(Bull) Market 2021

[ducati916]

Just a continuation of the thread. When the markets re-open on Monday (Tuesday our time) the Christmas/New Year low volume period will be over. It will be back to business as usual.

Last year saw:

The dominance of growth over value. This is likely to continue as it is a function of interest rates. As interest rates are not going to be allowed to rise too high, so value will continue to lag.

Last year's big gainers:

Proving the growth thesis.

US spending.

And across Europe.

All major central banks are playing the same game. Europe even more so. Currencies will (I think) come more into focus of those that normally would not pay too much attention to currencies.

Europe, US, all in the same boat, keeping zombies alive. This is highly deflationary as these zombies will provide some level of supply even if it is at a loss. If policy or circumstances change and these are allowed to fail/receivership, there could then be supply issues in the short-term creating inflationary pressure of the CPI version.

Still the (new) cold war continues. Congress just vetoed POTUS and defence spending cuts.

Mr flippe-floppe-flye is still on holiday.

When markets re-open, the bulls will remain in charge.

jog on
duc

 

[ducati916]

So without a doubt, the BTC mania is back. I have recovered an article from 2018, which while being an extremely long read, does offer a very different perspective on BTC.

First however, from @noirua and a link provided:

The ETFs are clearly a significant buyer of a broad array of coins, which in a universe of limited supply, result in big price changes to the upside. Given that the total value of BTC is only $400B +/-, this has not yet attracted the forces of institutional short sellers, for example Gold and the Bullion Banks. Along with some large speculators buying in, this has resulted in price rocketing higher.

Wow.

It however mirrors (correlates with) the SOXX ETF. So a way of analysing the internals of BTC is to take a peek under the hood of SOXX. So SOXX correlates with the QQQ:

Therefore, peeking under the hood of QQQ gives (a best guess) of where BTC is likely to go:

Which is in the short term, lower.

Now the loooooooong read:

layer innocent nothing argue pottery winner cotton menu task slim merge maid

The sequence of words is meaningless: a random array strung together by an algorithm let loose in an English dictionary. What makes them valuable is that they’ve been generated exclusively for me, by a software tool called MetaMask. In the lingo of cryptography, they’re known as my seed phrase. They might read like an incoherent stream of consciousness, but these words can be transformed into a key that unlocks a digital bank account, or even an online identity. It just takes a few more steps.

On the screen, I’m instructed to keep my seed phrase secure: Write it down, or keep it in a secure place on your computer. I scribble the 12 words onto a notepad, click a button and my seed phrase is transformed into a string of 64 seemingly patternless characters:

1b0be2162cedb2744d016943bb14e71de6af95a63af3790d6b41b1e719dc5c66

This is what’s called a “private key” in the world of cryptography: a way of proving identity, in the same, limited way that real-world keys attest to your identity when you unlock your front door. My seed phrase will generate that exact sequence of characters every time, but there’s no known way to reverse-engineer the original phrase from the key, which is why it is so important to keep the seed phrase in a safe location.

That private key number is then run through two additional transformations, creating a new string:

0x6c2ecd6388c550e8d99ada34a1cd55bedd052ad9

That string is my address on the Ethereum blockchain.

Ethereum belongs to the same family as the cryptocurrency Bitcoin, whose value has increased more than 1,000 percent in just the past year. Ethereum has its own currencies, most notably Ether, but the platform has a wider scope than just money. You can think of my Ethereum address as having elements of a bank account, an email address and a Social Security number. For now, it exists only on my computer as an inert string of nonsense, but the second I try to perform any kind of transaction — say, contributing to a crowdfunding campaign or voting in an online referendum — that address is broadcast out to an improvised worldwide network of computers that tries to verify the transaction. The results of that verification are then broadcast to the wider network again, where more machines enter into a kind of competition to perform complex mathematical calculations, the winner of which gets to record that transaction in the single, canonical record of every transaction ever made in the history of Ethereum. Because those transactions are registered in a sequence of “blocks” of data, that record is called the blockchain.

The whole exchange takes no more than a few minutes to complete. From my perspective, the experience barely differs from the usual routines of online life. But on a technical level, something miraculous is happening — something that would have been unimaginable just a decade ago. I’ve managed to complete a secure transaction without any of the traditional institutions that we rely on to establish trust. No intermediary brokered the deal; no social-media network captured the data from my transaction to better target its advertising; no credit bureau tracked the activity to build a portrait of my financial trustworthiness


And the platform that makes all this possible? No one owns it. There are no venture investors backing Ethereum Inc., because there is no Ethereum Inc. As an organizational form, Ethereum is far closer to a democracy than a private corporation. No imperial chief executive calls the shots. You earn the privilege of helping to steer Ethereum’s ship of state by joining the community and doing the work. Like Bitcoin and most other blockchain platforms, Ethereum is more a swarm than a formal entity. Its borders are porous; its hierarchy is deliberately flattened.

Oh, one other thing: Some members of that swarm have already accumulated a paper net worth in the billions from their labors, as the value of one “coin” of Ether rose from $8 on Jan. 1, 2017, to $843 exactly one year later.

You may be inclined to dismiss these transformations. After all, Bitcoin and Ether’s runaway valuation looks like a case study in irrational exuberance. And why should you care about an arcane technical breakthrough that right now doesn’t feel all that different from signing in to a website to make a credit card payment?

‘The Bitcoin bubble may ultimately turn out to be a distraction from the true significance of the blockchain.’
But that dismissal would be shortsighted. If there’s one thing we’ve learned from the recent history of the internet, it’s that seemingly esoteric decisions about software architecture can unleash profound global forces once the technology moves into wider circulation. If the email standards adopted in the 1970s had included public-private key cryptography as a default setting, we might have avoided the cataclysmic email hacks that have afflicted everyone from Sony to John Podesta, and millions of ordinary consumers might be spared routinized identity theft. If Tim Berners-Lee, the inventor of the World Wide Web, had included a protocol for mapping our social identity in his original specs, we might not have Facebook.

The true believers behind blockchain platforms like Ethereum argue that a network of distributed trust is one of those advances in software architecture that will prove, in the long run, to have historic significance. That promise has helped fuel the huge jump in cryptocurrency valuations. But in a way, the Bitcoin bubble may ultimately turn out to be a distraction from the true significance of the blockchain. The real promise of these new technologies, many of their evangelists believe, lies not in displacing our currencies but in replacing much of what we now think of as the internet, while at the same time returning the online world to a more decentralized and egalitarian system. If you believe the evangelists, the blockchain is the future. But it is also a way of getting back to the internet’s roots.
Once the inspiration for utopian dreams of infinite libraries and global connectivity, the internet has seemingly become, over the past year, a universal scapegoat: the cause of almost every social ill that confronts us. Russian trolls destroy the democratic system with fake news on Facebook; hate speech flourishes on Twitter and Reddit; the vast fortunes of the geek elite worsen income equality. For many of us who participated in the early days of the web, the last few years have felt almost postlapsarian. The web had promised a new kind of egalitarian media, populated by small magazines, bloggers and self-organizing encyclopedias; the information titans that dominated mass culture in the 20th century would give way to a more decentralized system, defined by collaborative networks, not hierarchies and broadcast channels. The wider culture would come to mirror the peer-to-peer architecture of the internet itself. The web in those days was hardly a utopia — there were financial bubbles and spammers and a thousand other problems — but beneath those flaws, we assumed, there was an underlying story of progress.

Last year marked the point at which that narrative finally collapsed. The existence of internet skeptics is nothing new, of course; the difference now is that the critical voices increasingly belong to former enthusiasts. “We have to fix the internet,” Walter Isaacson, Steve Jobs’s biographer, wrote in an essay published a few weeks after Donald Trump was elected president. “After 40 years, it has begun to corrode, both itself and us.” The former Google strategist James Williams told The Guardian: “The dynamics of the attention economy are structurally set up to undermine the human will.” In a blog post, Brad Burnham, a managing partner at Union Square Ventures, a top New York venture-capital firm, bemoaned the collateral damage from the quasi monopolies of the digital age: “Publishers find themselves becoming commodity content suppliers in a sea of undifferentiated content in the Facebook news feed. Websites see their fortunes upended by small changes in Google’s search algorithms. And manufacturers watch helplessly as sales dwindle when Amazon decides to source products directly in China and redirect demand to their own products.” (Full disclosure: Burnham’s firm invested in a company I started in 2006; we have had no financial relationship since it sold in 2011.) Even Berners-Lee, the inventor of the web itself, wrote a blog post voicing his concerns that the advertising-based model of social media and search engines creates a climate where “misinformation, or ‘fake news,’ which is surprising, shocking or designed to appeal to our biases, can spread like wildfire.”

For most critics, the solution to these immense structural issues has been to propose either a new mindfulness about the dangers of these tools — turning off our smartphones, keeping kids off social media — or the strong arm of regulation and antitrust: making the tech giants subject to the same scrutiny as other industries that are vital to the public interest, like the railroads or telephone networks of an earlier age. Both those ideas are commendable: We probably should develop a new set of habits governing how we interact with social media, and it seems entirely sensible that companies as powerful as Google and Facebook should face the same regulatory scrutiny as, say, television networks. But those interventions are unlikely to fix the core problems that the online world confronts. After all, it was not just the antitrust division of the Department of Justice that challenged Microsoft’s monopoly power in the 1990s; it was also the emergence of new software and hardware — the web, open-source software and Apple products — that helped undermine Microsoft’s dominant position.

The blockchain evangelists behind platforms like Ethereum believe that a comparable array of advances in software, cryptography and distributed systems has the ability to tackle today’s digital problems: the corrosive incentives of online advertising; the quasi monopolies of Facebook, Google and Amazon; Russian misinformation campaigns. If they succeed, their creations may challenge the hegemony of the tech giants far more effectively than any antitrust regulation. They even claim to offer an alternative to the winner-take-all model of capitalism than has driven wealth inequality to heights not seen since the age of the robber barons.

