A bearish signal for stocks… Some perspective on bitcoin’s 2018 fall… Teeka – This is what triggers the next crypto boom… In the mailbag: Is Dan Denning’s Digital Bill of Rights a “terrible idea”?…
First, an update on yesterday’s stock market action.
After jumping nearly 2% early in the session, the three major U.S. stock indexes rolled over.
The S&P 500 closed the day down -0.7%. And the Dow closed down -1%.
But it was the tech-heavy Nasdaq that got hit hardest. It plunged -1.6%.
That leaves the losses so far this month at -9.3% for the S&P 500… -7.5% for the Dow… and -12.6% for the Nasdaq.
We told you the sectors that had been leading the bull market higher – in particular, tech stocks – had started to break down.
And we warned you that… if this pattern continued… it would be a sign that a bear market was close at hand.
Stock market leaders are often referred to as the “generals.” As we wrote at the time…
Like generals lead their troops, these stocks lead the rest of the stock market – in both directions.
When the generals are advancing, the rest of the market tends to advance along with them. When the generals are in retreat, the rest of the market won’t be far behind.
And that’s exactly what’s been happening this month.
From the post-crash bottom – set on March 9, 2009 – to the end of September 2018, the Nasdaq rose 612% versus a gain of 426% for the S&P 500.
But it’s the Nasdaq that has led the broader stock market lower during the October rout. It’s down -12% versus a fall of -9% for the S&P 500.
Since their 52-week highs, Amazon (AMZN) is down -25%… Netflix (NFLX) is down -32%… and Facebook (FB) is down -35%.
That compares to a drop of just -10% from its 52-week high for the S&P 500.
That’s not a reason to panic. But it is a reason to make sure your portfolio isn’t overexposed to stocks.
And that brings us back to where we left off yesterday – bitcoin… and why it’s so attractive right now.
Last year, it shot 1,403% higher. So far in 2018, it’s down -56%.
In other words, bitcoin sellers have been more motivated than bitcoin buyers in 2018.
And if you listen to the cryptocurrency bears, it’s the end of bitcoin’s spectacular run.
But as Palm Beach Confidential editor Teeka Tiwari told folks at our first annual Legacy Investment Summit in Bermuda earlier this month, this year’s price drop is nothing new. Teeka…
The last great financial crisis for stocks before 2008 was in the 1930s. They happened nearly 80 years apart. But you get a financial crisis-type event in the crypto market every one or two years. It’s like clockwork.
For example, in 2011, bitcoin dropped 94%. In 2013, it dropped 72%. And in 2014, it dropped 75%.
Why would you invest in something that volatile? Teeka again…
Bitcoin may take big tumbles. But it’s resilient. Every time bitcoin has collapsed, it has roared back to new all-time highs.
In 2011, bitcoin fell from $32 to $2 – a 94% drop. But it was up 115x by its next peak. In 2013, bitcoin dropped from $230 to $70 – a 70% fall. But it was up 17x by its next peak. And from 2014, bitcoin fell from $1,200 to $173 – an 85% fall. But once again, it was up 115x by the next peak.
And Teeka reckons the greatest wealth-building opportunity in bitcoin is still to come.
Most Wall Street players missed out on the gains in bitcoin so far.
They’re not going to make the same mistake twice.
It’s why some of the biggest financial firms in the world are building new platforms to allow their customers to buy and store cryptocurrencies.
You see, right now, buying, selling, and storing cryptocurrencies is fiddly.
You have to buy and sell them on unregulated exchanges. You also have to figure out how to safely store your cryptos in digital “wallets” – apps on your smartphone or computer.
And that’s not something institutions such as hedge funds, endowments, family offices, and pension funds are comfortable with.
The first is Bakkt.
It’s a global network being put together by Intercontinental Exchange (ICE) – the owner of the New York Stock Exchange – that will allow institutional investors to buy, sell, and store cryptocurrencies safely and efficiently.
Next up is ErisX, which is backed by one of the “big five” retail brokerage firms in the U.S., TD Ameritrade.
It will allow investors to buy, sell, and store cryptocurrencies directly from their brokerage accounts on a regulated exchange.
Fidelity Investments is also making a move into cryptos.
The Boston-based firm is the largest custodian of 401(k) retirement savings plans. It’s also the fourth-largest asset manager, with about $2.5 trillion under management.
And it recently announced it would launch crypto products before the year is out.
Fidelity is keeping its plans to profit from the crypto boom close to its chest. But rumors suggest it will either launch a crypto exchange to compete with Bakkt and ErisX… or offer its brokerage clients the option of buying cryptos directly from their brokerage accounts.
For more on how big that sliver needs to be, make sure to catch up on yesterday’s Daily Cut here.
And if you’re interested in learning more about how to buy and store your bitcoin, check out this guide Teeka and his team put together.
It shows you where to buy and store bitcoin, as well as where to trade it for other cryptos.
Last week, one of your fellow readers took issue with Bill Bonner Letter co-author Dan Denning’s Digital Bill of Rights. Today, a rebuttal…
I would like to address Jeff G.’s comments indicating that our Bill of Rights is a terrible idea. First, I would like to thank him for pointing out that the current Bill of Rights is a charter of negative liberties, as I had never thought of them that way. When I read them again, it appears that he is largely correct. However, I would point out the following about our Bill of Rights:
Jeff indicates that, because our Bill of Rights lists specific rights, it would be considered all-inclusive. I would point out that our Bill of Rights specifically refers to Digital Rights, something that was not even conceived when the original Bill of Rights was installed.
As such, I do not believe that it could be considered a replacement for the original Bill of Rights, but only as an addition. Also, if that logic holds, presumably the original Bill of Rights could be considered all-inclusive if it forbids the addition of other things the government cannot do. I don’t believe that it does forbid such additions, nor should our Bill of Rights be considered to forbid the addition of other rights.
Even though our Bill of Rights is not written in negative terms, when I read through it, I could easily interpret the list as things the government should not restrict or impede. As far as who would enforce our Bill of Rights, I would ask, who enforces the original Bill of Rights? Ideally, ours would be enshrined in an amendment to the Constitution. However, my opinion is that such is unlikely. I would suggest a more realistic prospect is that it be put into law as regulatory documents, implementing bills submitted and passed by Congress and signed by the president. They would then be enforced by whatever regulatory agencies would be assigned to enforce them, the same way current laws are enforced.
I, for one, realize the difficulty in bringing any of this about. I consider that our efforts are a way in which to highlight these issues to our current congressional representatives and make them aware of a growing segment of the public that will be watching their response to them. I would hope that it will create pressure in the form of a potential voting block to encourage them to take action.
Finally, Jeff says that there are much better ways to secure these goals. I, for one, am open to any suggestions that he may have. My feeling about our Bill of Rights that Dan has written is that at least someone is doing something. My frustration has been that almost always, those who have a platform are eager to identify the problems, but they rarely, if ever, present any plan of action.
Kudos to Dan and Legacy Research for undertaking to propose and initiate a plan. As a note, I have referred to this Bill of Rights as “our” Bill of Rights as opposed to Dan’s Bill of Rights since we have all been asked to sign onto it.
– Charles H.
Did you sign Dan’s Digital Bill of Rights? Have you passed it on to friends and family? Let us know at [email protected].
Regards,
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Chris Lowe
October 30, 2018
Dublin, Ireland