I first got involved with bitcoin in 2011, when a subscriber wanting to thank me for a spectacular investment performance GAVE me ten Bitcoin. They were then worth $1 each.
Then, I forgot about them. When they appreciated to $100 in 2013, I decided to sell them and take the family out to dinner at The French Laundry, the best restaurant in California’s Napa Valley. I thought I was a genius.
Back then, early in the life of Bitcoin, theft was rampant, and exchange regularly went bankrupt. So cashing in on my windfall wasn’t such an unreasonable thing to do.
That turned out to be the most expensive dinner of my life. If I had kept the ten Bitcoin, they would be worth today over $600,000. Maybe I’m not such a genius after all.
Unless you have been living in a cave for the past five years, you have probably heard of Bitcoin.
By now, you have decided that it is the greatest money-making opportunity of all time or the greatest scam since Carlo Ponzi amassed a fortune selling international postal coupons in 1922.
Some things are certain. Bitcoin will change the financial system beyond all recognition. It will revolutionize banking and investment. And it will vastly accelerate the digitization of the global economy to everyone’s benefit.
After reading this book, you may or may not want to invest in Bitcoin. However, a working knowledge of what it is and how it works will become essential for everyone as the 21st century unfolds.
For s start, Bitcoin, other cryptos, and future cryptos yet to be invented will save $1 trillion a year in transaction costs in the global economy. Who will be the beneficiary of this bounty? You, me, and all the companies we invest in.
It is certain that some form of current or future crypto will be a stepping stone to a global digital currency, not just for emerging nations like El Salvador, but all nations.
And here is the most interesting thing. The eventual impact of crypto on our lives hasn’t even been imagined yet.
Going back to my Defense Department days, I was one of a handful who was present at the birth of the Internet and the similarities are legion. A few clever people were aware of bits and corners of the Internet back in 1989, but nobody had a big picture.
Long term predictions might as well have been science fiction. Insiders were buying up domain names for a dollar each, such as Mcdonalds.com, whitehouse.com, and sex.com. The MacDonald’s site was later sold to the fast-food company for $10 million.
When the Internet began mass adoption in 1995, no one imagined that every taxi company in the world would be out of business in 15 years. New York City taxi medallions once worth $1 million became worthless, prompting many suicides.
Nor did prime downtown apartment owners all over the world expect they could rent their homes for astronomical daily rates through Airbnb (ABNB). They didn’t even expect that a small startup named Netflix (NFLX) would stream videos online, wiping out Blockbuster Video.
Bitcoin was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology in a 2008 white paper. Nobody knows for sure. It might even be a US government agency that invented Bitcoin. It’s an appealingly simple concept: bitcoin is digital money that allows for secure, trustless, peer-to-peer transactions on the internet.
Unlike other payment services, like PayPal’s Venmo (PYPL), which rely on the traditional financial system for permission to transfer money and on existing debit/credit accounts, bitcoin is decentralized: any two people, anywhere in the world, can send bitcoin to each other without the involvement of a bank, government, or other institution.
Every transaction involving Bitcoin is tracked on the blockchain, which is like a bank’s ledger, or log of customers’ funds going in and out of the bank. In simple terms, it’s a record of every transaction ever made using bitcoin. Think of blockchain as a chain of blocks of code, each one of which contains millions of lines of code.
Unlike a bank’s ledger, the Bitcoin blockchain is distributed across the entire network. No company, country, or third party is in control of it; and anyone can become part of that network. The Mad Hedge Fund Trader is part of that network, otherwise known as a “node.”
There will only ever be 21 million Bitcoins. This is digital money that cannot be inflated or manipulated in any way.
It isn’t necessary to buy an entire bitcoin: you can buy just a fraction of one if that’s all you want or need. To open my own crypto wallet, I started with an initial buy of one ten thousand of a Bitcoin, or $10. Now, I’m trading in the millions.
Whatever the outcome of Bitcoin is, one thing is certain. None of our lives will be the same.
https://www.madhedgefundtrader.com/wp-content/uploads/2021/10/blockbuster.png624936Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-10-19 10:02:322021-10-19 13:27:20Where Does Bitcoin Go From Here?
You know those pesky seasonals that have been a drag of the market for the past five months? You know, that sell in May and go away thing?
It’s about to end, vanish, and vaporize.
We are only ten trading days away from when seasonals turn hugely positive on November 1.
On top of that, the pandemic is rapidly receding, the economy reaccelerating, and workers are returning to the workforce. The action Biden took with the west coast ports should unlock the logjam there. It all sounds like a Goldilocks scenario.
The ports issue has nothing to do with the pandemic. The truth is that with 6% GDP growth, the US economy is growing faster than it has ever done before. That means we are buying a lot more stuff, more than our antiquated infrastructure can handle. Unlock the ports, and growth could accelerate even further.
