Bitcoin at its Best (and Worst)

Posted On Jan 10, 2018 By Emily Clancy

  • James Altucher — from bitcoin skeptic to evangelist
  • How bitcoin comes to the rescue when everything goes sideways
  • James alerts readers to crypto scams
  • Freakout — China and U.S. Treasuries
  • Cash returns stateside… and M&A heats up
  • Bank of America disappoints (again)

Who called bitcoin a “scam” in 2013?

Shhh… It’s an (open) secret: Crypto-millionaire James Altucher wasn’t an early supporter of digital currency.

Then after researching everything crypto-related he could get his hands on, he made an unusual move. He decided to sell his book Choose Yourself on Amazon for — you guessed it — bitcoin.

James

James, a computer programmer since 1985, had a tough time coding a bitcoin-only store. “It was very hard,” he says. “I had to develop the store from scratch since there were no easy tools to help me.

“Once I launched it, quite a few people bought my book. I sold a PDF of my book for 0.1 bitcoin. Bitcoin was then $60, so I sold it for about $6 per PDF. Right now, it’s as if I sold each PDF for $1,600.”

Nice.

One reason James changed his mind about crypto: “Bitcoin is putting financial sovereignty back into the hands of the individual.”

James has written a lot about how crypto’s the next step in the evolution of currency and he makes a cogent argument. But one of the underplayed reasons for bitcoin is its utilityespecially WTSHTF.

At The 5, we’ve followed the story of Venezuela’s train-wreck government and economy. With mind-blowing inflation, citizens of the South American country are scraping by in a nation turned upside down. Bitcoin’s proven to be a lifesaver (literally) for Venezuelans lucky enough to own it; the crypto’s been used to buy food, pay rent and purchase prescription medications.

James turns his attention to Zimbabwe, a country undergoing its own convulsions. A military coup removed the elderly dictator Robert Mugabe from power in November. “As news spread that Mugabe was put under house arrest,” James says, “crowds of people lined up outside banks and waited overnight to withdraw savings.

“Although Zimbabwe abandoned its own currency in favor of the U.S. dollar in 2009, in 2016, the government demanded that banks deposit their U.S. dollars with the central bank in exchange for a new currency nicknamed ‘zollars.’

“Zimbabweans, who had trusted their banks to hold their money for them, watched helplessly as the values of their bank accounts collapsed.”

When a country finds itself financially insolvent, the temptation to raid citizens’ accounts is hard to resist. “Bitcoin holds the promise of putting an end to this,” says James.

“Bitcoin operates by way of a global, decentralized network. This means that as a user or holder of bitcoins, there are no third parties you have to trust or rely upon. You’re in full control of your funds. Effectively, you are your own bank.”

No doubt: James is a crypto convert who believes the advantages of bitcoin over other currencies can’t be overstated. But James cautions — even though bitcoin’s not a scam, there are a lot of scams in the crypto space….

I want to alert readers to some alarming trends in the cryptocurrency world,” says James.

Wall Street’s way is to dive head first into an emerging market or technology. Like clockwork. It happened a couple years ago with some overpriced marijuana stocks; today, crypto takes its turn as the darling of investors hoping to get rich — quick.

With the crypto boom at the end of 2017, the market’s been flooded with new digital currencies — too many to list, in fact. Most of these cryptos are worth exactly zero and wouldn’t know the blockchain from… a blockhead! Then there are other cryptos that don’t pretend to be anything other than a Ponzi scheme. “Similarly, a new batch of penny stocks have cropped up,” says James, “that claim to be investing in blockchain.

“Investors should be on alert for investments that may be labeled as blockchain or cryptocurrency but actually do not have any underlying value or real future growth opportunities.”

James warns: “Although it can be tempting… to jump onto the latest highflying digital currency, many of these investments might be headed for disaster.”

Fortunately for Agora Financial readers, James devotes many hours to identifying the scams… and the standouts. He’s still especially keen on a 24-cent upstart with a ton of potential.

To the markets, where there’s a minor freakout over news from China.

Bloomberg cites anonymous sources as saying the Middle Kingdom plans to dial back — or maybe even cease — its purchases of U.S. Treasuries. Out of every dollar of outstanding Treasury debt, China holds a little over 5 cents’ worth.

So if true, it’s a big deal — especially at a time the Federal Reserve has begun unloading its own stash of Treasuries. If the Chinese don’t buy, who will step in to take their place?

Less demand for Treasuries means lower prices. Lower prices mean higher yields. Higher yields mean higher interest payments Uncle Sam has to fork over on the $20.5 trillion national debt… and the national debt grows even faster than it was already.

Naturally, the biggest reaction is in the Treasury market.

Even before the news this morning, the yield on a 10-year note had recently broken above a tight range between 2.2–2.4%. This morning, it’s pushing 2.6% for the first time since last March.

Ten-Month Highs for the Ten-Year Note

Stocks sold off on the open but they’ve begun to recover; at last check the Dow was down a mere 40 points from yesterday’s close at 25,385.

On Twitter, Jim Rickards was quick to remind us this morning that “China still has a trade surplus. If they’re not buying Treasuries, what are they buying? Oh, that would be gold.” This morning gold has reclaimed its recent highs at $1,318, as the dollar index is sinking back toward its recent lows.

Crude has now pushed past $63 a barrel — territory last seen in late 2014 when oil was in a long slide down from $110.

“The new tax bill left many international companies with a lot of cash,” says our income specialist Zach Scheidt, “and questions about what to do with it.”

There’s been a lot of talk about “repatriation” lately. With massive tax breaks thanks to the GOP tax bill, companies are scouting out mergers and acquisitions… a safe way to invest — and multiply — their dollars.

