About That Crypto Meltdown…

Posted On Mar 5, 2018 By Dave Gonigam

  • What happened last month in crypto was mind-blowing…
  • … and almost no one noticed it except our new crypto insider
  • Market action in the shadow of trade wars, Italian election muddle
  • Pot power to the states: Governors pay no nevermind to Sessions
  • Who will MoviePass alienate first? Business partners or customers?
  • Jobs? Who cares! Trade war talk inspires a lively mailbag

“I’m liking what I see from the crypto markets lately,” said Rich Jacobs back on Valentine’s Day. “I see a new pump coming in the next 45–90 days.”

We’ll introduce you to Mr. Jacobs momentarily. But first, we ask that you contemplate what was happening in cryptocurrencies at the time he said that.

The market cap of all cryptos combined had collapsed 64% — from a record over $800 billion on Jan. 7 to less than $300 billion only a month later.

Then the market began to stabilize and Rich noticed something fascinating: Despite a deluge of bad crypto news day after day, crypto was no worse off in February than it was three months earlier:

Crypto Recovery

Before we go any further, we should get to that introduction…

When it comes to cryptocurrencies, Rich Jacobs is kind of a big deal.

The weekend after his Valentine’s Day call, he hosted the Bitcoin, Ethereum & Blockchain SuperConference in Dallas.

“We hosted over 1,500 mega-excited attendees, dozens of media and nearly 100 speakers,” he tells us. It was a marquee lineup including venture capital investor Tim Draper, software entrepreneur John McAfee… and even our own “crypto millionaire” James Altucher.

We’re privileged to announce Rich is now part of the Agora Financial family.

Yes, alongside James. It’s a big tent we have, and crypto’s growth is such that there’s room for more than one expert. James is the ex-hedge fund manager who, as we’re fond of saying, “cracked the crypto code.” Rich brings a different but equally valuable background. He’s the crypto insider, the dealmaker. Crypto is a small world; maybe 50 people call the shots. A good 35 of them were in attendance at the conference. Rich talks regularly with 10 more of them. (The other five prefer to stay anonymous.)

“My Rolodex of connections has given me unique insight into which cryptos could be for a fast move,” says Rich, “and my trading track record gives me the confidence to help you get in the right crypto trades at the right time.”

With that experience and those connections, Rich was able to say with confidence in mid-February that the end was not nigh.

Here in early March, he believes “now’s a perfect buying opportunity for cryptocurrencies.

“Many cryptocurrencies have endured incredible intraday price swings, spiking and falling 20%, sometimes 45% in ONE DAY. That’s enough to give even the most adventurous investor heartburn.

“But those 50 or so people we mentioned earlier? They live for moments like that.

“Consider the big players. Big-time crypto investors, as in other areas of investing, are called ‘whales.’ Crypto whales absolutely love dips like these because they give them a chance to pick up tons of coins at cheap prices.”

“Look at it this way: December’s run-up brought 100%, 500% and even 5,000% gains to main alt-coins,” Rich goes on.

“The current retracement of 40–50% is not a huge correction comparatively. If you buy at today’s prices, you’ll be a happy person when the next rally comes — and come it will.”

And especially at this moment. By now you’ve probably heard of ICOs, or initial coin offerings, comparable to an IPO in the stock market. And you’ve probably heard about both staggering gains in the ICO market… and the outright scams.

Recently, Rich was clued in to a whole new kind of opportunity in the crypto market — a time-sensitive “initial block offering.” There’s nothing in the past to compare it to… but the closest analogue to this opportunity generated $1.45 million per second.

Just follow this link for the details; there’s no long video to watch. Please note, however, that time is of the essence for reasons you’ll understand once you click. This information goes offline tonight at midnight.

The shadow of a trade war looms over the conventional markets as a new week begins.