That remedy is not yet visible in any product that would be intelligible to an ordinary tech consumer. The only blockchain project that has crossed over into mainstream recognition so far is Bitcoin, which is in the middle of a speculative bubble that makes the 1990s internet I.P.O. frenzy look like a neighborhood garage sale. And herein lies the cognitive dissonance that confronts anyone trying to make sense of the blockchain: the potential power of this would-be revolution is being actively undercut by the crowd it is attracting, a veritable goon squad of charlatans, false prophets and mercenaries. Not for the first time, technologists pursuing a vision of an open and decentralized network have found themselves surrounded by a wave of opportunists looking to make an overnight fortune. The question is whether, after the bubble has burst, the very real promise of the blockchain can endure.

To some students of modern technological history, the internet’s fall from grace follows an inevitable historical script. As Tim Wu argued in his 2010 book, “The Master Switch,” all the major information technologies of the 20th century adhered to a similar developmental pattern, starting out as the playthings of hobbyists and researchers motivated by curiosity and community, and ending up in the hands of multinational corporations fixated on maximizing shareholder value. Wu calls this pattern the Cycle, and on the surface at least, the internet has followed the Cycle with convincing fidelity. The internet began as a hodgepodge of government-funded academic research projects and side-hustle hobbies. But 20 years after the web first crested into the popular imagination, it has produced in Google, Facebook and Amazon — and indirectly, Apple — what may well be the most powerful and valuable corporations in the history of capitalism.

Blockchain advocates don’t accept the inevitability of the Cycle. The roots of the internet were in fact more radically open and decentralized than previous information technologies, they argue, and had we managed to stay true to those roots, it could have remained that way. The online world would not be dominated by a handful of information-age titans; our news platforms would be less vulnerable to manipulation and fraud; identity theft would be far less common; advertising dollars would be distributed across a wider range of media properties.

To understand why, it helps to think of the internet as two fundamentally different kinds of systems stacked on top of each other, like layers in an archaeological dig. One layer is composed of the software protocols that were developed in the 1970s and 1980s and hit critical mass, at least in terms of audience, in the 1990s. (A protocol is the software version of a lingua franca, a way that multiple computers agree to communicate with one another. There are protocols that govern the flow of the internet’s raw data, and protocols for sending email messages, and protocols that define the addresses of web pages.) And then above them, a second layer of web-based services — Facebook, Google, Amazon, Twitter — that largely came to power in the following decade.

The first layer — call it InternetOne — was founded on open protocols, which in turn were defined and maintained by academic researchers and international-standards bodies, owned by no one. In fact, that original openness continues to be all around us, in ways we probably don’t appreciate enough. Email is still based on the open protocols POP, SMTP and IMAP; websites are still served up using the open protocol HTTP; bits are still circulated via the original open protocols of the internet, TCP/IP. You don’t need to understand anything about how these software conventions work on a technical level to enjoy their benefits. The key characteristic they all share is that anyone can use them, free of charge. You don’t need to pay a licensing fee to some corporation that owns HTTP if you want to put up a web page; you don’t have to sell a part of your identity to advertisers if you want to send an email using SMTP. Along with Wikipedia, the open protocols of the internet constitute the most impressive example of commons-based production in human history.

To see how enormous but also invisible the benefits of such protocols have been, imagine that one of those key standards had not been developed: for instance, the open standard we use for defining our geographic location, GPS. Originally developed by the United States military, the Global Positioning System was first made available for civilian use during the Reagan administration. For about a decade, it was largely used by the aviation industry, until individual consumers began to use it in car navigation systems. And now we have smartphones that can pick up a signal from GPS satellites orbiting above us, and we use that extraordinary power to do everything from locating nearby restaurants to playing Pokémon Go to coordinating disaster-relief efforts.

But what if the military had kept GPS out of the public domain? Presumably, sometime in the 1990s, a market signal would have gone out to the innovators of Silicon Valley and other tech hubs, suggesting that consumers were interested in establishing their exact geographic coordinates so that those locations could be projected onto digital maps. There would have been a few years of furious competition among rival companies, who would toss their own proprietary satellites into orbit and advance their own unique protocols, but eventually the market would have settled on one dominant model, given all the efficiencies that result from a single, common way of verifying location. Call that imaginary firm GeoBook. Initially, the embrace of GeoBook would have been a leap forward for consumers and other companies trying to build location awareness into their hardware and software. But slowly, a darker narrative would have emerged: a single private corporation, tracking the movements of billions of people around the planet, building an advertising behemoth based on our shifting locations. Any start-up trying to build a geo-aware application would have been vulnerable to the whims of mighty GeoBook. Appropriately angry polemics would have been written denouncing the public menace of this Big Brother in the sky.

But none of that happened, for a simple reason. Geolocation, like the location of web pages and email addresses and domain names, is a problem we solved with an open protocol. And because it’s a problem we don’t have, we rarely think about how beautifully GPS does work and how many different applications have been built on its foundation.

The open, decentralized web turns out to be alive and well on the InternetOne layer. But since we settled on the World Wide Web in the mid-’90s, we’ve adopted very few new open-standard protocols. The biggest problems that technologists tackled after 1995 — many of which revolved around identity, community and payment mechanisms — were left to the private sector to solve. This is what led, in the early 2000s, to a powerful new layer of internet services, which we might call InternetTwo.

For all their brilliance, the inventors of the open protocols that shaped the internet failed to include some key elements that would later prove critical to the future of online culture. Perhaps most important, they did not create a secure open standard that established human identity on the network. Units of information could be defined — pages, links, messages — but people did not have their own protocol: no way to define and share your real name, your location, your interests or (perhaps most crucial) your relationships to other people online.
This turns out to have been a major oversight, because identity is the sort of problem that benefits from one universally recognized solution. It’s what Vitalik Buterin, a founder of Ethereum, describes as “base-layer” infrastructure: things like language, roads and postal services, platforms where commerce and competition are actually assisted by having an underlying layer in the public domain. Offline, we don’t have an open market for physical passports or Social Security numbers; we have a few reputable authorities — most of them backed by the power of the state — that we use to confirm to others that we are who we say we are. But online, the private sector swooped in to fill that vacuum, and because identity had that characteristic of being a universal problem, the market was heavily incentivized to settle on one common standard for defining yourself and the people you know.

The self-reinforcing feedback loops that economists call “increasing returns” or “network effects” kicked in, and after a period of experimentation in which we dabbled in social-media start-ups like Myspace and Friendster, the market settled on what is essentially a proprietary standard for establishing who you are and whom you know. That standard is Facebook. With more than two billion users, Facebook is far larger than the entire internet at the peak of the dot-com bubble in the late 1990s. And that user growth has made it the world’s sixth-most-valuable corporation, just 14 years after it was founded. Facebook is the ultimate embodiment of the chasm that divides InternetOne and InternetTwo economies. No private company owned the protocols that defined email or GPS or the open web. But one single corporation owns the data that define social identity for two billion people today — and one single person, Mark Zuckerberg, holds the majority of the voting power in that corporation.

If you see the rise of the centralized web as an inevitable turn of the Cycle, and the open-protocol idealism of the early web as a kind of adolescent false consciousness, then there’s less reason to fret about all the ways we’ve abandoned the vision of InternetOne. Either we’re living in a fallen state today and there’s no way to get back to Eden, or Eden itself was a kind of fantasy that was always going to be corrupted by concentrated power. In either case, there’s no point in trying to restore the architecture of InternetOne; our only hope is to use the power of the state to rein in these corporate giants, through regulation and antitrust action. It’s a variation of the old Audre Lorde maxim: “The master’s tools will never dismantle the master’s house.” You can’t fix the problems technology has created for us by throwing more technological solutions at it. You need forces outside the domain of software and servers to break up cartels with this much power.
But the thing about the master’s house, in this analogy, is that it’s a duplex. The upper floor has indeed been built with tools that cannot be used to dismantle it. But the open protocols beneath them still have the potential to build something better.

One of the most persuasive advocates of an open-protocol revival is Juan Benet, a Mexican-born programmer now living on a suburban side street in Palo Alto, Calif., in a three-bedroom rental that he shares with his girlfriend and another programmer, plus a rotating cast of guests, some of whom belong to Benet’s organization, Protocol Labs. On a warm day in September, Benet greeted me at his door wearing a black Protocol Labs hoodie. The interior of the space brought to mind the incubator/frat house of HBO’s “Silicon Valley,” its living room commandeered by an array of black computer monitors. In the entrance hallway, the words “Welcome to Rivendell” were scrawled out on a whiteboard, a nod to the Elven city from “Lord of the Rings.” “We call this house Rivendell,” Benet said sheepishly. “It’s not a very good Rivendell. It doesn’t have enough books, or waterfalls, or elves.”

Benet, who is 29, considers himself a child of the first peer-to-peer revolution that briefly flourished in the late 1990s and early 2000s, driven in large part by networks like BitTorrent that distributed media files, often illegally. That initial flowering was in many ways a logical outgrowth of the internet’s decentralized, open-protocol roots. The web had shown that you could publish documents reliably in a commons-based network. Services like BitTorrent or Skype took that logic to the next level, allowing ordinary users to add new functionality to the internet: creating a distributed library of (largely pirated) media, as with BitTorrent, or helping people make phone calls over the internet, as with Skype.

‘We’re not trying to replace the U.S. government. It’s not meant to be a real currency; it’s meant to be a pseudo-currency inside this world.’
Sitting in the living room/office at Rivendell, Benet told me that he thinks of the early 2000s, with the ascent of Skype and BitTorrent, as “the ‘summer’ of peer-to-peer” — its salad days. “But then peer-to-peer hit a wall, because people started to prefer centralized architectures,” he said. “And partly because the peer-to-peer business models were piracy-driven.” A graduate of Stanford’s computer-science program, Benet talks in a manner reminiscent of Elon Musk: As he speaks, his eyes dart across an empty space above your head, almost as though he’s reading an invisible teleprompter to find the words. He is passionate about the technology Protocol Labs is developing, but also keen to put it in a wider context. For Benet, the shift from distributed systems to more centralized approaches set in motion changes that few could have predicted. “The rules of the game, the rules that govern all of this technology, matter a lot,” he said. “The structure of what we build now will paint a very different picture of the way things will be five or 10 years in the future.” He continued: “It was clear to me then that peer-to-peer was this extraordinary thing. What was not clear to me then was how at risk it is. It was not clear to me that you had to take up the baton, that it’s now your turn to protect it.”