Bitcoin has been on fire as well, doubling since August 1. The focus has been on the launch of the first crypto futures ETF, which may happen as early as today. All of the trade alerts we issued in this space have been total home runs. (Click here for our Bitcoin Letter).
As a result, Bitcoin is within striking range of hitting a new all-time high at $66,000. Break that, and we could see a melt-up straight to $100,000.
Want another reason to be bullish? The Millennial generation is about to inherit $68 trillion by 2030. Guess where that is going? Bitcoin and all other risk assets, as younger investors tend to be more aggressive.
So, what to do about all of this?
Keep doing more of what’s working. Buy financials and Bitcoin and sell short bonds. Wait for tech to bottom out at the next interest rate peak, then load the boat there once again.
Make as much money as you can now because 2022 could be a year of diminished expectations. Stocks might rise by only 15% compared to this year’s 30% torrid rate.
As for Bitcoin, that is a horse of a different color.
CPI Hits 5.4%, and was up 0.4% in September, a high for this cycle. This time, it was food and energy that took the lead. Used car prices, which went ballistic last month, showed a decline. Supply chain problems are wreaking havoc and those with inventory can charge whatever they want. The Fed thinks this is transitory, the bond market doesn’t. Sell rallies in the (TLT).
Weekly Jobless Claims Plunge to 293,000, a new post-pandemic low. With delta in retreat, higher wages are luring people back to work to deal with massive supply chain problems. This may be the beginning of the big drop in unemployment to pre-pandemic levels. Stocks will love it. Buy stocks on dips.
Big Banks Report Blowout Earnings and are firing on all cylinders. The best is yet to come. Interest rates are rising, default rates are falling, profit margins expanding, and the economy is growing at a record rate. Buy (JPM), BAC), and (C) on dips.
The Nonfarm Payroll Bombs in September, coming in at only 194,000. That follows a weak 235,000 in August. The headline Unemployment Rate dropped to a new post-pandemic low of 4.8%, down from a peak of 22%. It’s not a soggy economy that’s causing this, but a shortage of people to hire. Some 10 million workers have gone missing from the American economy, and many may never come back.
Bitcoin Soars to $61,000, a five-month high, putting the previous $66,000 high in range. With ten crypto ETFs waiting in the wings for SEC approval, a flood of money is about to hit the sector. Several countries are now considering the adoption of Bitcoin as a national currency after El Salvador’s move. Keep buying Bitcoin dips. Mad Hedge Bitcoin Letter followers are making a fortune.
Oil (USO) Tops $80, after OPEC limits production increases to 400,000 barrels a day, dragging on the stocks market. Prices are approaching levels that will restrain growth. Pandemic under-investment and distribution problems have triggered a short squeeze. There will be many spikes on the way to zero.
Fed Minutes Show Taper to Start in November, as discussed in the September meeting. They may start with $15 billion a month in fewer bond purchases. The inflation boogie man is getting bigger with the 5.4% print on Tuesday. Sell rallies in the (TLT)
JOLTS Comes in at 10.4 million indicating that the labor shortage is getting more severe. Millions are still staying home for fear of catching covid. There is also a massive skills disparity resulting from decades of under-investment in education.
IMF Cuts Global Growth Forecast to 5.9%. Supply chains, delta, inflation worries, and vaccine access are to blame.
US Dollar (UUP) Hits One-Year High on rising interest rates. This will continue for the foreseeable future. Stand aside from the (UUP) as this is a countertrend trade. We may be only 15 basis points away from an interim peak in rates at 1.76% for the ten-year. My Ten Year View
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!
My Mad Hedge Global Trading Dispatch saw a heroic +8.91% gain so far in October. My 2021 year-to-date performance soared to 81.51%. The Dow Average was up 15.4% so far in 2021.
Figuring that we are either at, or close to a market bottom, and being a man of my convictions, I kept 90% invested in financial stocks all the wall until the October 15 options expirations. Those include (MS), (GS), (JPM), (BLK), (BRKB), (BAC), and (C).
The payday was big and more than covered earlier in the month stop-losses in (SPY) and (DIS). I quick trip by the Volatility Index (VIX) to $29, then back to $15 was a big help.
That brings my 12-year total return to 511.06%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 43.19%, easily the highest in the industry.
My trailing one-year return popped back to positively eye-popping 119.57%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.
We need to keep an eye on the number of US Coronavirus cases at 45 million and rising quickly and deaths topping 725,000, which you can find here.
The coming week will be slow on the data front.
On Monday, October 18 at 8:15 AM, Industrial Production for September is published. Johnson & Johnson (JNJ) reports.
On Tuesday, October 19 at 8:00 AM, the Housing Starts for September are released. Netflix (NFLX) reports. On Wednesday, October 20 at 7:30 AM, Crude Oil Stocks are announced. Tesla (TSLA) and IMB (IBM) report.