The Dow recovered some of its early losses on Friday, a workmanlike process that continues today. At last check, the Big Board is a hair below 24,700. But it’s still not back to its level before the president announced plans for steel and aluminum tariffs on Thursday. (This morning, the president says those tariffs will remain in place until the NAFTA trade treaty is revised.)

Treasury rates are rising, the 10-year at 2.86%. Gold is treading water at $1,322. Crude is up more than a buck, to $62.28. Bitcoin has been holding the line on $11,000 for a good 72 hours now.

The currency markets are taking the Italian election results in stride, the euro up slightly at $1.234. The results were a muddle. The left-populist Five Star movement garnered the most votes, about a third of the total. But some of the right-populist parties could conceivably form a governing coalition. Or not.

If there was any doubt state governments are going their own way with marijuana, the federal ban be damned, it was laid to rest last week.

Forty-two of the nation’s 50 governors gathered last week in Washington for the National Governors Association conference. “For many of them,” says our penny-pot stock authority Ray Blanco, “getting clarification on Attorney General Jeff Sessions’ new pot policy was a top priority.”

But it was not a priority for Sessions. “He tried his best to avoid the governors from cannabis-friendly states,” says Ray. “Colorado’s Gov. John Hickenlooper tried asking Sessions about his anti-weed stance at the attorney general’s sole Q&A appearance to the group, but he couldn’t get called on.”

Still, regardless of federal policy, Ray says “U.S. governors have made it clear that they’re pushing forward with pot.”

For instance, New Jersey’s new governor, Phil Murphy: “We’re proceeding apace, again, beginning to make sure we get the medical piece right, because it’s life or death,” he tells Rolling Stone. “And then we will deliberately and steadily get to the recreational side.”

Ray’s final take: “As I’ve said before, we’re still in the early innings. I’m keeping a very close eye on a short list of opportunities.” (For the ones he says are buys right now, check this out.)

For everyone who suspects MoviePass is too good to be true, the weekend’s headlines brought confirmation.

Perhaps you’ve heard of MoviePass: “For $7.95 a month,” says our Zach Scheidt, “you get a MoviePass MasterCard debit card that you use to buy tickets at movie theaters. When you use the card to purchase a movie ticket, MoviePass pays the bill.

“There are no blackout dates, meaning you can go whenever you want. The only restriction is that you only get one movie ticket per day. Right now 91% of movie theaters already accept MoviePass.”

Not surprisingly, its subscriber base has swelled in just a month from 1.5 million to 2 million.

But for how long? “Simple math tells you that it loses money with every customer,” says Zach. “If all 2 million users see a pair of $9 movies in a given month, the company gets nearly $8 million in revenue but spends $36 million on tickets. How is that a good business strategy?”

MoviePass investors Helios and Matheson Analytics (HMNY) will tell you it’s all about creating a critical mass of customers it can monetize later.

OK, that sounds a little like the old joke about the CEO whose company loses money with every sale: “We’ll make it up on volume!” But in theory, anyway, it could work. For instance, Zach tells us, “MoviePass is seeking deals with independent movie theaters. Over 1,000 theaters have agreed to give MoviePass a $3 cut on ticket sales plus a 25% cut of concession sales.”

Ah, but what if MoviePass plays hardball on those deals and starts alienating customers?

Last week, users in Southern California, Washington, D.C. and a few other areas were dismayed to learn MoviePass would not give them entry to weekend showings of the Jennifer Lawrence spy flick Red Sparrow.

Explains Deadline Hollywood: “We have been hearing from sources for some time that MoviePass was using hardball negotiation tactics: While they refused to honor certain big-market cinema chain locations (such as AMC’s) who wouldn’t provide a share of ticket and concession revenues, some of those in the distribution community have cried that MoviePass has refused to list their titles on their app if they don’t enter into a sponsorship deal with the monthly movie ticket service.”

Hmmm… Zach doesn’t like where this is going. “There are potential limits to MoviePass’ reach. And of course, other companies are using the MoviePass model to start their own subscription services.” For Zach, HMNY is a clear “avoid.”

