“Generation C” (for Crypto)

Posted On Aug 10, 2017 By Dave Gonigam

  • Millennials have given up on the 401(k). Here’s what they’re doing instead…
  • … and here’s why you should consider doing likewise
  • Gold makes another run toward $1,300
  • Volatility spikes thanks to North Korea: Knuckman says it won’t last
  • Philadelphia’s soda-pop tax — a (lack of) progress report
  • Are we engaged in “fantasy” about war with North Korea?

Your dad had a pension — and lived a secure retirement. You have a 401(k) — and live, uhh, perhaps less securely. Your kid has Bitcoin — and might make out better than either you or your dad.

We tentatively turn our gaze this morning back to the “cryptocurrency” market, after a break of a few days. Rest assured we still have half an eye on developments with North Korea. Oh, and the debt ceiling and the prospect of a government shutdown — although as a practical matter nothing’s going to happen until Congress returns to Washington after Labor Day.

Believe it or not, however, it’s that uncertainty about the world at large, and its effects on the market, that’s helping drive the crypto craze now…

“There’s a low cost for entry, you don’t pay a lot of fees and millennials are the most tech-savvy,” John Guarco tells The New York Times.

Mr. Guarco is 22. Just out of Duke, he lives on Staten Island. He is representative of the generation embracing cryptocurrencies with the most enthusiasm. “Unlike previous generations,” says the Times, “many of these greenhorn investors don’t have pensions or 401(k)s, are mistrustful of socking money away in mutual funds and are fully accustomed to owning digital assets that have no concrete properties.”

Or in other words, why invest in blue chip stocks when the Dow is at all-time highs? That didn’t work out very well 10 years ago, did it? Millennials are just old enough to remember all that.

“I do feel we’ve reached a new level where nobody knows what’s going to happen,” says Gabe Wax — a 24-year-old who runs a recording studio in Brooklyn. “The things we’ve been able to rely on aren’t as reliable and we have a president who knows absolutely nothing about how the economy works, and he’s appointed people who have twisted views about how it works. That, more than anything, is what scares me.”

You don’t have to agree with Mr. Wax’s politics to see where all this is going.

“I don’t like the idea of money just sitting in a savings account — with the way inflation works and how low interest rates are, you’re losing money… It’s weird to say that owning cryptocurrency soothes that anxiety, because it’s counterintuitive, but it does.”

Ditto for Ron Ginn, an older millennial who quit his finance job at Fidelity just before the Panic of 2008 went critical. “It’s not investing,” he says of traditional asset classes. “It’s just sticking money somewhere. The investment advisory industry has to give out watered-down, averaged-out advice. When you get into mutual funds, you lose a lot of the ability to beat the markets.”

At 35, Ginn is living in St. Augustine, Florida. He has most of his money in real estate… and a cryptocurrency called Ripple.

As it happens, Mr. Ginn’s old firm is venturing into the cryptocurrency market.

Yesterday Fidelity announced a pilot project with a cryptocurrency exchange called Coinbase. “As part of the partnership,” reports Business Insider, “Coinbase users will be able to view their bitcoin, ethereum and litecoin holdings alongside their other accounts in their Fidelity portfolio.”

The project builds on a previous Fidelity experiment allowing customers to donate bitcoin to Fidelity Charitable, the company’s philanthropy arm. Bitcoin donations totaled $7 million last year… and swelled to $9 million in just the first half of this year.

Fidelity CEO Abigail Johnson showed up at a crypto conference back in May, according to The Wall Street Journal. “Why am I here today?” she asked rhetorically. “I’m here because I love this stuff… all that the future might hold.”

“The more research I do, the more convinced I am that the moment for cryptocurrencies has arrived,” says our resident cryptocurrency evangelist Louis Basenese.

There was a time he was down on the idea. “Years ago,” he tells us, “I famously spoke out against the investment opportunity in Bitcoin. It was too early, in my opinion.”

