto drops 50% or goes up  500%, it is the wild west.  But a few things started to push me in this direction.

I read an article for Bitcoin Cash and Lite coin Trust to be listed as a trade able stock ticker (BCHG & LTCN) , and it has passed its first hurdle. (click to read)  

Update 8/28: Ether and XRP are two crypto’s entering into mainstream currency trading in Japan on 8/31/20. ( click to read )

I am mildly optimistic that a new way to 'trade' these assets will cause material valuation increase in these coins.  I expect when the listing is getting closer, the assets will rise materially in price in anticipation.  Therefore I bought some of each today, and will monitor and purchase more depending on the movement.  I highly recommend using Coinbase.com , its trustworthy and integrates into Fidelity.

I also own Bitcoin, but I bought it waaaay cheaper than the current price.  I may roll more into it, depending on action.

If these get listed, I have to expect at 10X if not 100X price rise.  The ability in times of crisis for people to sell their stock ETF and buy these 'stocks' will cause bubbles.  Further, I wouldn't be surprised if ETF's appear that buy a blend of crypto tickers eventually, which will also increase the values.

Let me be perfectly clear, Crypto currencies as they are today at PONZI SCHEMES.   But one or more may evolve into a future , functional, storage of wealth that isn't a Ponzi scheme.  Also much of our current system is also a Ponzi scheme, such as real estate or bonds.   That is why the Federal Reserve is breaking laws to circumvent money creation to the tune of 2 trillion and buy assets it isn't allowed to buy by law.  It is also trying to keep the Ponzi going.

I just think between now and later, a 10-100X return is worth the risk of 50% drop.

This is high risk, high reward, you own the consequences (good or bad).

Crypto Miner stocks

Alternately can buy stocks in companies involved in crypto, some to consider, with current price (for future reference)   Please be careful, these are depending on the Ponzi schemes of crypto.  What is good about them is if any one crypto takes off, chances are these companies will benefit as they can mine any crypto they wish.

HVBTF 0.60

RIOT    2.19

HUTMF 0.80

GBTC   10.39

I looked at ETF's and they dont invest in Crypto companies, but online retailers or payment processors.  So please share any good ETF you find.

Detailed thoughts

This is over-the top thoughts shared, proceed at your own time-loss risk. :)

By me being in Gold/Silver heavily, if there is ANY government intervention the market could collapse in a second.  This WILL happen the moment any world power views gold as a threat to their monopoly on currency.   It could be as simple as slapping a 50% tax on all miners, which would crush their stock prices.

Plus gold is physical, it can be confiscated, and again, depressing values or  even if it doesn't make it not liquid.  For the record, I don't believe or own physical gold, its just too risky.

I do believe the EVOLUTION of crypto is the future, and a likely short term winner is Facebook if they ever issue their own crypto, which again, could collapse the competing crypto. 

 Facebook does face government 'permission' challenges and is 5 years out from becoming a reality.  Longer term however, the spirit of Crypto is to not have a single entity control its creation or rules, and a Facebook crypto owned would be a long term failure.

Finally, the rift with world banks just infusing cash, circumventing normal cash creating processes, I believe will have unintended consequences.  At some point, the appeasement of perpetual money creation will have consequence.  Further if traditional investments such as stocks, real estate, or bonds have issues there isn't many places to store wealth, Crypto I think will benefit.  Finally if any one large country has issues (CHINA, RUSSIA, USA) a flight of wealth will benefit crypto.

Worse  case the next 4 years is all roses, but crypto will continue to evolve and make inroads.

Good Luck!

Information is power

President Trump tweeted a story that Covid-19 was in China as early as August 2019.

On a hunch, I looked at Federal reserve bank purchases of 'distressed assets'.

After years of flat to lower assets, the FED started increasing assets Sept 11.

Therefore the ramp up into January and February was potentially a preparation for a market dislocation.

Potentially a coincidence.