One Tweet? That’s Meaningless. One Million? That’s Money

Posted On Dec 12, 2017 By Dave Gonigam

  • Social media clues to major stock market moves
  • Party like it’s 2004: Small-biz optimism soars
  • “Holy crap, what’s this?” An update on tax reform
  • After 5 years, HSBC skates: Will Eric Holder get a thank-you card?
  • The 5 hears from a crypto millionaire not named Altucher

On a day when tech stocks as a group are flat, one of the hottest names in the sector has slumped more than 1.5% as we write. That’s Nvidia Corp. (NVDA) — the big maker of computer GPUs, or graphics processing units.

The proximate event for this drop is the following…

Tweet

The information we just shared is mildly interesting… but utterly useless.

Well, unless you had advance knowledge that Mr. Palihapitiya was about to go on CNBC and slag NVDA because it was feeling the heat from other players in the artificial-intelligence space. Then you’d have made a nice killing by shorting NVDA (albeit at the cost of possible prosecution for violating insider trading laws).

But really, we’re talking about a lone data point — a droplet in an ocean of information. Plug NVDA’s ticker into the search box on Twitter and you’ll be overwhelmed with such useless information coming in by the minute.

And yet… all those data points in aggregate do add up to something meaningful. Something actionable, and profitable, in fact.

Which brings us to a phenomenon Greg Guenthner was explaining here yesterday during an Overtime briefing. Check out this chart of NVDA covering a nine-week span in late summer and early fall…

NVIDIA

In the main part of the chart, you see a big move up starting on Aug. 23. Now, on the bottom part of the chart, take note of the big green vertical line that we’ve circled. That represents a big spike in positive social media activity surrounding NVDA — a spike detected by a sophisticated computer algorithm Greg’s had a hand in developing.

Fast-forward four weeks to Sept. 24… and you see a big sudden drop in NVDA in the main part of the chart. And on the bottom part, you see a big red spike representing negative social media chatter about NVDA. That’s followed five days later by a green spike on the bottom chart… and a spiffy reversal to the upside for NVDA.

Finally, after NVDA spends the better part of two weeks going sideways, there’s a series of green spikes starting on Oct. 23 — powering NVDA shares into the first week of November.

Result? Gains of 105% in nine weeks. That’s useful information!

“The social media universe is quickly morphing into one of the most powerful sentiment data sets we’ve ever seen,” says Greg. “As our database grows, the potential trading power is almost immeasurable.”

But after months of development, the database is already large enough that Greg feels comfortable sharing it with readers — showing you how to harness its power for trading gains comparable to our NVDA example, over and over again.

Greg’s holding a special online training session for Agora Financial readers this coming Thursday at 1:00 p.m. EST. It’s worth rearranging your schedule to be in front of your computer. It won’t cost you a thing to watch, and there’s no obligation. Just sign up in advance at this link and you’re guaranteed access.

The Dow and the S&P 500 are inching higher into record territory on this Tuesday. At last check the Dow has added 100 points and is now only 15 points away from 24,500.

Gold’s retreat continues, the bid down to a five-month low at $1,237. Bitcoin has powered ahead to $17,468, on par with its highs late last week.

The big economic number of the day is wholesale prices — up 0.4% in November. The year-over-year increase works out to 3.1%, the highest in nearly six years.

From here that looks like another sign inflation is making a comeback. It certainly won’t dissuade the Federal Reserve from raising the fed funds rate tomorrow.

Small-business owners haven’t been this exuberant in 13 years.

The National Federation of Independent Business is out with its monthly Optimism Index. It jumped 3.7 points in November, to 107.5 — the highest since November 2004.

Exuberant

It’s not hard to connect the dots — the survey coincides with tax reform racing through Congress.

The day after the House bill was rolled out in early November, we mentioned how the NFIB was displeased with how small business fared under the bill. But since then it was rewritten so that more business owners can qualify for a lower 25% tax rate on “pass through” businesses. The organization is on board now.

“As long as Congress and the president follow through on tax reform,” says NFIB president Juanita Duggan, “2018 is shaping up to be a great year for small business, workers and the economy.”

That said, investors are waking up to a nasty provision in the tax bill we warned you about three weeks ago. The clause has finally found its way onto Page 1 of this morning’s Wall Street Journal.

A quick recap: Say you own 50 shares of XYZ Corp. You bought 25 of those shares in 2012 for $50 each. You bought the other 25 of those shares in 2015 for $100 each. The current share price of XYZ is $80… and you’re looking to sell some but not all of your holdings to raise a little cash.

Under current tax law, you can sell the shares you bought in 2015 — pocketing some cash and booking a capital loss, lowering your tax bill. But the Senate version of the bill kills this strategy — you’d have to first sell the shares you’d owned longest. More revenue for Uncle Sam, less cash for you.

Presumably it’s become front-page news now because it looks increasingly likely that tax reform will make it through Congress by Christmas… and many investors are liable to sell some of those losing shares before the law changes on New Year’s Day.

