Currency

The Empire Strikes Back – At Bitcoin

Posted by John Rubino - DollarCollapse.com

on Wednesday, 6 September 2017 13:03

One of the uncertainties with cryptocurrencies has always been how governments would react once bitcoin and its kin got big enough to actually threaten the monopolies of national fiat currencies. 

That day seemed to be approaching as cryptocurrencies’ aggregate market cap blew through $100 billion and the pipeline of new bitcoin wannabes (initial coin offerings, or ICOs) swelled into the hundreds. Even – in a classic sign of a bubble top — Paris Hilton got involved: 

Hotel Heiress Paris Hilton Is the Latest Celebrity to Promote an ICO

(Coin Desk) – Celebrity heiress and reality TV star Paris Hilton has taken to Twitter to announce her participation in a token sale, or ICO.

Called Lydian, the venture claims the project is developing “blockchain driven technologies to reduce ad fraud and to maximize the effectiveness of ad marketing expenditures.” The idea has been floated by a number of projects of late, including efforts backed by advertising industry participants.

In the tweet, Hilton wrote:
Looking forward to participating in the new @LydianCoinLtd Token! #ThisIsNotAnAd #CryptoCurrency #BitCoin #ETH #BlockChain pic.twitter.com/a8kT9eHEko
— Paris Hilton (@ParisHilton) September 3, 2017

And lately governments have indeed begun to defend their turf. The US Internal Revenue Service decided that since cryptocurrencies were clearly not money (only the dollar is money!) they must be commodities, which means every transaction creates a taxable gain or loss. In August the IRS drove the point home by unveiling software that can track supposedly anonymous crypto transactions:

The IRS Has Special Software to Find Bitcoin Tax Cheats

(Fortune) – One benefit of using bitcoin is the digital currency can be anonymous—its owners can move money around the world without revealing who they are. Well, in theory at least. In reality, bitcoin is less secret than people think.

The latest reminder of this comes via a report that the Internal Revenue Service is using software to unmask bitcoin users who have failed to report profits. According to a contract unearthed by the Daily Beast, the IRS is paying a company called Chainalysis to help identify the owners of digital “wallets” that users employ to store their bitcoins.

In a letter to the IRS, the co-founder of Chainalysis says the company has information on 25 percent of all bitcoin addresses and that it deploys millions of tags to help track and identify transactions. 

The decision by the IRS to license the software of Chainalysis, which is based in Switzerland with an office in New York, appears to be part of the agency’s larger campaign to target digital currency users who have failed to pay tax.

As Fortune reported earlier this year, the IRS claims only 802 people declared a capital gain or loss related to bitcoin in 2015. This is significant since the price of bitcoin soared from around $13 to over $1100 between 2013 and 2015, and hundreds of thousands (like millions) of Americans bought and sold digital currency during this time—in other words, there are many people who face bitcoin-related tax trouble, and the IRS is tracking some of them down. 

Then China decided it had had enough of the dot-com-like tsunami of new digital currencies pouring into its economy, and banned future releases, crashing the price of most extant cryptocurrencies. 

China Halts Initial Coin Offerings

(Bloomberg) – Bitcoin tumbled the most since July after China’s central bank said initial coin offerings are illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales.

The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors.

It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.

“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions — the short story is we all know regulations are coming,” said Jehan Chu, managing partner at Kenetic Capital Ltd. in Hong Kong, which invests in and advises on token sales. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”

Bitcoin tumbled as much as 11.4 percent, the most since July, to $4,326.75. The ethereum cryptocurrency was down more than 16 percent Monday, according to data from Coindesk.

IPOs-Sept-17

And apparently there’s more coming:

ICO crackdown may just be the start: China is reportedly planning tighter cryptocurrency rules

(CNBC) – China is poised to further tighten rules on virtual currencies after regulators on Monday banned virtual coin fundraising schemes, Chinese financial news outlet Yicai reported, citing sources.

China banned and deemed illegal the practice of raising funds through launches of token-based digital currencies, targeting so-called initial coin offerings (ICO) in a market that has exploded since the start of the year.

Yicai’s report late Monday cited a source close to decision-makers as saying the announcement on the ban was just the start of further follow-up regulations of virtual currencies.

The above raises two big questions. First, how will cryptocurrencies fare in a world of increasingly strict and complex regulations? Second, what kinds of assets stand to benefit if cryptocurrencies cease to function as “digital gold”? 

The first question is a tough one, because it involves the interplay of governments, revolutionary tech and free markets, which means pretty much anything is possible. The second, though, is easier: If digital gold falters, real gold wins: 

Mobius Foresees Cryptocurrency Crackdown Sparking a Rush to Gold

(Bloomberg) – Mark Mobius is sensing danger in the explosive growth of cryptocurrencies.

Governments will begin clamping down on digital currencies because of their use in illicit financing, with terrorist groups to drug dealers contributing to their rise, Mobius, executive chairman at Templeton Emerging Markets Group, said in an interview in Hong Kong Monday.