“Last week, there were some big stories circulating about potential mergers,” Zach says. “For instance, Target was said to be in the cross hairs for Amazon to buy. And one Wall Street analyst said there was a 40% probability that Apple would buy Netflix.

“These are some of the bigger deals on traders’ radars. But deals where companies buy out smaller firms can be just as lucrative (if not more so) for investors.”

Small companies can be bought at a premium — higher than their actual valuations. And if two (or more) companies get into a bidding war, the small company’s stock soars higher.

Zach is on the lookout for “buyout bait” in a new service he launched only a few days ago. For the moment, only his existing readers have access during a “beta test.” But once we judge the service is ready for rollout to the general public, you’ll be the first to know.

“I was really surprised and let down,” says a Seattle man after Bank of America refused to redeem a bank bill.

William Bossen’s the owner of a bank bill (similar to a bond) his grandfather purchased for him in 1980 from Rainier Bank. “Wow, what a gift my grandfather gave me,” Mr. Bossen tells KING-TV. “This is amazing. My mother squirreled it away. I had no idea. I forgot about it.”

Along the way, Rainier Bank was acquired by Seafirst Bank… which was later swallowed up by Bank of America. So Mr. Bossen took his bank bill to — who else? — Bank of America to redeem its value — about $100,000 — in 2015. That’s when the bank manager started acting cagey. “He got up and made some phone calls, came back, and he told me they have no record.”

No record? Mr. Bossen’s family did everything right. They kept the original certificate in a safe-deposit box and the bill was registered in Mr. Bossen’s name.

He’s had to lawyer up: “Bossen is now suing Bank of America for the value of the bill, roughly $125,000,” the TV station reports.

“When a bank consumes another bank, if you will, they take on all the liabilities and risks of that bank,” said Bossen’s attorney, Eric Harrison.

“Interesting take regarding Social Security changes coming in 2019,” a reader writes.

“I would expect to see additional forms of means testing in the changes where demographics meets politics. With the increasing slice of the Social Security pie going to disability instead of retirement benefits, ‘disabled’ is the coveted new voting bloc.

“If only there were a way to invest in the growing cottage industry of ethically challenged doctors and lawyers that serve as enablers to the trend.”

The 5: The good news is that the number of people on Social Security disability peaked at roughly 9 million in 2013. The bad news is that at 8.7 million, the number is still about double what it was 20 years ago.

Back to the Great Subject Line Debate, and readers are now rising to our defense: “I just wanted to let you know that your switch from ‘Agora Financial’ to ‘5 Min. Forecast’ hasn’t bothered me.

“It’s pretty easy to see which is which because your non-ad emails have an informative but not over-the-top subject line while the ads ask a leading question or have subject lines that are a little more brazen and ambitious. Thank you for writing!”

“It was amusing at first,” writes another — “a great example of ‘first-world problems.’ But then all the whining about not being able to tell who their mail was from became old very quickly.

“But then I remembered, this is my competition in the market, focused on all sorts of triviality.

“No wonder I am doing so well!

“So never mind, keep whining, kids!”

“Some people just like to b**** about any and everything,” says a third. “You can’t/won’t please everybody. Also, I believe The 5 is free, right? Keep up the good work.”

“The whine gets better with time,” adds the reader who weighed in on Social Security above.

“Do we not understand that a) Everyone who gets The 5 must have responded to at least one of those sales emails at one point when they bought a service, b) It’s how permission email marketing works… quid pro quo for the info received, c) We connected types should know how to filter at a glance with any decent email user interface, and d) Your marketing department already uses analytics to determine what works and what triggers unsubscribe rates? What you offer is some form of edutainment meets advormation. If we wanna play, we gotta pay.

“If you really want to help us out, ratchet down the hype on cryptos and gold that produce more noise than signal. We get it. Everyone should have an allocation of gold in their portfolio and there are myriad ways to cover that square, and BTC billionaire stories play like lotto adverts. That said, still love the biting analysis.”

But wait — Dave inadvertently opened a new can of worms yesterday when he said the following…

We have a sophisticated marketing staff armed with equally sophisticated software that “suppresses” you from a sales email if you already subscribe to the publication being pitched.

“I still get ads,” objects a Platinum Reserve member. “In fact, I’ve found it interesting to click on an ad and see which advisory service it was supposed to be for, because it isn’t always obvious.”

“Reality is not congruent with what you say,” another reader writes.

“I keep getting offers from Agora Financial to purchase a service that I have paid for through March 2019,” writes a third. “Today I called the phone number to see if there was a problem with my account. There was no problem with my account. So I asked why I keep getting email for this service. The answer was, ‘You have to understand that Agora is an aggressive marketing organization.’ Agora’s sophisticated software does not ‘suppress’ email to me for publications to which I already am a subscriber.”

The 5: Let’s turn this one over to Dave. “Blech. This shouldn’t be happening. It’s one thing if there’s an ad within your daily issues for a publication you already receive. But it’s another thing if you’re getting a ‘dedicated’ email advertising something you’ve already paid for. That doesn’t do anyone any favors — you or us. I’ll give the marketing folks a heads-up.”

Best regards,

Emily Clancy
The 5 Min. Forecast

P.S. Kodak — the company that infamously invented digital photography but never brought it to market — is getting into the cryptocurrency business.

The firm just announced it’ll launch an initial coin offering — or ICO — called kodakcoin on Jan. 31, 2018. Per Kodak’s website, the crypto will allow pro and amateur photographers to “sell their work confidently on a secure blockchain platform.”

Hmmm… remember what James said? Blockchain’s a buzzword and doesn’t necessarily mean a crypto has value. But James is enthusiastic about another crypto — with real value — and at only 24 cents per coin, it’s a bargain with plenty of room to grow. Check it out here.


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