No more. And it’s not just hipsters interviewed by The New York Times who are driving the phenomenon. Last month, Lou told us about a big-name venture capital honcho who left his lucrative post at the $1 billion-strong Union Square Ventures. He’s going all-in on crypto — reeling in $100 million of investor money to launch a crypto hedge fund. Nor is he the only one.

“The fact they’re treating cryptocurrencies as a new asset class is a major tell that we’re on the cusp of a permanent transformation,” says Lou. “This isn’t simply a hype-driven fad that will fade. It’s the dawn of a new technology.”

“I believe Bitcoin’s price could conceivably reach $10,000,” Lou goes on.

Which is nice. But from a present price of $3,340 that’s about a triple. Going forward, “the biggest gains aren’t going to come from Bitcoin.”

Over the last couple of months, Lou has shown thousands of readers of his newsletter True Alpha how to snag far bigger gains from the other 900-some cryptocurrencies out there, many of which can be had for only pennies.

But in the course of his research he stumbled across an even more lucrative subniche of the cryptocurrency market — a ground-floor opportunity he calls an “initial coin offering.”

Here, the numbers are almost beyond belief — $34 million in gains in the space of seven minutes. Or $35 million in 24 seconds — less time than it takes to watch a typical TV commercial.

But it’s for real. You can see the proof — and the next “ICO” opportunity unfolding within the next 18 days — when you follow this link. (No long video to watch, we promise.)

So much for Dow 22,000. All the major U.S. stock indexes are in the red today, and it’s the Dow holding up best, down half a percent. The S&P 500 is off three-quarters of a percent and the Nasdaq has shed 1%.

The big economic number of the day shocked on the downside: Wholesale prices dipped 0.1% last month. Literally no one among dozens of economists polled by Bloomberg saw that one coming; the average guess was for a 0.1% jump.

We’d already written off the possibility of another interest rate increase by the Federal Reserve next month… but if we get many more numbers like this the Fed might also have to hold off on plans to shrink its balance sheet.

Gold traders are already sniffing out that possibility; the bid on the Midas metal has been drifting higher ever since the Bureau of Labor Statistics issued the number this morning. At $1,286, gold is about to make its third run at the $1,300 level since April…

“This North Korean drama is nothing but noise” says Alan Knuckman, our options specialist at the Chicago Board Options Exchange.

Understand, he’s not talking about the threat of war, but about the market’s near-term reaction. Specifically, volatility as measured by the VIX. On Friday the VIX closed below 10. Checking our screens this morning it’s nearly 13.

Alan’s unimpressed. “Sure, you saw an upswing in volatility, but picking the bottom of the VIX is a sucker’s sport. It’s like a game of whack-a-mole.

Volatility chart

“When the VIX is at low levels,” Alan goes on, “there are intermittent spikes of panic. Then it just gets beaten back down… and continues on to all-time lows.”

Even this morning the VIX is barely half the level it was after the shock of the “Brexit” vote in June of last year. And it’s not even one-third what it was on Aug. 24, 2015 — that crazy day when China sold off hard and the Dow plunged 1,000 points in the space of five minutes.

Here’s Alan’s point: Even after those shocks, the market kept on rallying. And that’s how it’s been ever since the market bottomed after the Panic of 2008 in March 2009…

Volatile index chart

“Each time the VIX shoots higher,” says Alan, “it always ends up coming back down.

“And until volatility remains above 20 for a sustained period of time, the market will continue forward, and volatility will continue on a downward path.”

The best way to play the market in this low-volatility era? Alan says hands-down, it’s options. Puts or calls, doesn’t matter. “If you are betting on a directional movement of a stock, options are the way to go. They are close to the cheapest they have EVER been. All it takes is a 2% move in an underlying company to produce a triple-digit win in a short amount of time.”

Which is exactly what Alan aims to do in our newest trading service, Weekly Wealth Alert. If you’ve never traded options before, Alan makes it brain-dead simple. And using the power of his patent-pending “WPI” indicator, you can ride on the back of big insider bets.