Protocol Labs is Benet’s attempt to take up that baton, and its first project is a radical overhaul of the internet’s file system, including the basic scheme we use to address the location of pages on the web. Benet calls his system IPFS, short for InterPlanetary File System. The current protocol — HTTP — pulls down web pages from a single location at a time and has no built-in mechanism for archiving the online pages. IPFS allows users to download a page simultaneously from multiple locations and includes what programmers call “historic versioning,” so that past iterations do not vanish from the historical record. To support the protocol, Benet is also creating a system called Filecoin that will allow users to effectively rent out unused hard-drive space. (Think of it as a sort of Airbnb for data.) “Right now there are tons of hard drives around the planet that are doing nothing, or close to nothing, to the point where their owners are just losing money,” Benet said. “So you can bring online a massive amount of supply, which will bring down the costs of storage.” But as its name suggests, Protocol Labs has an ambition that extends beyond these projects; Benet’s larger mission is to support many new open-source protocols in the years to come.

Why did the internet follow the path from open to closed? One part of the explanation lies in sins of omission: By the time a new generation of coders began to tackle the problems that InternetOne left unsolved, there were near-limitless sources of capital to invest in those efforts, so long as the coders kept their systems closed. The secret to the success of the open protocols of InternetOne is that they were developed in an age when most people didn’t care about online networks, so they were able to stealthily reach critical mass without having to contend with wealthy conglomerates and venture capitalists. By the mid-2000s, though, a promising new start-up like Facebook could attract millions of dollars in financing even before it became a household brand. And that private-sector money ensured that the company’s key software would remain closed, in order to capture as much value as possible for shareholders.

And yet — as the venture capitalist Chris Dixon points out — there was another factor, too, one that was more technical than financial in nature. “Let’s say you’re trying to build an open Twitter,” Dixon explained while sitting in a conference room at the New York offices of Andreessen Horowitz, where he is a general partner. “I’m @cdixon at Twitter. Where do you store that? You need a database.” A closed architecture like Facebook’s or Twitter’s puts all the information about its users — their handles, their likes and photos, the map of connections they have to other individuals on the network — into a private database that is maintained by the company. Whenever you look at your Facebook newsfeed, you are granted access to some infinitesimally small section of that database, seeing only the information that is relevant to you.

Running Facebook’s database is an unimaginably complex operation, relying on hundreds of thousands of servers scattered around the world, overseen by some of the most brilliant engineers on the planet. From Facebook’s point of view, they’re providing a valuable service to humanity: creating a common social graph for almost everyone on earth. The fact that they have to sell ads to pay the bills for that service — and the fact that the scale of their network gives them staggering power over the minds of two billion people around the world — is an unfortunate, but inevitable, price to pay for a shared social graph. And that trade-off did in fact make sense in the mid-2000s; creating a single database capable of tracking the interactions of hundreds of millions of people — much less two billion — was the kind of problem that could be tackled only by a single organization. But as Benet and his fellow blockchain evangelists are eager to prove, that might not be true anymore.

So how can you get meaningful adoption of base-layer protocols in an age when the big tech companies have already attracted billions of users and collectively sit on hundreds of billions of dollars in cash? If you happen to believe that the internet, in its current incarnation, is causing significant and growing harm to society, then this seemingly esoteric problem — the difficulty of getting people to adopt new open-source technology standards — turns out to have momentous consequences. If we can’t figure out a way to introduce new, rival base-layer infrastructure, then we’re stuck with the internet we have today. The best we can hope for is government interventions to scale back the power of Facebook or Google, or some kind of consumer revolt that encourages that marketplace to shift to less hegemonic online services, the digital equivalent of forswearing big agriculture for local farmers’ markets. Neither approach would upend the underlying dynamics of InternetTwo.

The first hint of a meaningful challenge to the closed-protocol era arrived in 2008, not long after Zuckerberg opened the first international headquarters for his growing company. A mysterious programmer (or group of programmers) going by the name Satoshi Nakamoto circulated a paper on a cryptography mailing list. The paper was called “Bitcoin: A Peer-to-Peer Electronic Cash System,” and in it, Nakamoto outlined an ingenious system for a digital currency that did not require a centralized trusted authority to verify transactions. At the time, Facebook and Bitcoin seemed to belong to entirely different spheres — one was a booming venture-backed social-media start-up that let you share birthday greetings and connect with old friends, while the other was a byzantine scheme for cryptographic currency from an obscure email list. But 10 years later, the ideas that Nakamoto unleashed with that paper now pose the most significant challenge to the hegemony of InternetTwo giants like Facebook.

The paradox about Bitcoin is that it may well turn out to be a genuinely revolutionary breakthrough and at the same time a colossal failure as a currency. As I write, Bitcoin has increased in value by nearly 100,000 percent over the past five years, making a fortune for its early investors but also branding it as a spectacularly unstable payment mechanism. The process for creating new Bitcoins has also turned out to be a staggering energy drain.

History is replete with stories of new technologies whose initial applications end up having little to do with their eventual use. All the focus on Bitcoin as a payment system may similarly prove to be a distraction, a technological red herring. Nakamoto pitched Bitcoin as a “peer-to-peer electronic-cash system” in the initial manifesto, but at its heart, the innovation he (or she or they) was proposing had a more general structure, with two key features.

First, Bitcoin offered a kind of proof that you could create a secure database — the blockchain — scattered across hundreds or thousands of computers, with no single authority controlling and verifying the authenticity of the data.

Second, Nakamoto designed Bitcoin so that the work of maintaining that distributed ledger was itself rewarded with small, increasingly scarce Bitcoin payments. If you dedicated half your computer’s processing cycles to helping the Bitcoin network get its math right — and thus fend off the hackers and scam artists — you received a small sliver of the currency. Nakamoto designed the system so that Bitcoins would grow increasingly difficult to earn over time, ensuring a certain amount of scarcity in the system. If you helped Bitcoin keep that database secure in the early days, you would earn more Bitcoin than later arrivals. This process has come to be called “mining.”
For our purposes, forget everything else about the Bitcoin frenzy, and just keep these two things in mind: What Nakamoto ushered into the world was a way of agreeing on the contents of a database without anyone being “in charge” of the database, and a way of compensating people for helping make that database more valuable, without those people being on an official payroll or owning shares in a corporate entity. Together, those two ideas solved the distributed-database problem and the funding problem. Suddenly there was a way of supporting open protocols that wasn’t available during the infancy of Facebook and Twitter.

These two features have now been replicated in dozens of new systems inspired by Bitcoin. One of those systems is Ethereum, proposed in a white paper by Vitalik Buterin when he was just 19. Ethereum does have its currencies, but at its heart Ethereum was designed less to facilitate electronic payments than to allow people to run applications on top of the Ethereum blockchain. There are currently hundreds of Ethereum apps in development, ranging from prediction markets to Facebook clones to crowdfunding services. Almost all of them are in pre-alpha stage, not ready for consumer adoption. Despite the embryonic state of the applications, the Ether currency has seen its own miniature version of the Bitcoin bubble, most likely making Buterin an immense fortune.

These currencies can be used in clever ways. Juan Benet’s Filecoin system will rely on Ethereum technology and reward users and developers who adopt its IPFS protocol or help maintain the shared database it requires. Protocol Labs is creating its own cryptocurrency, also called Filecoin, and has plans to sell some of those coins on the open market in the coming months. (In the summer of 2017, the company raised $135 million in the first 60 minutes of what Benet calls a “presale” of the tokens to accredited investors.) Many cryptocurrencies are first made available to the public through a process known as an initial coin offering, or I.C.O.

The I.C.O. abbreviation is a deliberate echo of the initial public offering that so defined the first internet bubble in the 1990s. But there is a crucial difference between the two. Speculators can buy in during an I.C.O., but they are not buying an ownership stake in a private company and its proprietary software, the way they might in a traditional I.P.O. Afterward, the coins will continue to be created in exchange for labor — in the case of Filecoin, by anyone who helps maintain the Filecoin network. Developers who help refine the software can earn the coins, as can ordinary users who lend out spare hard-drive space to expand the network’s storage capacity. The Filecoin is a way of signaling that someone, somewhere, has added value to the network.

Advocates like Chris Dixon have started referring to the compensation side of the equation in terms of “tokens,” not coins, to emphasize that the technology here isn’t necessarily aiming to disrupt existing currency systems. “I like the metaphor of a token because it makes it very clear that it’s like an arcade,” he says. “You go to the arcade, and in the arcade you can use these tokens. But we’re not trying to replace the U.S. government. It’s not meant to be a real currency; it’s meant to be a pseudo-currency inside this world.” Dan Finlay, a creator of MetaMask, echoes Dixon’s argument. “To me, what’s interesting about this is that we get to program new value systems,” he says. “They don’t have to resemble money.”

Pseudo or not, the idea of an I.C.O. has already inspired a host of shady offerings, some of them endorsed by celebrities who would seem to be unlikely blockchain enthusiasts, like DJ Khaled, Paris Hilton and Floyd Mayweather. In a blog post published in October 2017, Fred Wilson, a founder of Union Square Ventures and an early advocate of the blockchain revolution, thundered against the spread of I.C.O.s. “I hate it,” Wilson wrote, adding that most I.C.O.s “are scams. And the celebrities and others who promote them on their social-media channels in an effort to enrich themselves are behaving badly and possibly violating securities laws.” Arguably the most striking thing about the surge of interest in I.C.O.s — and in existing currencies like Bitcoin or Ether — is how much financial speculation has already gravitated to platforms that have effectively zero adoption among ordinary consumers. At least during the internet bubble of late 1990s, ordinary people were buying books on Amazon or reading newspapers online; there was clear evidence that the web was going to become a mainstream platform. Today, the hype cycles are so accelerated that billions of dollars are chasing a technology that almost no one outside the cryptocommunity understands, much less uses.