And so it goes for much of this tax bill: “The more you read, the more you go, ‘Holy crap, what’s this?’” says Greg Jenner, who was a top tax official at the Treasury Department under Bush 43. “We will be dealing with unintended consequences for months to come because the bill is moving too fast,” he tells Politico.

For the record: The banking giant HSBC is officially off the hook for helping launder money on behalf of Mexico’s Sinaloa drug cartel.

The clock ran out yesterday on a “deferred prosecution agreement,” under which HSBC paid a $1.9 billion fine — about five weeks of profit — and promised to keep its nose clean for five years.

Per a Bloomberg story citing a statement from the bank, “The Justice Department will file a motion with a court in the Eastern District of New York seeking the dismissal of charges after HSBC ‘lived up to all of its commitments’ to improve its anti-money laundering and sanctions compliance capabilities.”

That’s how most of the mainstream stories read — omitting the name Eric Holder.

Evidently it’s up to us to tell, if we may borrow the late Paul Harvey’s phrase, the rest of the story.

Career prosecutors at the Justice Department were keen to press criminal charges against HSBC back in 2012… but they were overruled by Attorney General Eric Holder.

We know that because of a thoroughly documented report issued in the summer of last year by the House Financial Services Committee.

But Holder himself all but confirmed in 2013 that he had a “too big to jail” policy for the banks. Asked why no criminal cases had been brought against large banks after the Panic of 2008, he replied, “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

Holder stepped down in 2014 to return to the white-shoe law firm of Covington & Burling — which literally kept a corner office empty for him when it moved into a new building. The firm’s clients have included most of the large banks Holder refused to prosecute.

Bonus points: Holder’s successor, Loretta Lynch, negotiated that “deferred prosecution agreement” with HSBC as U.S. attorney.

“I agree with Jim Rickards’ view on bitcoin, even though it has shown remarkable increases in a very short time,” a reader writes as the Great Bitcoin Debate continues.

“But now that bitcoin is trading on the CBOE and will soon trade on the CME, has anyone given any thought as to how the future contracts may be manipulated by the very same ones who now manipulate the future prices on gold and silver?

“It would appear to me that a seller, with very deep pockets, could sell down bitcoin futures very quickly and derive some very large profits. I don’t think it would take that much to create a panic resulting in a very thin market, which would add to the downward pressure. Bitcoin could end up where it was last year or it could march on toward the record highs that have been talked about.

“My feeling is bitcoin has now exited the ‘private’ market and entered into a realm controlled by very few, which will allow certain members to do what they do best without fear of prosecution, which should lead to lower prices.”

“Wow! Rickards’ hate for bitcoin and cryptocurrencies is getting worse by the day,” says a reader reacting to yesterday’s weekly update in Rickards’ Strategic Intelligence.

“I think he’s upset that basically gold has not budged for almost a year (I know, I own a nice chunk of real, in-hand gold and silver). Meanwhile, bitcoin has gone from less than $1,000 to $17,000. I’d say it’s well worth taking the risk and putting some of our savings in bitcoin.

“I feel that cryptocurrencies are here to stay because they offer the little people (not banksters, not Wall Street traders, not governments, not central banks) a way to place their hard-earned money into a currency that cannot be manipulated by the high and mighty of this world. There is a limited amount of them decided in advance and it will never grow in quantity (unlike fiat currencies created from thin air at will but manipulated by central banks and the IMF). This is a currency revolution.

“Because it is distributed and decentralized, there is nothing governments can do to ban cryptocurrencies. Nothing!!! They tried in China recently and what happened? Crypto moved the next day to South Korea, Hong Kong and Japan (where it’s legal, by the way). Soon China and Russia will create their own cryptocurrencies.

“Other reasons are that people all over the world are sick and tired of their governments inflating their currency at their good will while screwing (pardon my French 😉 the little savers like me. We, the little people, are sick and tired of our money disappearing through the hands of the 1% while none of them go to jail for ruining us. When was the last time you saw 8% interest on your CD?

“Yes, I am one of these bitcoin millionaires. That said, I am diversifying into lesser-known cryptos in the top 20 levels just to spread my risk. But as with stocks, you have to do your homework and maybe be a little bit a money geek 🙂

“Cryptocurrencies are, in my modest opinion, the money of the people by the people and I like that… a lot.”

The 5: You’re living proof of our thesis last Friday — that bitcoin is, for many buyers, a giant middle finger extended toward Wall Street and central bankers…

Best regards,

Dave Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. As we go to virtual press, bitcoin is now $17,781 — challenging the highs of late last week.

By now it’s public record that Agora Financial contributor James Altucher thinks bitcoin could reach $1 million by year-end 2020.

But he’s made other cryptocurrency forecasts that he’s not yet shared with the general public — only with Agora Financial readers like you. Have you seen them yet? Click here and prepare to have your mind blown.


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