On Thursday, October 21 at 8:30 AM, Weekly Jobless Claims are announced. At 10:00 AM, Existing Home Sales for September are printed. Alaska Air (ALK) and Southwest Air (LUV) report.
On Friday, October 22 at 8:45 AM, the US Markit Flash Manufacturing and Services PMI is out. American Express (AXP) reports. At 2:00 PM, the Baker Hughes Oil Rig Count are disclosed.
As for me, I normally avoid the diplomatic circuit, as the few non-committal comments and soggy appetizers I get aren’t worth the investment of time.
But I jumped at the chance to celebrate the 70th anniversary of the founding of the People’s Republic of China with San Francisco consul general Gao Zhansheng.
Happy Birthday, China!
When I casually mention that I survived the Cultural Revolution from 1968 to 1976 and interviewed major political figures like Premier Deng Xiaoping, who launched the Middle Kingdom into the modern era, and his predecessor, Zhou Enlai, modern-day Chinese are enthralled.
It’s like going to a Fourth of July party and letting drop that I palled around with Thomas Jefferson and Benjamin Franklin.
Five minutes into the great hall, and I ran into my old friend Wen. She started out her career with the Chinese Intelligence Service and had made the jump to the Foreign Ministry, as all their best people did. Wen was passing through town with a visiting trade mission.
When I was touring China in the seventies as the guest of the Bank of China, Wen was assigned as my guide and translator, and we kept in touch over the years. I was assigned a bodyguard who doubled as the driver of a tank-like Russian sedan, a Volga.
The Cultural Revolution was on, and while the major cities were safe, we ran the risk of running into a renegade band of xenophobic Red Guards, with potentially fatal consequences.
By the time Wen married, China had already adopted its one-child policy. As much as she wanted more children, she understood the government’s need to adopt such a drastic policy. Without it, the population today would be 1.6 billion, not 1.2 billion, and all of the money that went into buying capital goods would have been spent on food imports instead.
The country would have stagnated at its 1980 per capita income of $100/year. There would have been no Chinese economic miracle. She was very proud of her one son, who was a software engineer at Microsoft (MSFT) in Beijing.
I asked if she recalled our first trip together and a dark cloud came over her face. We were touring a section of Fuzhou in southern China when three policemen marched up. They started shouting at Wen that we were in a restricted section of the city where foreigners were not allowed. They started mercilessly beating her with clubs.
I was about to intercede when my late wife, Kyoko, let go with a blood-curdling tirade in Japanese that froze them in their tracks. I saw from the fear in their faces that she had ignited their wartime fear of Japanese authority and the dreaded Kempeitai, or secret police, and they beat a hasty retreat.
To this day, I’m not exactly sure what Kyoko said. We took Wen back to our hotel room and bandaged her up, putting ice on the giant goose egg on her head. When I left, I gave her my paperback copy of HG Well’s A Short History of the World, which she treasured, as the book was then banned in China.
Wen mentioned that she was approaching the mandatory retirement age of 60, and soon would be leaving the Foreign Service. I suggested she move to San Francisco, which offered a thriving Chinese community.
She laughed. No matter how much prices had fallen, she could never afford anything here on a Chinese civil servant’s salary.
I asked Wen if she still had the book I gave her nearly five decades ago. She said it had become a treasured family heirloom and was being passed down through the generations.
As she smiled, I notice the faint scar on her eyebrow from that unpleasantness so long ago.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Kyoko and I in Beijing in 1977
https://www.madhedgefundtrader.com/wp-content/uploads/2021/10/John-Thomas-and-Kyoko.png448598Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-10-18 09:02:182021-10-18 14:51:18The Market Outlook for the Week Ahead, or The Good News is Here
I was flying on first class flight on Virgin America from New York to San Francisco last year, and all I can say is that you meet the most interesting people in first class.
The woman sitting next to me was dark-haired, rail-thin, elegantly dressed, and utterly gorgeous. She addressed the flight attendant in a heavy Italian accent.
I hadn’t been to the former Roman empire since the summer, so I thought I would give my Italian a workout.
What I learned was amazing and opened up nothing less than a peek into the future of retailing.
I am always on the lookout for the next “big thing” than can generate a great Trade Alert, and suddenly here was a golden opportunity
It turned out that the woman was a senior executive with the fashion house Prada, based in Milan. Why was a fashion executive flying to a city where the hoodie and torn designer jeans were the primary means of dress?
She was flying halfway around the world to develop a relationship with Stitch Fix (SFIX), the hottest new concept in online apparel retail.
The fact that major companies were flying people in from Europe to check out a small startup said a lot right there.
The company’s business model is very simple, if not brave.
Consumers fill out a personal profile that includes every conceivable measurement, preference, and lifestyle. A personal stylist is then assigned to you who mails you a monthly box of items they think you would like.