“Cryptocurrencies are beginning to get out of control and it’s going to attract the attention of governments around the world,” Mobius said. “You’re going to get a reversion back to gold because people are going to wonder, can I really trust these currencies?”

Mobius isn’t the only one voicing concern. Bank of America Merrill Lynch was cautious around bitcoin in July, saying there were a lot of obstacles, such as theft and hacking risks, that make it unlikely it will gain the status of pledgeable collateral.

“People need a means of exchange and they need to trust that,” said Mobius, who was interviewed before China’s announcement. “Right now the trust is good — with bitcoin people are buying and selling it, they think it’s a reasonable market — but there will come a day when government crackdowns come in and you begin to see the currency come down.”

Your Stock Our Take – Ten Peaks Coffee Company Inc. (TPK:TSX)

Posted by Ryan Irvine - Key

on Tuesday, 5 September 2017 17:21

n our Your Stock, Our Take segment we take a question from a listener about, Ten Peaks Coffee Company Inc. (TPK:TSX), a unique BC-based small-cap which uses its proprietary process to decaffeinate premium green coffee – the company reported a strong second quarter this week, is it a BUY, SELL or HOLD?

 

new logo burlap bag

Gold Market Update – Very Bullish Indeed

Posted by Clive Maund

on Tuesday, 5 September 2017 16:00

Price and volume action in gold in recent weeks has been very bullish indeed, as it moves towards completion of its giant 4-year long Head-and-Shoulders base pattern. We can see this to advantage on gold’s 10-year chart shown below. The volume pattern and volume indicators give the game away, and confirm that this is a genuine base pattern that will lead to a major new bullmarket in gold. Observe the volume build on the strong rise out of the lows of the “Head” of the pattern early last year, and how its even stronger on the rise this year out of the Right Shoulder low, and especially on the rally of recent weeks – the Accumulation – Distribution line has already reached its bullmarket highs of 2011, which is clearly a very positive sign. The new bullmarket hasn’t officially started yet of course and won’t until the price breaks out of the base pattern by breaking above the 1st band of resistance shown on the chart. That means that the days left to accumulate investments in this sector at good prices are numbered. 

gold10year030817b

About a week ago it looked like gold was going to roll over again and play dead as it had arrived at an important zone of resistance at its April and June peaks as we can see on its year-to-date chart, with the risk of its doing so being increased by the potential for a dollar rebound, which we will come to later, but it didn’t – instead it broke above this resistance to advance on strong volume, which drove volume indicators sharply higher, a bullish development. This has given gold a buffer to buttress it in the event of a near-term dollar bounce. 

There is a parallel giant Head-and-Shoulders bottom pattern completing in gold stocks proxy GDX, as we can see on its 10-year chart below, and with the price still not far above the Right Shoulder low of the pattern and quite a way below its neckline (the 1st resistance level), we are still generally at a good point to accumulate Precious Metals stocks, as we have doing in recent weeks. The persistently high volume on the dramatic surge out of the lows of the Head of the pattern early last year was a sign that the bottom is in and was a very bullish development. The real big action will follow breakout above the 1st resistance level, although there will be considerable resistance to work through on the way up to the 2011 highs, but since the new sector bullmarket is set to be an order of magnitude greater than the last one, we can look forward to huge gains once GDX breaks out above its 2011 highs to new highs where there will be no further overhanging supply. 

The gold charts that we have just looked at suggest that the dollar is destined for a serious breakdown, so now we will look at the latest dollar index chart to see what it portends. On the 8-year dollar index chart we can see that it has marked out a large Broadening Top over the past 2 years, which it is now threatening to break down from. However at this point is oversold and on support at the bottom of the pattern, making a near-term bounce likely, although if it happens, it probably won’t get very far. 

Also pointing to a near-term dollar bounce is the latest Hedgers chart, which itself looks bullish for the dollar, and suggests that it is not ready to break down just yet. If it does bounce gold would be expected to pull back, but not by very much, to provide what will be probably turn out to be the last chance to accumulate the sector at favorable prices before the expected major bullmarket begins in earnest. 

Click on chart to popup a larger clearer version. 

Chart courtesy of www.sentimentrader.com

Sentiment Speaks: Greed Is Not Good

Posted by Avi Gilburt via Seeking Alpha

on Tuesday, 5 September 2017 13:42

Screen Shot 2017-09-05 at 7.41.39 AMSummary

The pitfall of buying high.

Leveraged ETF’s.

A real-life Example.

The market pinball wizard.

Special announcement.

As many of you know, I run a trading room with well over 3000 members, and have over 450 money manager clients. I have seen the good, the bad, and the ugly as far as what traders and investors do through the years. And, no matter how much I warn about the pitfalls in the market, many chose to ignore me, and eventually learn on their own the hard way.

The Pitfall Of Buying High

First, I would suggest you begin by reading an article I wrote several years ago, which should describe what every new trader/investor goes through as they begin their career.