Let’s say, for the sake of argument, that the hype is warranted, and blockchain platforms like Ethereum become a fundamental part of our digital infrastructure. How would a distributed ledger and a token economy somehow challenge one of the tech giants? One of Fred Wilson’s partners at Union Square Ventures, Brad Burnham, suggests a scenario revolving around another tech giant that has run afoul of regulators and public opinion in the last year: Uber. “Uber is basically just a coordination platform between drivers and passengers,” Burnham says. “Yes, it was really innovative, and there were a bunch of things in the beginning about reducing the anxiety of whether the driver was coming or not, and the map — and a whole bunch of things that you should give them a lot of credit for.” But when a new service like Uber starts to take off, there’s a strong incentive for the marketplace to consolidate around a single leader. The fact that more passengers are starting to use the Uber app attracts more drivers to the service, which in turn attracts more passengers. People have their credit cards stored with Uber; they have the app installed already; there are far more Uber drivers on the road. And so the switching costs of trying out some other rival service eventually become prohibitive, even if the chief executive seems to be a jerk or if consumers would, in the abstract, prefer a competitive marketplace with a dozen Ubers. “At some point, the innovation around the coordination becomes less and less innovative,” Burnham says.

The blockchain world proposes something different. Imagine some group like Protocol Labs decides there’s a case to be made for adding another “basic layer” to the stack. Just as GPS gave us a way of discovering and sharing our location, this new protocol would define a simple request: I am here and would like to go there. A distributed ledger might record all its users’ past trips, credit cards, favorite locations — all the metadata that services like Uber or Amazon use to encourage lock-in. Call it, for the sake of argument, the Transit protocol. The standards for sending a Transit request out onto the internet would be entirely open; anyone who wanted to build an app to respond to that request would be free to do so. Cities could build Transit apps that allowed taxi drivers to field requests. But so could bike-share collectives, or rickshaw drivers. Developers could create shared marketplace apps where all the potential vehicles using Transit could vie for your business. When you walked out on the sidewalk and tried to get a ride, you wouldn’t have to place your allegiance with a single provider before hailing. You would simply announce that you were standing at 67th and Madison and needed to get to Union Square. And then you’d get a flurry of competing offers. You could even theoretically get an offer from the M.T.A., which could build a service to remind Transit users that it might be much cheaper and faster just to jump on the 6 train.

How would Transit reach critical mass when Uber and Lyft already dominate the ride-sharing market? This is where the tokens come in. Early adopters of Transit would be rewarded with Transit tokens, which could themselves be used to purchase Transit services or be traded on exchanges for traditional currency. As in the Bitcoin model, tokens would be doled out less generously as Transit grew more popular. In the early days, a developer who built an iPhone app that uses Transit might see a windfall of tokens; Uber drivers who started using Transit as a second option for finding passengers could collect tokens as a reward for embracing the system; adventurous consumers would be rewarded with tokens for using Transit in its early days, when there are fewer drivers available compared with the existing proprietary networks like Uber or Lyft.

As Transit began to take off, it would attract speculators, who would put a monetary price on the token and drive even more interest in the protocol by inflating its value, which in turn would attract more developers, drivers and customers. If the whole system ends up working as its advocates believe, the result is a more competitive but at the same time more equitable marketplace. Instead of all the economic value being captured by the shareholders of one or two large corporations that dominate the market, the economic value is distributed across a much wider group: the early developers of Transit, the app creators who make the protocol work in a consumer-friendly form, the early-adopter drivers and passengers, the first wave of speculators. Token economies introduce a strange new set of elements that do not fit the traditional models: instead of creating value by owning something, as in the shareholder equity model, people create value by improving the underlying protocol, either by helping to maintain the ledger (as in Bitcoin mining), or by writing apps atop it, or simply by using the service. The lines between founders, investors and customers are far blurrier than in traditional corporate models; all the incentives are explicitly designed to steer away from winner-take-all outcomes. And yet at the same time, the whole system depends on an initial speculative phase in which outsiders are betting on the token to rise in value.

“You think about the ’90s internet bubble and all the great infrastructure we got out of that,” Dixon says. “You’re basically taking that effect and shrinking it down to the size of an application.”

‘Bitcoin is now a nine-year-old multibillion-dollar bug bounty, and no one’s hacked it. It feels like pretty good proof.’
Even decentralized cryptomovements have their key nodes. For Ethereum, one of those nodes is the Brooklyn headquarters of an organization called ConsenSys, founded by Joseph Lubin, an early Ethereum pioneer. In November, Amanda Gutterman, the 26-year-old chief marketing officer for ConsenSys, gave me a tour of the space. In our first few minutes together, she offered the obligatory cup of coffee, only to discover that the drip-coffee machine in the kitchen was bone dry. “How can we fix the internet if we can’t even make coffee?” she said with a laugh.

Planted in industrial Bushwick, a stone’s throw from the pizza mecca Roberta’s, “headquarters” seemed an unlikely word. The front door was festooned with graffiti and stickers; inside, the stairwells of the space appeared to have been last renovated during the Coolidge administration. Just about three years old, the ConsenSys network now includes more than 550 employees in 28 countries, and the operation has never raised a dime of venture capital. As an organization, ConsenSys does not quite fit any of the usual categories: It is technically a corporation, but it has elements that also resemble nonprofits and workers’ collectives. The shared goal of ConsenSys members is strengthening and expanding the Ethereum blockchain. They support developers creating new apps and tools for the platform, one of which is MetaMask, the software that generated my Ethereum address. But they also offer consulting-style services for companies, nonprofits or governments looking for ways to integrate Ethereum’s smart contracts into their own systems.

The true test of the blockchain will revolve — like so many of the online crises of the past few years — around the problem of identity. Today your digital identity is scattered across dozens, or even hundreds, of different sites: Amazon has your credit-card information and your purchase history; Facebook knows your friends and family; Equifax maintains your credit history. When you use any of those services, you are effectively asking for permission to borrow some of that information about yourself in order perform a task: ordering a Christmas present for your uncle, checking Instagram to see pictures from the office party last night. But all these different fragments of your identity don’t belong to you; they belong to Facebook and Amazon and Google, who are free to sell bits of that information about you to advertisers without consulting you. You, of course, are free to delete those accounts if you choose, and if you stop checking Facebook, Zuckerberg and the Facebook shareholders will stop making money by renting out your attention to their true customers. But your Facebook or Google identity isn’t portable. If you want to join another promising social network that is maybe a little less infected with Russian bots, you can’t extract your social network from Twitter and deposit it in the new service. You have to build the network again from scratch (and persuade all your friends to do the same).

The blockchain evangelists think this entire approach is backward. You should own your digital identity — which could include everything from your date of birth to your friend networks to your purchasing history — and you should be free to lend parts of that identity out to services as you see fit. Given that identity was not baked into the original internet protocols, and given the difficulty of managing a distributed database in the days before Bitcoin, this form of “self-sovereign” identity — as the parlance has it — was a practical impossibility. Now it is an attainable goal. A number of blockchain-based services are trying to tackle this problem, including a new identity system called uPort that has been spun out of ConsenSys and another one called Blockstack that is currently based on the Bitcoin platform. (Tim Berners-Lee is leading the development of a comparable system, called Solid, that would also give users control over their own data.) These rival protocols all have slightly different frameworks, but they all share a general vision of how identity should work on a truly decentralized internet.

What would prevent a new blockchain-based identity standard from following Tim Wu’s Cycle, the same one that brought Facebook to such a dominant position? Perhaps nothing. But imagine how that sequence would play out in practice. Someone creates a new protocol to define your social network via Ethereum. It might be as simple as a list of other Ethereum addresses; in other words, Here are the public addresses of people I like and trust. That way of defining your social network might well take off and ultimately supplant the closed systems that define your network on Facebook. Perhaps someday, every single person on the planet might use that standard to map their social connections, just as every single person on the internet uses TCP/IP to share data. But even if this new form of identity became ubiquitous, it wouldn’t present the same opportunities for abuse and manipulation that you find in the closed systems that have become de facto standards. I might allow a Facebook-style service to use my social map to filter news or gossip or music for me, based on the activity of my friends, but if that service annoyed me, I’d be free to sample other alternatives without the switching costs. An open identity standard would give ordinary people the opportunity to sell their attention to the highest bidder, or choose to keep it out of the marketplace altogether.

Gutterman suggests that the same kind of system could be applied to even more critical forms of identity, like health care data. Instead of storing, say, your genome on servers belonging to a private corporation, the information would instead be stored inside a personal data archive. “There may be many corporate entities that I don’t want seeing that data, but maybe I’d like to donate that data to a medical study,” she says. “I could use my blockchain-based self-sovereign ID to [allow] one group to use it and not another. Or I could sell it over here and give it away over there.”

The token architecture would give a blockchain-based identity standard an additional edge over closed standards like Facebook’s. As many critics have observed, ordinary users on social-media platforms create almost all the content without compensation, while the companies capture all the economic value from that content through advertising sales. A token-based social network would at least give early adopters a piece of the action, rewarding them for their labors in making the new platform appealing. “If someone can really figure out a version of Facebook that lets users own a piece of the network and get paid,” Dixon says, “that could be pretty compelling.”

Would that information be more secure in a distributed blockchain than behind the elaborate firewalls of giant corporations like Google or Facebook? In this one respect, the Bitcoin story is actually instructive: It may never be stable enough to function as a currency, but it does offer convincing proof of just how secure a distributed ledger can be. “Look at the market cap of Bitcoin or Ethereum: $80 billion, $25 billion, whatever,” Dixon says. “That means if you successfully attack that system, you could walk away with more than a billion dollars. You know what a ‘bug bounty’ is? Someone says, ‘If you hack my system, I’ll give you a million dollars.’ So Bitcoin is now a nine-year-old multibillion-dollar bug bounty, and no one’s hacked it. It feels like pretty good proof.”