Early reviews from readers are fulsome in their praise: “I cashed in so nicely! Thanks to your alerts, I made about $1,850 yesterday!” says one. You can do likewise — as Alan shows you right here.

Now a 5 follow-up: Philadelphia’s “soda tax” has fallen flat.

Early this year we told you how the City of Brotherly Love had imposed a 1.5-cent-per-ounce tax on both sugary and sugar-free beverages.

Unlike similar measures in places like San Francisco, this one wasn’t intended to encourage healthy diet habits: No, this one was a straight-up revenue grab to help fund schools and parks. The city was counting on collecting $7.7 million a month from the tax.

In no single month has the take come anywhere near that figure: March was the closest at $7 million. June, the most recent figure available, rang in at $6.9 million. As we anticipated back in February, city consumers are simply venturing to the suburbs to get their fizzy fix.

Bonus points for failure: Local Coca-Cola and Pepsi bottlers have cut up to 140 jobs.

With that, business owners and workers displaced by the soda tax have filed a lawsuit claiming the tax is illegal: As they see it, the government is essentially “double dipping” by first taxing the beverage manufacturer and then the consumer.

Two courts ruled against the plaintiffs but the case is on appeal and will be heard by the state’s highest court. We’ll keep you posted…

[More bonus points, thanks to the law of unintended consequences: In some cases, soda pop in Philadelphia is now more expensive than beer. Well, beer goes down better with a cheesesteak anyway…]

“Your alarums as to impending war w/ North Korea are fantasy,” a reader writes after yesterday’s episode.

“Kim and Trump are erratic and uninformed, but neither is crazy. They only talk that way.

“That the South Korean stock market is up 20.1% this year and dipped only 1.1% yesterday when Trump issued his threat is evidence that smart people with the most to lose are not greatly exercised over this glorified posing by both leaders.

“We lived (and yet live) with a far more dangerous nuclear foe in the USSR-Russia. Mutual assured destruction meant (and means) that we all were (are) reasonably safe. It will be the same with North Korea. We’ll learn to live with a nuclear North Korea. No big deal. Relax — and shuffle the cards.”

The 5: We wish we could be as complacent as you are. But the fact is a sitting president has suggested first use of nuclear weapons is, to use the hackneyed phrase, “on the table.”

“This is a dangerous departure from historical precedent. The policy and practice of the United States on threats to use nuclear weapons has been consistent for many decades, and for presidents of both political parties,” says William Perry.

Perry was, among other things, secretary of defense for three years during the Clinton administration. Now approaching age 90, he’s devoting the final chapter of his life to ridding the world of nuclear weapons — even as he recognizes that’s an uphill climb.

“Historically,” he explains, “the threat to use nuclear weapons has always been tied to deterrence or extended deterrence; unofficial U.S. policy is that the use of nuclear weapons would only be in response to the first use of nuclear weapons against the United States or an ally covered by our extended deterrence.

“We do not make empty threats, because empty threats weaken our credibility, and weaken the strength of threats that we do intend to carry out.”

“Your constant slurs regarding our president is  disappointing,” a reader writes.

“A true professional who wants to be taken seriously doesn’t use that kind language or innuendo — he is our president, who with his generals will soon be leading us in war.

“Be a little more respectful or get none yourselves.”

The 5: From your tone we’re not quite sure whether you mean the office of the presidency or this particular president.

But in either case, we come from the same place the Founders did — a place that’s suspicious of political power, no matter who presumes to wield it.

And if you’re referring specifically to yesterday’s episode of The 5, we’re scratching our heads about the “language or innuendo” that so offended you. But lots of people seem quick to take offense these days, so we’re not terribly surprised…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Just how quickly is the cryptocurrency market exploding? More than $241 trillion is up for grabs. And our own Louis Basenese, one of the world’s foremost experts, has pinpointed the best place you’ll want to be positioned to capture the biggest possible share.

It’s something called an initial coin offering, or ICO. And the next one is coming online only days from now. Check it out before the opportunity passes you by.


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