Good morning, from Europe. Buenos Dias. Bongiorno.
Well, I'm actually in Chicago, but for one day let's pretend I'm a Reuters correspondent in Paris. Two top stories today: ECB's Draghi cuts rates (again)...
... and France bans Facebook's Libra over "monetary sovereignty" concerns.
Imagine the comedy. This is like the manager of a French football side that hasn't won a game in 6 seasons asking his brother, the Prime Minister, to make it illegal to fire lousy football managers.
Of course Paris is worried about competing foreign exchange offerings because their negative-infinity rates paradigm is only now getting started. Who said a decade of easy money was sufficient. Basta! Give us a 1,000 years of negative compounding interest: punish savers & let junk bonds become the new "safe haven". If you think the housing debacle of 2008 was calamitous, wait to see what he have in store for you next. You can borrow in Italy, a country that's broke, almost for free for the next ten years. That seems like a rational idea.
Isn't it odd Facebook endures all the ridicule and abrasiveness yet bitcoin - for now - is quietly ignored? Pretend it's not there and maybe it will go away. That must be the thinking in European circles. Just like Russia - where 80 dissidents this morning were arrested.
There are two permeating thoughts I read about often these days both of which have the same fatal flaw. In brief, there is a belief markets turn because humans are simply exhausted or elated by the persistent pattern; we've gone in one direction too long, surely we must bounce or retreat, right?
Wrong. Remember what famed economist Sir John Maynard Keynes said: "Markets can remain irrational longer than you can remain solvent."
So where do we see this?
Two places: one, in the view we're bound to fall into a recession here since historically we see economic declines every 7-8 years & we haven't seen one now in almost 12. No doubt the trade war & weakness abroad are posing challenges to the US economy at present & two quarters (or more) of negative growth - the technical definition of a recession - is a possibility; but an inevitability, it is not. Australia, remember, dodged a recession for decades.
Two, alt-coins, separately & trivially, have been in a death spiral for almost 2 years. Which leads some prognosticators to conclude a rebound is assured. Why? I see zero evidence of a convincing, meaningful recovery in digital assets not named BTC. I'm not saying this can never occur; simply pointing out a turnaround isn't visible at this time.
I found this lovely (bullish) piece of bitcoin research floating around on Medium and social media today.
Highlights: "The price model presented here estimates bitcoin to reach $100k in August 2026, with a range of uncertainty of 9 years: not earlier than January 2021 and no later than February 2030...The model also estimates bitcoin to reach $1MM in November 2036, with an uncertainty of fifteen years: not earlier than November 2027 and no later than July 2042...Any outcome in these ranges is VERY POSITIVE, the most conservative outcome still returning an annualized profit of 23% every year over a 23 year period.”
Have I mentioned yet investing in digital assets poses enormous risks & may not be suitable for every investor. OK, great. And, oh yeah, please do your own research.
What I like about this report is it uses quadratic formulas & calculus I'll never understand. But I get this: if you run a 10-year regression analysis on an asset that went from a penny to $10k - and you believe the forces or gravity & physics only move upward - then sure these numbers are reasonable, conceivable. My contention with this "study" is it gives no indication prices can go down - even to zero. Lehman was once worth a lot once; AIG, GM. You probably see my point. BTC can go up; or down - a lot.
For some reason, I'm writing more speeches and doing more interviews lately. Not sure why. Maybe it's because everyone seems to have extra motivation post-Labor Day as we head into the fall. Whatever the case, I just wrote this up for an investment panel our team will be presenting at soon; here's an advanced teaser.
Aren't sneak peaks fun? Enjoy.
"Bitcoin has moved past the novelty stage. In our view, it's likely here forever unless it's surpassed by a rival digital asset, which could happen. But undeniably bitcoin is in the driver's seat as the 70% dominance index indicates. To be candid, we probably do not need bitcoin in this country where we have the luxury of a strong economy, currency, military, judiciary and banking system, among many other positive national attributes.
Look around the world: most countries have neither a strong economy or currency, nor a strong military, judiciary or banking system. Inflation is 60,000% in Venezuela; Argentina just defaulted on international capital markets for the umpteenth time; trade wars, sanctions & negative interest rates loom elsewhere. This doesn't mean bitcoin must appreciate in value and this is not investment advice, but if you still believe bitcoin is a fad and it's going to zero, it may be time to re-test your hypothesis."
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