Additional security would come from the decentralized nature of these new identity protocols. In the identity system proposed by Blockstack, the actual information about your identity — your social connections, your purchasing history — could be stored anywhere online. The blockchain would simply provide cryptographically secure keys to unlock that information and share it with other trusted providers. A system with a centralized repository with data for hundreds of millions of users — what security experts call “honey pots” — is far more appealing to hackers. Which would you rather do: steal a hundred million credit histories by hacking into a hundred million separate personal computers and sniffing around until you found the right data on each machine? Or just hack into one honey pot at Equifax and walk away with the same amount of data in a matter of hours? As Gutterman puts it, “It’s the difference between robbing a house versus robbing the entire village.”

So much of the blockchain’s architecture is shaped by predictions about how that architecture might be abused once it finds a wider audience. That is part of its charm and its power. The blockchain channels the energy of speculative bubbles by allowing tokens to be shared widely among true supporters of the platform. It safeguards against any individual or small group gaining control of the entire database. Its cryptography is designed to protect against surveillance states or identity thieves. In this, the blockchain displays a familial resemblance to political constitutions: Its rules are designed with one eye on how those rules might be exploited down the line.
Much has been made of the anarcho-libertarian streak in Bitcoin and other nonfiat currencies; the community is rife with words and phrases (“self-sovereign”) that sound as if they could be slogans for some militia compound in Montana. And yet in its potential to break up large concentrations of power and explore less-proprietary models of ownership, the blockchain idea offers a tantalizing possibility for those who would like to distribute wealth more equitably and break up the cartels of the digital age.

The blockchain worldview can also sound libertarian in the sense that it proposes nonstate solutions to capitalist excesses like information monopolies. But to believe in the blockchain is not necessarily to oppose regulation, if that regulation is designed with complementary aims. Brad Burnham, for instance, suggests that regulators should insist that everyone have “a right to a private data store,” where all the various facets of their online identity would be maintained. But governments wouldn’t be required to design those identity protocols. They would be developed on the blockchain, open source. Ideologically speaking, that private data store would be a true team effort: built as an intellectual commons, funded by token speculators, supported by the regulatory state.

Like the original internet itself, the blockchain is an idea with radical — almost communitarian — possibilities that at the same time has attracted some of the most frivolous and regressive appetites of capitalism. We spent our first years online in a world defined by open protocols and intellectual commons; we spent the second phase in a world increasingly dominated by closed architectures and proprietary databases. We have learned enough from this history to support the hypothesis that open works better than closed, at least where base-layer issues are concerned. But we don’t have an easy route back to the open-protocol era. Some messianic next-generation internet protocol is not likely to emerge out of Department of Defense research, the way the first-generation internet did nearly 50 years ago.
Yes, the blockchain may seem like the very worst of speculative capitalism right now, and yes, it is demonically challenging to understand. But the beautiful thing about open protocols is that they can be steered in surprising new directions by the people who discover and champion them in their infancy. Right now, the only real hope for a revival of the open-protocol ethos lies in the blockchain. Whether it eventually lives up to its egalitarian promise will in large part depend on the people who embrace the platform, who take up the baton, as Juan Benet puts it, from those early online pioneers. If you think the internet is not working in its current incarnation, you can’t change the system through think-pieces and F.C.C. regulations alone. You need new code.


So congrats if you made it all-the-way-through. That was a 3 cups of coffee read for me.

jog on
duc

 

[ducati916]

Some more charts:

Wow!

Back on planet earth: Gold not looking super strong atm. Which makes me really question what exactly (other than a pure speculative bubble) people are buying in the crypto space. If you love crypto, you should love gold. I haven't seen anything in the crypto space, as an argument for holding that does not apply to gold. The 1 difference is volume of supply/availability. BTC will be 21M coins. Full stop. If crypto (BTC) is going to be an equivalent store of value re. gold, then a higher price/coin is definitely on the cards.

But therein lies the seed of its own destruction: one of the functions of money (and this is what it is being touted as) is that there has to be enough of it to be in common usage. At 21M coins, BTC is not 'money'.

The great (1982-2020) Bull market is over (assuming ZIRP and no moves to NIRP). Therefore as a long term hold, short treasuries via an ETF. Obviously if you are short, you pay the holding costs (yield). Not really an attractive proposition.

All of the below are defensive positions in a stock based bear market. None are even hinting at a 'top' in the SPY.

Financials looking to break out.

Dow Theory confirmation:

jog on
duc

 

[qldfrog]

Can not say i read it, went thru in fast read mode: it is true that there isa quasi evangetical view of that technology.
Sadly that anarchist ideal is far from being realistic and you see blockchain at all sauces, going thru very slow and archaic loops to do things like tracing slabs of meat or counting trees in forests.
The argument being that blockchain is incorruptible..which is mostly true but how many people write their own code to exploit this?
Blockchain is mostly safe but the tools using it or pretending to are mostly uncontrolled and corruptible

Similar as telling you can not have fraud unless you use forged money
So blockchain as a technology has few real world usages, a niche indeed..yet in a world where facts do not matter and narrative is the truth...i might be surprised

Back to crypto currencies, yes it can be. A wealth store, maybe even a currency ..but BTC too slow or limited numbers for that last part.
A lot of scams, some making money..after all ETFs will want to invest in more than BTC and Ethereum so we see exotic rubbish jumping higher and higher.
My view is that both BTC and Ethereum as a machine currency could have a future, a bright one as long as governments do not take umbrage and just ban it.
So my limited exposure...
Hope it adds to the debate

 

[barney]

That was a 3 cups of coffee read for me. jog on duc

Lol. And possibly a candidate for the longest Post on ASF Mr Duc. ? When do you find time to sleep!

 

[ducati916]

So the first real trading day of 2021 and we have a vol. spike:

We had a couple of 'warnings' during the Santa Rally and lead up: they didn't trigger any sort of decline. The hints were also in the tepid moves higher. The issue is: is this spike moving higher (a buy the dip) or are there going to be further declines?

Leading into the 2021 market: lots of insider selling. The Market Data post details the worst offenders which includes (my hated) ZM.

The hyper activity in Options this year has had its impact on equity markets: the bulls being highly active.

Not sure how you classify one from t'other.

Now this is interesting: the OTC (Over the Counter) market has been red hot. I would have been interested to see how that compared to the 2000 market.

This has been touched on. The difference is that at least this time they (IPOs) have some actual earnings rather than the eyeball metric.

Schiller et al. have just completed 'new research' that makes this metric redundant. Now that is 'typical' of market tops.

How January goes, goes the rest of the year. Therefore we would want to see January recover.

Probably not a big deal. Then again?

From Mr flippe-floppe-flye:

I would expect the 'buy-the-dip' brigade to be out in force. This is a jump in vol. but the fundamental underpinning of the Bull (ultra-low interest rates) are still in place and are not going anywhere anytime soon. Whether the dip continues, is anybody's guess currently, however I would venture that tomorrow will see the peak in the VIX and then gradually receding vol. I would wait until tomorrow before buying-the-dip.

jog on
duc

 

[ducati916]

So looking now at some EOD charts:

So first from 28 Dec. 2020, Bulls were buying the market, but not with a great deal of conviction.

Today, the Bears stepped in. This could continue and I think early trading tomorrow will see initial weakness. However, I don't think it continues much past lunch/close of the market.

Now this is the SPY. There is (next set of charts) a divergence between SPY and QQQ. The cubes are more over extended than the SPY. Continued weakness in SPY will be likely due to higher vol. in QQQ.

SPY has a short-term support. QQQ is still in free-fall.

Margin is high. A fall in value of stock collateral, of course creates a margin call. Just how much too high, possibly we may find out.

Mutual Funds have low cash positions also: they are unlikely to be dip buyers.

Not the greatest start.

jog on
duc

 

[investtrader]

That 'smart money' cliche always makes me laugh. Look at the performance of the smart money funds - not too smart.

 

[ducati916]

The buy-the-dip brigade came out early. I was expecting a far weaker open.

I wouldn't quite sound the all clear. We have a pause. I would expect vol. to recede. However something spooked the herd. Possibly the elections in Georgia, possibly C19 news, whatever. Everything that jumped: Gold, Bonds, has calmed down. So for the moment all is well.

Some data on that '1'st trading day of the year':

Nothing much in it.

Gold:

Mr @rederob chart (and who was very right the last time around) is bullish again. So I have a sizeable gold position currently and gold therefore is of great interest currently. Now I am not overly concerned re. direction overall, but I am interested (very) in turning points (fluctuations), as my strategy revolves around turning points in trends, rather than outright directional trends. My opening of the position was about 20 days ago, well actually 9 Dec. 2020.

So if gold is breaking out in a new bull cycle higher, I'm very interested and even more interested when it takes a retrace. So my chart after.

As you can see, possibility of a breakout higher, but still very open to argument (Miners as opposed to gold).

My other big market neutral position, Natural Gas:

Some fundamentals (not that I have the slightest interest in them as they change with the weather):

So essentially we can see (a) there is a low(er) supply currently than in previous years, and (b) there still seems to be ample production (time delay in supplying market?). There is weather data suggesting colder temperatures for the US. which has been driving the price higher.

Now I almost re-balanced at the recent lows, but didn't, thinking price would go lower. It didn't. It bounced. So this is a super twitchy market.

Mr flippe-floppe-flye:

Inflation: we are in agreement on the meme of inflation. The inflation theory is out there (obviously the market is paying attention) but it is not embraced by all. There are still many sitting in the dis-inflationary camp and to be fair, there are still significant dis-inflationary forces present, never mind the bete noir risk of an outright deflation (although the Fed. is leaning with all of its weight against that risk).

So overall I expect more vol. in commodities, less vol. (to the upside) in stocks, blunting their returns (slow grind higher) with obvious risks to BS type events with concurrent fast jumps in vol. due to (extreme) valuations. Also clearly the Options market has become an area that can influence short term fluctuations in the market. Because PUT/CALL data is EOD, difficult to catch intra-day moves caused by big volume in the Options market, so it can be as much of a hinderance as help.

jog on
duc

 

[ducati916]

News:

Market Movers

- Suncor Energy (NYSE: SU) says it will record a C$425 million impairment charge for the fourth quarter on its White Rose project.