Our musings on Friday about tariffs and trade wars generated a full mailbag. We’ve had to truncate several of the emails, but we hope we’ve preserved their spirit…

“In response to the hand-wringing about how tariffs end up costing jobs, I think such a view is shortsighted and an outright threat to whatever freedoms this country was supposed to be a haven for. Every policy/legal change results in some jobs won and some jobs lost. That should be secondary.

“There should, foremost, be an analysis of whether it makes the U.S. stronger or weaker, not in relation to other countries necessarily, but strong from the perspective of creating a bulwark for our freedoms and way of life. If having a strong in-country steel manufacturing capability, for example, ensures that China, the EU, etc. can’t economically force us to adopt those more authoritarian or socialist ways of life, then we ought to ensure that it survives.”

“China is not our friend. Neither is Russia,” reads the next entry. “And after some of the things that have occurred in the last decade, I wouldn’t be too sure of the U.K., Europe or even Israel.

“I think China would like to own us — and by and large, it looks like they do. Because of the effectiveness of their cheap steel and control of rare metals, etc., etc., of which I am too ignorant to comment on, we have essentially lost our once-powerful position in heavy manufacturing.

“We mustn’t overlook the ridiculously over-regulated (driven mostly by those who have grown up in urban environments on concrete and who have no real notion of where things come from) business environment that has been imposed on this country. Isn’t it interesting, then, that we wring our hands in fear of losing their ‘cheap’ steel, etc., while we continue to devastate our own economy?”

“I find I must disagree with the assertion that tariffs will result in increasing prices over the long term, although it will be an excuse over the short term,” says a third.

“If tariffs increase prices, why didn’t prices drop precipitously after NAFTA? Mexican wages were a small fraction of U.S. wages, and a disproportionate exchange rate with Canada drove out manufacturing from the U.S without any reduction in prices. Chinese wages were even lower. You should know that prices are a reflection of demand, not costs. How else could Apple get away with selling cellphones that are manufactured for less than $10 (and yes, I’m including GSA costs)?

“Auto companies raise car prices each time that they give raises to their employees, even though productivity over the past century has far outstripped those increases. A poorly informed public has always swallowed the idea that increased wages are the source of inflation, rather than excess money creation resulting in watered-down value of the dollar. The market ALWAYS dictates price. That’s a fundamental characteristic of free markets.

“It’s up to every business to compete with all other businesses to make their product valuable at an acceptable price. It’s also necessary to have cost pressure to generate innovation. During our entire history, tariffs acted as a force for innovation in America, and tariffs were often as high as 50% before World War II.

“Always enjoy the discussions at The 5.”

The 5: For all the caterwauling going on, you’d never guess that only 30% of our steel is imported. Or if “national security” is your worry, that military use accounts for only 3% of U.S. steel production.

But from where we sit, the most disturbing thing is the binary choice that Trump and his opponents in the Deep State are presenting us peasants. On the one hand, Trump and his protectionist hangers-on like Wilbur Ross insist on old-fashioned protectionism. On the other hand, the power elite insists on multihundred-page “free trade” agreements that are anything but; they layer on new levels of bureaucracy and carve out advantages for favored crony capitalists.

The idea that goods should be able to cross borders free of any government interference? How quaint.

“Your ‘democracy’ reference,” reads the subject line of our final entry today.

“The U.S. was not established as a democracy; it’s supposed to be a republic. Our founders couldn’t think of a democracy that didn’t commit suicide.”

The 5: We don’t need to be lectured on that distinction. We’re sorry our effort at sarcasm was lost on you.

Must be hard, going through life as humorless as that…

Best regards.

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. Last chance: Something big is going down in the cryptocurrency markets… and it could mean life-changing gains regardless of what happens to bitcoin or ethereum or the rest.

Get the details on “the floppening” right here — before the page goes offline tonight at midnight.

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