BUYING HIGH; SELLING LOW: NO NO NO!!

And, if it sounds familiar, well, then you are in good company, as most of us have gone through it. The question is if you will learn from it. Unfortunately, most do not.

Leveraged ETFs

Harvey’s Animals and Robot Seals

Posted by Connecting the Dots - Mauldin Economicsl

on Tuesday, 5 September 2017 13:18

Hurricane Harvey hit Texas hard. Much of Houston, our largest city, will be uninhabitable for months, maybe years.

We had no damage where I live near Austin, but like most Texans, I have friends and relatives in the affected areas. We’re all doing what we can to help them—thanks to everyone pitching in from other states too.

Watching the news coverage, I’ve noticed a common scene.

Many flood victims bring dogs and cats with them on the Cajun Navy’s small boats. I haven’t seen any rescuers object. They seem to think nothing of it and even welcome the animals aboard.

Leave them behind? Inconceivable. Pets are part of the family.

This is another example of an economic trend I wrote about last year. It’s not reversing, and I doubt it ever will.

Image 1a 20170905 CTD
Photo: AP

True Priorities

As I said, Harvey didn’t hit Austin, but I know what it’s like having to evacuate in a rush.

Our area experienced several huge wildfires back in 2011. One got close enough that we could see the flames. As the wind picked up, firefighters told us to “Get out of there right now!”

Given only minutes to grab what possessions you can—and thinking you will probably lose everything else—you learn your true priorities.

Mine were some essential medicines and our three dogs. My wife, son, and I crammed them into our two vehicles and drove to safety.

Fortunately, the fire went a different way and spared our house. But during that period when we didn’t know, did I regret leaving so much behind? No. Bringing the dogs was the right choice… and the Harvey photos show I’m not the only one who thinks that way.


Photo: AP

Long-Term Trend

Last December, I wrote a Connecting the Dots story called “Investing in Our Furry Friends.” It discussed the way Americans increasingly apply their parental instincts to pets instead of children.

One consequence of this trend is a colossal and growing amount of money spent on our pets. The American Pet Products Association estimates that in 2017, $69.4 billion will be spent on US pet care, up from $66.7 billion in 2016.

The substantial growth in pet care stocks supports these numbers. Check out these one-year returns (as of 8/31/17):

 

  • Phibro Animal Health (PAHC) +58.7%
  • Heska Corp. (HSKA) +83.2%
  • Freshpet Inc. (FRPT) +52.6%

 

However, that doesn’t mean you can just throw darts and win. The sector had some losers too, such as…

 

  • Aratana Therapeutics (PETX) -41.4%
  • Spectrum Brands (SPB) -18.0%

 

Normally, an ETF would be the right answer if you’re bullish on a sector but not sure which stocks will perform best. Unfortunately, there is no pet care ETF available to US investors, as far as I can tell.

Worse, private equity firms are snapping up some of the once-public stocks from this segment. The two big pet retailers, Petco and PetSmart, are both private now.

So, that’s aggravating. Here we have a really attractive, long-term theme, but actually investing in it is hard. What can you do?

You can try to build your own ETF with a basket of stocks. You probably need at least 20 stocks to be well-diversified, and that will be tough. Some of the best performers are quite small.

I’m constantly watching for opportunities in this segment, and my Yield Shark and Macro Growth & Income Alert subscribers will be first to know when I find them.

Tiny Motors

Before you enter any investment, you want to consider the risks.

Among other things, the pet care industry faces the same risk we discussed last week for bus drivers. What if robots replace our pets?

That’s not as nutty as it sounds. In fact, it’s already happening.


Photo: Paro Therapeutics

A Japanese company, Paro Therapeutics, makes a robotic baby seal that is apparently very lifelike. It reacts and moves much like a real animal. The company envisions it helping sick children and dementia patients.

Clever Japanese inventions don’t always catch on in the West. Remember Tamagotchi?

But technology improves. Eventually, could robotic dogs or cats take the place of our real ones? Would we even know the difference?

In some ways, maybe not. Sufficiently advanced technology could probably make a robotic dog look, feel, and move like a real one. But that’s not the same as being a real dog.

Dogs are a strange mix of predictability and randomness, and cats even more so. Half the time, I have no idea why my three cats do what they do, or what they’ll do next.

I am sure of one thing, though: whatever a cat does, makes perfect sense to the cat.

How do you duplicate that wonderful mixture in an artificial pet? Never say never, but to me it seems unlikely, at least in our lifetimes.

That means the pet care industry ought to keep doing well for several more decades. We will still have dogs and cats. They will still need food, toys, bedding, healthcare and in the future other luxuries we can’t currently imagine.

Best of all, our dogs, cats and other critters will keep making life better—just by being there. That’s what family does.

See you at the top,

Patrick Watson

P.S. If you’d like to help Harvey’s animal victims, here’s some information on charities working to save them. I’m personally supporting Austin Pets Alive, which is temporarily housing hundreds of animals evacuated from shelters in the disaster area.