- Royal Dutch Shell (NYSE: RDS.A) will lay off 700 workers following the shutdown of its Convent refinery.

- Ivanhoe Capital Acquisition Corp., the special purpose acquisition company led by billionaire mining investor Robert Friedland, is raising $200 million to invest in industries key to the global energy transition.

Tuesday, January 5, 2021

Oil prices shot up more than 3% in early trading on Tuesday on news that OPEC+ would push off an expected production increase next month. Risks remain, but investors and traders see more restraint as bullish for oil.

OPEC+ leans towards no change. Oil prices rallied on Tuesday morning, following reports that Russia—the OPEC+ producer that was insisting on a 500,000-bpd production increase in February—has agreed that there would not be another rise in the pact's production next month.

OPEC+ sees downside risk. Oil prices have rallied, but OPEC Secretary-General warned of downside risks ahead of the group’s meeting on Monday. “Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle,” said OPEC Secretary-General Mohammad Barkindo.

U.S. shale could recover. EIA estimates point to U.S. oil production staying at around 11 million bpd for at least another year, as production rates from existing wells in the U.S. shale patch will fall faster than production gains from fewer newly drilled wells. But some analysts say that the market has been too quick to write off U.S. shale again, and will be surprised by the rebound in American oil production in 2021.

South Korea tanker seized by Iran. Iran seized a South Korean vessel in the Persian Gulf. The move comes as Seoul has frozen Iranian funds in Korean banks due to U.S. sanctions.

China struggles to keep lights on. China’s rapid recovery has strained power supplies, forcing power cuts to some industrial and commercial users. Electricity demand in November was up 9.4% from a year earlier.

The megatrend in solar. The solar sector’s sole pure-play solar fund, Invesco Solar Portfolio ETF (TAN), is up 234% over the past 52 weeks, with a good chunk of those returns having come after Joe Biden was declared the winner of the U.S. presidential elections a month-and-half ago. That incredible momentum is certainly beginning to look like a big bubble in the making, but Wall Street remains bullish. And one secular trend is looking to completely redefine the solar sector.

EPA finalizes science rule. The U.S. EPA finalized a rule to limit what scientific research can be used in regulations, a move critics say is aimed at crippling the agency’s ability to regulate air and water pollution.

Interior finalizes NPR-A plans. The Trump administration on Monday finalized plans to open more than 80 percent of Alaska’s National Petroleum Reserve (NPR-A) to oil drilling. The NPR-A is adjacent to the Arctic National Wildlife Refuge.

Russia’s oil production falls for the first time. Oil production in Russia declined in 2020 for the first time since 2008.

Iraq struggles to pay debts. The New York Times looked at the brewing financial crisis in Iraq from the steep drop in oil revenues.

Permian showing signs of life. On the ground in the Permian basin, there are visible signs of an uptick in activity. More traffic, higher production, and better-than-expected revenues for the New Mexico state government. New Mexico’s oil production increased by 5.5% in the third quarter.

Dallas Fed: Shale returning. The quarterly Dallas Fed survey showed a positive reading for its oil and gas index, the first positive reading since the first quarter of 2019. Multiple readings in the survey – capex, drilling activity, employment, oilfield services activity – showed improvement.

CNOOC could be delisted from NYSE. China’s state-owned oil firm CNOOC could be removed from the New York Stock Exchange after the Pentagon deemed the company as controlled by the Chinese military. PetroChina Co. and China Petroleum and Chemical Corp., also known as Sinopec, may also be under threat.

Biden as $40 billion loan fund to use for clean energy. The Department of Energy has a $40 billion fund for loan guarantees for clean energy that has been largely unused by the Trump administration. Politico reports that the Biden administration will likely tap it to accelerate renewables research and deployment.

China’s EV automakers see a surge in sales. Chinese electric car start-ups Nio, Li Auto, and Xpeng each announced in the last few days that vehicle deliveries surged last year.

Tesla narrowly misses 500,000 sale target. Tesla delivered 499,550 vehicles throughout 2020, falling just short of the company’s goal of shipping 500,000, the company announced on Saturday.

Massachusetts to ban gasoline vehicles by 2035. Massachusetts Governor Charlie Baker released a plan on Monday that calls for mandating electric vehicle sales by 2035. The plan also calls for scaling up offshore wind and retrofitting 1 million homes. Gov. Baker is a Republican.

U.S. increases Nord Stream 2 sanctions. As part of a Pentagon funding bill that the U.S. Congress approved over a presidential veto, the U.S. widened sanctions on the Nord Stream 2 pipeline. The pipeline is more than 90% completed but has been delayed for a year. Russia aims to use its own vessels to complete the project, but new sanctions could pose more delays.

Total remove staff from Mozambique over unrest. Total (NYSE: TOT) removed staff from its Mozambique LNG project due to militant attacks and unrest.

Interesting article on BTC mining:

Two things that seem futuristic: Bitcoin and energy efficiency. Two things that are diametrically opposed: Bitcoin and energy efficiency. Mining Bitcoin might not sound like a resource-intensive process, but in fact it requires almost unbelievably vast amounts of energy. In order to track the shocking energy footprint of Bitcoin mining, the University of Cambridge’s Centre for Alternative Finance created an online tool that measures this consumption to its best ability and compares it to the energy consumption of other entities to put the shocking quantities into perspective.

Thanks to the climbing price of Bitcoin, this week the cryptocurrency’s energy consumption topped that of Pakistan--a nation of more than 200 million people.

This spike in Bitcoin mining is thanks to an explosion in Bitcoin prices. The cryptocurrency’s value has jumped 276% this year alone, trading around $27,000 on Tuesday with a total market value near $500 billion. As MarketWatch points out, this could make Bitcoin not only more energy intensive, but less energy efficient, as the price spike “has made it more profitable to use less-efficient equipment.”

It’s not just Bitcoin’s energy footprint and market value that are gargantuan--its carbon footprint is worryingly large as well. Last year, however, Bitcoin defenders rallied around a new study by cryptocurrency investment products and research firm CoinShares that found nearly 75% of Bitcoins were mined using clean energy. Unfortunately, that report has now come under great scrutiny by other researchers, who have found that estimate to be greatly exaggerated. After all, two thirds of all Bitcoin mining in the world takes place in China, where more than half of the nation’s power is coal-fired.

Related: Russia Looks To Become Leader In Hydrogen Tech

In recent months however, this dependence on coal has become a major issue for Bitcoin mining operations in China. As China has experienced an energy shortage in recent months, in large part thanks to Beijing’s decision to blacklist Australian coal imports, domestic Bitcoin mining has come under siege. While China is still far and away the world’s largest trader of Bitcoin, energy shortages and the increased production of other countries are quickly closing that cap.

As of now, two thirds of bitcoin production happens in China, followed by the United States which represents just 7% of all bitcoin production. The U.S. is closely followed by Russia and Kazakhstan. But that ranking could soon change as Russia makes a power play to ramp up its mining operations in a venture led by Gazpromneft, the petro-based subsidiary of Russia’s state-owned natural gas giant Gazprom, the 10th biggest oil producer in the world.

Gazpromneft recently began a cryptocurrency mining operation based in one of its Siberian oil drilling sites, “unlocking the power of Russia’s oil and gas resources for the needs of bitcoin mining,” Yahoo! Finance reported this week. In slightly better news for Bitcoin’s carbon footprint, Russia’s new mining operation will be powered by natural gas from the oil field, located in the Khanty-Mansiysk region of northwestern Siberia, which has its own power plant to convert the gas into electricity for Bitcoin production. And there is another silver (and green) lining to this model: “The CO2 that gets freed during the oil drilling is normally a liability for oil companies as they have to burn it into the atmosphere, which results in fines. However, there are ways to utilize it instead of wasting it, and electricity generation is one of them,” Yahoo! Finance reports.

The location of the new Russian Bitcoin farm also means that the costs of the operation will be relatively low. Instead of paying a premium to use energy from the grid, locating the cryptocurrency mining on-site at an oil field means that a steady supply of natural gas is virtually free. All this is to say that China and the U.S. had better get ready for some stiff competition.

With a different look:

So the BO occurred 15 Dec. +/- (see short term chart)

Now I haven't drawn the resistance line (longer term chart) but that could be an important inflection point. A BO through that and it is blue sky.

Gold:

Correlated to the inverse of TIPS: ready to turn higher again?

M1 supply:

Little behind on the data, but with those stimulus cheques coming out, moving higher.

So support seems to have held. We will now test that resistance (line not drawn) above. So whenever I come across a market commentary on a market that I am interested in, I will, time permitting, read/watch their analysis. Most are bullish (vast majority) currently, based on the inflation meme. Does that fill you with confidence or concern?

At the market nadir in March, most were bearish. They were mostly wrong. Now gold/BTC are not the same trade, but they share some of the same arguments re. inflation. BTC has already gone stratospheric. Gold had a good run, then sold off. I think BTC goes higher, at least to test that resistance point, I think gold follows. What happens after that, anybodies guess.

Meanwhile, Mr flippe-floppe-flye had issues into the market close.

jog on
duc

 

[Knobby22]

Looks, at this time, that the Dems are to win Senate.

Also Trump is leaning on Pence to disrupt handover.

All this uncertainty should create a market shock tomorrow. I have the cash ready from my recent sales to take advantage on the ASX.

 

[ducati916]

So I agree with @Knobby22 above, it looks as if the Dems. will control the Senate after Georgia. That means increased fiscal stimulus for the man in the street, which the market is taking as inflationary.

Other markets (except crypto) are taking their lead from Bonds:

Stocks are up, but 'value' stocks more than Tech (Tech/growth are valued on low yields making growth more valuable) and Banks are having another big move. DPST up 20%+

Stocks also have a very positive catalyst moving forward: lots of cash and low equity issuance levels (especially compared to Europe and EEM). Thus when stock purchases start back in earnest, a bid will sit under the market:

Gold however, not doing so well: Gold hates rising yield. While Fed. policy may move to capping, there is currently no capping in place. Therefore with yields rising, gold is declining.

And a shorter time frame:

Crypto:

Still looking strong. Crypto is currently a Religion. Never short a religion.