For this service, you are charged a “stylist” fee of $20, which can then be applied as a credit towards any purchases.
You simply buy the items that appeal and mail the rest back. An artificial intelligence-driven algorithm records your picks and returns and then predicts what you are most likely to buy next time.
After several of these cycles, the algorithm knows what you like better than you do and will even mail you special offerings at a discount.
Along the way, Stitch Fix will introduce you to styles and brands that you never would have thought of. In order words, it does all the thinking for you.
The company has already clocked $1 billion in revenues in 2017 and is on an exponential growth trajectory.
Stitch Fix boasts an operating gross margin of 44%, well in excess of traditional retailers like Macy’s (M), Kohl’s (KSS), The Gap (GPS), and JC Penny (JCP).
Originally targeting Millennials, it quickly learned that its real market was with middle-aged professional women who don’t have time to shop.
It is already marketing 700 brands and is working to establish its own brands where the real margins are.
Some 95% of the firm’s employees are women.
The recent history of tech IPOs has not been great ((SNAP), (GPRO), (APRN), etc.). However, given the current online retail explosion, I have great hopes for (SFIX).
Just to have some fun, I filled out a profile but listed my age as 25. I can’t wait to see what they send me.
Hopefully, I won’t blow up their algorithm.
To place your first order with Stitchfix, please visit their website by clicking here.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Arthur Henryhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngArthur Henry2021-10-13 09:02:072021-10-13 11:37:03The Brave New World of Online Retailing
(ON THE AIR WITH CASEY STUBBS),
(HOW TO HANDLE THE FRIDAY, OCTOBER 15 OPTIONS EXPIRATION),
(SPY), (GS), (MS), HPM), (BAC), (BLK),
(UNP), (TLT), (C), (BAC), (BRKB)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-10-12 08:06:282021-10-12 14:24:22October 12, 2021
Followers of the Mad Hedge Fund Trader alert service have the good fortune to own deep-in-the-money options positions that expire on Friday, October 15, and I just want to explain to the newbies how to best maximize their profits.
These involve the:
(SPY) 10/$410-$420 call spread 10.00%
(GS) 10/$320-$330 call spread 10.00%
(JPM) 10/$130-$140 call spread 10.00%
(BLK) 10/$770-$790 call spread 10.00%
(MS) 10/$85-$90 call spread 10.00%
(BRKB) 10/$255-$265 call spread 10.00%
(C) 10/$62-$65 call spread 10.00%
Provided that we don’t have another 2,000-point move down in the market this week, these positions should expire at their maximum profit points.
So far, so good.
I’ll do the math for you on our deepest in-the-money position, the Goldman Sachs (GS) October 15 $320-$330 vertical bull call spread, which I most certainly will run into expiration. Your profit can be calculated as follows:
Profit: $10.00 expiration value - $8.50 cost = $1.50 net profit
(11 contracts X 100 contracts per option X $1.50 profit per options)
= $1,650 or 17.65% in 24 trading days.
Many of you have already emailed me asking what to do with these winning positions.
The answer is very simple. You take your left hand, grab your right wrist, pull it behind your neck, and pat yourself on the back for a job well done.
You don’t have to do anything.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, October 18 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
If you don’t see the cash show up in your account on Monday, get on the blower immediately and find it.
Although the expiration process is now supposed to be fully automated, occasionally machines do make mistakes. Better to sort out any confusion before losses ensue.
If you want to wimp out and close the position before the expiration, it may be expensive to do so. You can probably unload them pennies below their maximum expiration value.
Keep in mind that the liquidity in the options market understandably disappears, and the spreads substantially widen, when a security has only hours, or minutes until expiration on Friday, October 15. So, if you plan to exit, do so well before the final expiration at the Friday market close.
This is known in the trade as the “expiration risk.”
One way or the other, I’m sure you’ll do OK, as long as I am looking over your shoulder, as I will be, always. Think of me as your trading guardian angel.
I am going to hang back and wait for good entry points before jumping back in. It’s all about keeping that “Buy low, sell high” thing going.
I’m looking to cherry-pick my new positions going into the next month-end.
Take your winnings and go out and buy yourself a well-earned dinner. Just make sure it’s take-out. I want you to stick around.
Well done, and on to the next trade.
You Can’t Do Enough Research
https://www.madhedgefundtrader.com/wp-content/uploads/2019/09/john-and-girls.png322345Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-10-12 08:02:022021-10-12 11:31:04How to Handle the Friday, October 15 Options Expiration
(THE MAD HEDGE SUMMIT VIDEOS ARE UP),
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HAPPY DAYS ARE HERE AGAIN),
(GS), (MS), (JPM), (BAC), (C), (BLK), (TLT), (BRKB), (SPY)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-10-11 09:06:572021-10-11 11:34:53October 11, 2021
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