Currently nothing from Mr flippe-floppe-flye, very quiet.

jog on
duc

 

[Knobby22]

Good comments duc The market is up in the USA. Doesn't seem to be a short term fall as I hoped.

Perhaps I should have seen this. The Trump die-hards/true believers who post in the general thread don't own shares directly and are into holding actual gold.

 

[qldfrog]

Well, the market shot up!!;
About

As China has experienced an energy shortage in recent months, in large part thanks to Beijing’s decision to blacklist Australian coal imports

This is pure BS, in Australia, we do export a minute part of China thermal coal.
These are facts so electricity issues have not much and probably nothing at all to do with the boycott.
Once again, narrative over facts.repeat BS over and over again and it becomes truth.
But this lies not to say fake news is more comforting for the West than the fact that the economy in China is booming so much that even their hundreds of coal power stations being built are not enough.
While our economies are self destroyed by our own leaders..
Sadly, we can not leverage this knowledge as all the Chinese shares and ETFs in Wall Street are under legislative threat...

 

[ducati916]

So (another longer read):

Executive Summary
The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.

These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part. Every career incentive in the industry and every fault of individual human psychology will work toward sucking investors in.

But this bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios. Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives. Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time. It is a privilege to ride through a market like this one more time.

“The one reality that you can never change is that a higher-priced asset will produce a lower return than a lower-priced asset. You can’t have your cake and eat it. You can enjoy it now, or you can enjoy it steadily in the distant future, but not both – and the price we pay for having this market go higher and higher is a lower 10-year return from the peak.”1
Most of the time, perhaps three-quarters of the time, major asset classes are reasonably priced relative to one another. The correct response is to make modest bets on those assets that measure as being cheaper and hope that the measurements are correct. With reasonable skill at evaluating assets the valuation-based allocator can expect to survive these phases intact with some small outperformance. “Small” because the opportunities themselves are small. If you wanted to be unfriendly you could say that asset allocation in this phase is unlikely to be very important. It would certainly help in these periods if the manager could also add value in the implementation, from the effective selection of countries, sectors, industries, and individual securities as well as major asset classes.

The real trouble with asset allocation, though, is in the remaining times when asset prices move far away from fair value. This is not so bad in bear markets because important bear markets tend to be short and brutal. The initial response of clients is usually to be shocked into inaction during which phase the manager has time to reposition both portfolio and arguments to retain the business. The real problem is in major bull markets that last for years. Long, slow-burning bull markets can spend many years above fair value and even two, three, or four years far above. These events can easily outlast the patience of most clients. And when price rises are very rapid, typically toward the end of a bull market, impatience is followed by anxiety and envy. As I like to say, there is nothing more supremely irritating than watching your neighbors get rich.

How are clients to tell the difference between extreme market behavior and a manager who has lost his way? The usual evidence of talent is past success, but the long cycles of the market are few and far between. Winning two out of two events or three out of three is not as convincing as a larger sample size would be. Even worse the earlier major market breaks are already long gone: 2008, 2000, or 1989 in Japan are practically in the history books. Most of the players will have changed. Certainly, the satisfaction felt by others who eventually won long ago is no solace for current pain experienced by you personally. A simpler way of saying this may be that if Keynes really had said, “The market can stay irrational longer than the investor can stay solvent,” he would have been right.

I am long retired from the job of portfolio management but I am happy to give my opinion here: it is highly probable that we are in a major bubble event in the U.S. market, of the type we typically have every several decades and last had in the late 1990s. It will very probably end badly, although nothing is certain. I will also tell you my definition of success for a bear market call. It is simply that sooner or later there will come a time when an investor is pleased to have been out of the market. That is to say, he will have saved money by being out, and also have reduced risk or volatility on the round trip. This definition of success absolutely does not include precise timing. (Predicting when a bubble breaks is not about valuation. All prior bubble markets have been extremely overvalued, as is this one. Overvaluation is a necessary but not sufficient condition for their bursting.) Calling the week, month, or quarter of the top is all but impossible.

I came fairly close to calling one bull market peak in 2008 and nailed a bear market low in early 2009 when I wrote “Reinvesting When Terrified.” That’s far more luck than I could hope for even over a 50-year career. Far more typically, I was three years too early in the Japan bubble. We at GMO got entirely out of Japan in 1987, when it was over 40% of the EAFE benchmark and selling at over 40x earnings, against a previous all-time high of 25x. It seemed prudent to exit at the time, but for three years we underperformed painfully as the Japanese market went to 65x earnings on its way to becoming over 60% of the benchmark! But we also stayed completely out for three years after the top and ultimately made good money on the round trip.

Similarly, in late 1997, as the S&P 500 passed its previous 1929 peak of 21x earnings, we rapidly sold down our discretionary U.S. equity positions then watched in horror as the market went to 35x on rising earnings. We lost half our Asset Allocation book of business but in the ensuing decline we much more than made up our losses.

Believe me, I know these are old stories. But they are directly relevant. For this current market event is indeed the same old story. This summer, I said it was likely that we were in the later stages of a bubble, with some doubt created by the unique features of the COVID crash. The single most dependable feature of the late stages of the great bubbles of history has been really crazy investor behavior, especially on the part of individuals. For the first 10 years of this bull market, which is the longest in history, we lacked such wild speculation. But now we have it. In record amounts. My colleagues Ben Inker and John Pease have written about some of these examples of mania in the most recent GMO Quarterly Letter, including Hertz, Kodak, Nikola, and, especially, Tesla. As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over $600 billion, amounts to over $1.25 million per car sold each year versus $9,000 per car for GM. What has 1929 got to equal that? Any of these tidbits could perhaps be dismissed as isolated cases (trust me: they are not), but big-picture metrics look even worse.

The "Buffett indicator," total stock market capitalization to GDP, broke through its all-time-high 2000 record. In 2020, there were 480 IPOs (including an incredible 248 SPACs2) – more new listings than the 406 IPOs in 2000. There are 150 non-micro-cap companies (that is, with market capitalization of over $250 million) that have more than tripled in the year, which is over 3 times as many as any year in the previous decade. The volume of small retail purchases, of less than 10 contracts, of call options on U.S. equities has increased 8-fold compared to 2019, and 2019 was already well above long-run average. Perhaps most troubling of all: Nobel laureate and long-time bear Robert Shiller – who correctly and bravely called the 2000 and 2007 bubbles and who is one of the very few economists I respect – is hedging his bets this time, recently making the point that his legendary CAPE asset-pricing indicator (which suggests stocks are nearly as overpriced as at the 2000 bubble peak) shows less impressive overvaluation when compared to bonds. Bonds, however, are even more spectacularly expensive by historical comparison than stocks. Oh my!

So, I am not at all surprised that since the summer the market has advanced at an accelerating rate and with increasing speculative excesses. It is precisely what you should expect from a late-stage bubble: an accelerating, nearly vertical stage of unknowable length – but typically short. Even if it is short, this stage at the end of a bubble is shockingly painful and full of career risk for bears.

I am doubling down, because as prices move further away from trend, at accelerating speed and with growing speculative fervor, of course my confidence as a market historian increases that this is indeed the late stage of a bubble. A bubble that is beginning to look like a real humdinger.

The strangest feature of this bull market is how unlike every previous great bubble it is in one respect. Previous bubbles have combined accommodative monetary conditions with economic conditions that are perceived at the time, rightly or wrongly, as near perfect, which perfection is extrapolated into the indefinite future. The state of economic excellence of any previous bubble of course did not last long, but if it could have lasted, then the market would justifiably have sold at a huge multiple of book. But today’s wounded economy is totally different: only partly recovered, possibly facing a double-dip, probably facing a slowdown, and certainly facing a very high degree of uncertainty. Yet the market is much higher today than it was last fall when the economy looked fine and unemployment was at a historic low. Today the P/E ratio of the market is in the top few percent of the historical range and the economy is in the worst few percent. This is completely without precedent and may even be a better measure of speculative intensity than any SPAC.

This time, more than in any previous bubble, investors are relying on accommodative monetary conditions and zero real rates extrapolated indefinitely. This has in theory a similar effect to assuming peak economic performance forever: it can be used to justify much lower yields on all assets and therefore correspondingly higher asset prices. But neither perfect economic conditions nor perfect financial conditions can last forever, and there’s the rub.

All bubbles end with near universal acceptance that the current one will not end yet…because. Because in 1929 the economy had clicked into “a permanently high plateau”; because Greenspan’s Fed in 2000 was predicting an enduring improvement in productivity and was pledging its loyalty (or moral hazard) to the stock market; because Bernanke believed in 2006 that “U.S. house prices merely reflect a strong U.S. economy” as he perpetuated the moral hazard: if you win you’re on your own, but if you lose you can count on our support. Yellen, and now Powell, maintained this approach. All three of Powell’s predecessors claimed that the asset prices they helped inflate in turn aided the economy through the wealth effect. Which effect we all admit is real. But all three avoided claiming credit for the ensuing market breaks that inevitably followed: the equity bust of 2000 and the housing bust of 2008, each replete with the accompanying anti-wealth effect that came when we least needed it, exaggerating the already guaranteed weakness in the economy. This game surely is the ultimate deal with the devil.

Now once again the high prices this time will hold because…interest rates will be kept around nil forever, in the ultimate statement of moral hazard – the asymmetrical market risk we have come to know and depend on. The mantra of late 2020 was that engineered low rates can prevent a decline in asset prices. Forever! But of course, it was a fallacy in 2000 and it is a fallacy now. In the end, moral hazard did not stop the Tech bubble decline, with the NASDAQ falling 82%. Yes, 82%! Nor, in 2008, did it stop U.S. housing prices declining all the way back to trend and below – which in turn guaranteed first, a shocking loss of over eight trillion dollars of perceived value in housing; second, an ensuing weakness in the economy; and third, a broad rise in risk premia and a broad decline in global asset prices (see Exhibit 1). All the promises were in the end worth nothing, except for one; the Fed did what it could to pick up the pieces and help the markets get into stride for the next round of enhanced prices and ensuing decline. And here we are again, waiting for the last dance and, eventually, for the music to stop.

EXHIBIT 1: BUBBLES – GREAT WHILE THEY LAST

Housing bubble as of 11/30/2011, Tech bubble as of 2/28/2003
Source: S&P 500 (Tech bubble); National Association of Realtors, U.S. Census Bureau (Housing bubble)
Nothing in investing perfectly repeats. Certainly not investment bubbles. Each form of irrational exuberance is different; we are just looking for what you might call spiritual similarities. Even now, I know that this market can soar upwards for a few more weeks or even months – it feels like we could be anywhere between July 1999 and February 2000. Which is to say it is entitled to break any day, having checked all the boxes, but could keep roaring upwards for a few months longer. My best guess as to the longest this bubble might survive is the late spring or early summer, coinciding with the broad rollout of the COVID vaccine. At that moment, the most pressing issue facing the world economy will have been solved. Market participants will breathe a sigh of relief, look around, and immediately realize that the economy is still in poor shape, stimulus will shortly be cut back with the end of the COVID crisis, and valuations are absurd. “Buy the rumor, sell the news.” But remember that timing the bursting of bubbles has a long history of disappointment.

Even with hindsight, it is seldom easy to point to the pin that burst the bubble. The main reason for this lack of clarity is that the great bull markets did not break when they were presented with a major unexpected negative. Those events, like the portfolio insurance fiasco of 1987, tend to give sharp down legs and quick recoveries. They are in the larger scheme of things unique and technical and are not part of the ebb and flow of the great bubbles. The great bull markets typically turn down when the market conditions are very favorable, just subtly less favorable than they were yesterday. And that is why they are always missed.

Either way, the market is now checking off all the touchy-feely characteristics of a major bubble. The most impressive features are the intensity and enthusiasm of bulls, the breadth of coverage of stocks and the market, and, above all, the rising hostility toward bears. In 1929, to be a bear was to risk physical attack and guarantee character assassination. For us, 1999 was the only experience we have had of clients reacting as if we were deliberately and maliciously depriving them of gains. In comparison, 2008 was nothing. But in the last few months the hostile tone has been rapidly ratcheting up. The irony for bears though is that it’s exactly what we want to hear. It’s a classic precursor of the ultimate break; together with stocks rising, not for their fundamentals, but simply because they are rising.

Another more measurable feature of a late-stage bull, from the South Sea bubble to the Tech bubble of 1999, has been an acceleration3 of the final leg, which in recent cases has been over 60% in the last 21 months to the peak, a rate well over twice the normal rate of bull market ascents. This time, the U.S. indices have advanced from +69% for the S&P 500 to +100% for the Russell 2000 in just 9 months. Not bad! And there may still be more climbing to come. But it has already met this necessary test of a late-stage bubble.

It is a privilege as a market historian to experience a major stock bubble once again. Japan in 1989, the 2000 Tech bubble, the 2008 housing and mortgage crisis, and now the current bubble – these are the four most significant and gripping investment events of my life. Most of the time in more normal markets you show up for work and do your job. Ho hum. And then, once in a long while, the market spirals away from fair value and reality. Fortunes are made and lost in a hurry and investment advisors have a rare chance to really justify their existence. But, as usual, there is no free lunch. These opportunities to be useful come loaded with career risk.

So, here we are again. I expect once again for my bubble call to meet my modest definition of success: at some future date, whenever that may be, it will have paid for you to have ducked from midsummer of 2020. But few professional or individual investors will have been able to have ducked. The combination of timing uncertainty and rapidly accelerating regret on the part of clients means that the career and business risk of fighting the bubble is too great for large commercial enterprises. They can never put their full weight behind bearish advice even if the P/E goes to 65x as it did in Japan. The nearest any of these giant institutions have ever come to offering fully bearish advice in a bubble was UBS in 1999, whose position was nearly identical to ours at GMO. That is to say, somewhere between brave and foolhardy. Luckily for us though, they changed their tack and converted to a fully invested growth stock recommendation at UBS Brinson and its subsidiary, Phillips & Drew, in February 2000, just before the market peak. This took out the 800-pound gorilla that would otherwise have taken most of the rewards for stubborn contrariness. So, don't wait for the Goldmans and Morgan Stanleys to become bearish: it can never happen. For them it is a horribly non-commercial bet. Perhaps it is for anyone. Profitable and risk-reducing for the clients, yes, but commercially impractical for advisors. Their best policy is clear and simple: always be extremely bullish. It is good for business and intellectually undemanding. It is appealing to most investors who much prefer optimism to realistic appraisal, as witnessed so vividly with COVID. And when it all ends, you will as a persistent bull have overwhelming company. This is why you have always had bullish advice in a bubble and always will.

However, for any manager willing to take on that career risk – or more likely for the individual investor – requiring that you get the timing right is overreach. If the hurdle for calling a bubble is set too high, so that you must call the top precisely, you will never try. And that condemns you to ride over the cliff every cycle, along with the great majority of investors and managers.

What to Do?
As often happens at bubbly peaks like 1929, 2000, and the Nifty Fifty of 1972 (a second-tier bubble in the company of champions), today’s market features extreme disparities in value by asset class, sector, and company. Those at the very cheap end include traditional value stocks all over the world, relative to growth stocks. Value stocks have had their worst-ever relative decade ending December 2019, followed by the worst-ever year in 2020, with spreads between Growth and Value performance averaging between 20 and 30 percentage points for the single year! Similarly, Emerging Market equities are at 1 of their 3, more or less co-equal, relative lows against the U.S. of the last 50 years. Not surprisingly, we believe it is in the overlap of these two ideas, Value and Emerging, that your relative bets should go, along with the greatest avoidance of U.S. Growth stocks that your career and business risk will allow. Good luck!



So, if he is normally 2yrs too early, where exactly do we sit, best guess/estimation?

So we have just been through or are still in the Tech. phase. Materials is coming up fast. We have missed industrials, largely due to the very specific issues around C19. I'll start looking for a top when Energy is leading the pack.

jog on
duc

 

[ducati916]

Moving away from the noise and looking at three distinct areas of the markets:

S&P500 will continue to rise in the near term.

The 10yr will consolidate +/- at 1.3%. Therefore I would expect gold to again start moving higher in the interim.

BTC will continue higher. The thing with BTC is that it is a separate thing. It doesn't really tell us anything about markets. It is its own self-contained religion currently. At +/- $500B it simply is too small to influence other markets. It is rank speculation. It may change in the future, but not currently.

An interesting stat. re. the other religion that is TSLA:

That is never a good thing.


jog on
duc

 

[Dr.Stock]

Moving away from the noise and looking at three distinct areas of the markets:

S&P500 will continue to rise in the near term.

View attachment 117957

The 10yr will consolidate +/- at 1.3%. Therefore I would expect gold to again start moving higher in the interim.

View attachment 117956

BTC will continue higher. The thing with BTC is that it is a separate thing. It doesn't really tell us anything about markets. It is its own self-contained religion currently. At +/- $500B it simply is too small to influence other markets. It is rank speculation. It may change in the future, but not currently.

An interesting stat. re. the other religion that is TSLA:

View attachment 117955

That is never a good thing.


jog on
duc

Cheer Mr Ducati
Always enjoy starting my day with your appraisal.
I very much Appreciate your effort and time to post.

 

[UMike]

So the first real trading day of 2021 and we have a vol. spike:....
How January goes, goes the rest of the year. Therefore we would want to see January recover.
.......
I would expect the 'buy-the-dip' brigade to be out in force. This is a jump in vol. but the fundamental underpinning of the Bull (ultra-low interest rates) are still in place and are not going anywhere anytime soon. Whether the dip continues, is anybody's guess currently, however I would venture that tomorrow will see the peak in the VIX and then gradually receding vol. I would wait until tomorrow before buying-the-dip.
jog on
duc

Just sold my last lot of QBE (earlier on), Santos and WPL that I got at the lows mid year. (although I got and sold Santos twice now). Let Banks go too early.

Just wondering when the next dip will be. Or will it be as I expect another Crash.
Can't see the gulf of struggling economies and booming markets last forever!

 

[ducati916]

Just sold my last lot of QBE (earlier on), Santos and WPL that I got at the lows mid year. (although I got and sold Santos twice now). Let Banks go too early.

Just wondering when the next dip will be. Or will it be as I expect another Crash.
Can't see the gulf of struggling economies and booming markets last forever!

In this chart we have a way of looking at the huge mutual fund managers who are not allowed to be out of the market, their cash holdings essentially always have to be invested (possibly they can hold 10% cash) nor can they go short the market. So we have when the market is a bull market, they are overweight XLY (Consumer Discretionary) and underweight XLP (Consumer Staples). When they become nervous, they switch to underweight XLY and overweight XLP.

They are super bullish! These guys control hundreds of billions of dollars (trillions even). You can see leading into 2020, they were bears. There were lots of other bear indicators.

So yes, the market is somewhat overbought. Yes, there could well be some corrections. But there is no sign yet of a bear.

jog on
duc

 

[ducati916]

Musk now officially world's richest man, although when Bezos got divorced he had to give 50% of his wealth to his ex-wife, so actually Musk is nowhere close. Anyway:

Stocks fluctuating. Yield levels currently of no concern to stocks. They could sustain real yields of probably 5%. That would probably be their lot however with valuations so extended. However, if earnings growth can stay abreast of inflationary pressures, they can resist for a while. If however inflation morphs back to disinflation, those real yields will exceed nominal and we'll hit that 5% barrier a lot sooner. ATM inflation = good.

Bonds: 10yr moving fast towards my projected 1.3%. So much so, 1.45% could well be on the cards.

That (not drawn) 1.43%/1.5% level looks magnetic.

Commodities: still driving that inflation meme, hence Bonds.

Gold & Silver....woodshed. My miners position: looking increasingly like it's headed south.

Crypto:

The level for BTC is fast approaching: does it make it through to blue sky? Next week will probably be the week. Previously a 3 year run. Long consolidation and a new run, yes, it could well go through.

Mr flippe-floppe-flye returns:

jog on
duc