Disruptive, volatile…and back at new highs

Monday, 20 November 2017
Melbourne, Australia
By Bernd Struben

  • A 43% rebound in eight days
  • Far more than bitcoin

Over in the US, Congress has inched towards passing Donald Trump’s signature tax cuts.

The so-called ‘Tax Cuts and Jobs Act’ would slash the US corporate tax rate from 35%, down to 20%. A massive 15% reduction.

Personal tax rates would also be adjusted. Though whether for the benefit of the wealthy or the working classes depends on which lobbyist you ask.

Last week the House of Representatives and the Senate Finance Committee, each passed their own version of the bill.

And, as US Treasury Secretary Steven Mnuchin points out, the tax cuts should prove a boon for Wall Street.

From Bloomberg:

The Republican tax plan isn’t designed to help rich New Yorkers, but Wall Street can certainly look forward to some advantages, said Treasury Secretary Steven Mnuchin.

“There’s a lot of benefit to the New York economy to lowering the corporate tax to 20 percent,” Mnuchin said in an interview on Fox News on Friday. “That’s a huge boom for the financial services industry — they can hire more people, they can pay more people, they can create more jobs, they can be competitive.”

As a proponent of small government and free markets, I was sold the moment the words ‘lowering’ and ‘taxes’ were combined in one nifty sentence. But before you run out and load up on US stocks, the full Senate still needs to approve the House bill before Trump can sign off on it.

And that could prove tricky.

Republicans only need a simple majority in the 100 member Senate to get the bill passed. But with a meagre 52 seat margin, it only takes two defectors to send the tax cuts back to the drawing board.

And the inside scoop from our US affiliates tells us there are not two, but five Republican senators who may shoot down the House version of the bill. The potential mutineer names to watch are: John McCain, Jeff Flake, Susan Collins, Robert Corker and Ted Cruz.

Doubts about the viability of the tax cuts has already seen Wall Street wobble. On Friday (US time), the Dow Jones fell 0.43%. If the Senate shoots the bill down, US markets may well fall another 10% or more, before year’s end.

On the other hand, if the tax cuts pass through quickly, the bull market should rally strongly.

That’s because it looks like investors have broadly straddled the fence on this one. Meaning Trump’s corporate tax cuts are partly…but not fully, priced into the market already.

Meanwhile, here in Oz, the government’s enterprise tax plan remains in even greater doubt. The plan would cut the corporate tax rate for all businesses to 25%, from 30% — a much more modest 5% reduction.

The mere prospect of giving tax breaks to big business, has our socialist brethren up in arms. That’s despite the fact leaders from some of Australia’s biggest companies have said they would ramp up investment and hire more workers if their tax burden is reduced.

As The Australian Financial Review reports:

Chief executives from Australia’s biggest companies have pledged to unleash a fresh wave of investment and hire more workers if the corporate tax rate is cut, building pressure on a recalcitrant Parliament to pass the Turnbull government’s enterprise tax plan.

Warning the nation would suffer economic damage if the top rate remained frozen at 30 per cent, four out of five company chiefs told a Business Council of Australia survey their investment plans hinge on embracing a more globally competitive tax regime…

“Our members employ over 1 million people in Australia, they know that to drive economic growth and create more jobs we must give Australia a competitive company tax system,” [Business Council of Astralia chief Jennifer Westacott] said.’

Regardless of where you stand on the issue, one thing is almost certain.

If Canberra can push through the corporate tax cuts, the Aussie market should rally.

If the US Senate passes Trump’s tax bill, the US and Aussie markets should rally.

If the bills stall in both nations, as looks increasingly likely, I’d expect the ASX to join US markets in a 10% plus correction before the Christmas holidays.

Yet while the Dow Jones fell 0.43% over the weekend, and the ASX 200 is down 0.10% at time of writing, one particular index is soaring to new heights.

More after the markets.

Markets

Over the weekend, the Dow Jones Industrial Average closed down 100.12 points, or 0.43%.

The S&P 500 lost 6.79 points, or 0.26%.

In Europe, the Euro Stoxx 50 index finished down 17.34 points, or 0.49%. Meanwhile, the FTSE 100 fell 0.08%, and Germany’s DAX lost 53.49 points, or 0.41%.

In Asian markets, Japan’s Nikkei 225 index is down 144.39 points, or 0.64%. And China’s CSI 300 is down 0.69%.

In Australia, the S&P/ASX 200 is down 6.15 points, or 0.10%.

On the commodities markets, West Texas Intermediate crude oil is US$56.59 per barrel. Brent crude is US$62.53 per barrel.

Gold is trading for US$1,293.57 (AU$1,712.20) per troy ounce. Silver is US$17.26 (AU$22.85) per troy ounce.

One bitcoin is worth US$8,034.45.

The Aussie dollar is worth 75.55 US cents.

A 43% rebound in eight days

When bitcoin fell almost 29% in value earlier this month, the naysayers came out in force.

Bitcoin bottomed at US$5617.69 on 12 November. Investors were worried about potential technology issues and in-fighting within the bitcoin community. And the question trumpeted by the mainstream was, ‘Has the bitcoin bubble popped?’

However, as you can see on the chart below, those concerns well and truly evaporated…almost overnight:



chart image

Source: CoinDesk
Click to enlarge


You can see the dip there last weekend. A dip which, by the way, still saw the digital currency up 767% year-on-year.

As at writing, bitcoin has rebounded to US$8,034.45 (AU$10,634.62) or up 43% in just over a week.

Volatile?

Certainly.

Appealing returns? Heck yes. Especially when you compare it to the ASX 200 over the same period:



chart image

Source: Google Finance
Click to enlarge


At time of writing, the ASX 200 is down 1.74% since market close on Friday, 10 November.

The rapid rebound in bitcoin — and dawdling pace of the ASX, which had just surpassed its 6,000 point milestone — surprised many analysts.

Not so, our own crypto expert Sam Volkering.

Back in early 2016, Sam called for a US$10,000 bitcoin price coming in the not so distant future. And a lot of readers thought he was exaggerating. That we were just throwing around big numbers to sell subscriptions.

Today, that call looks conservative…if anything.

Sam spoke at the Precious Metals Investment Symposium in Melbourne on 3 November. But he didn’t talk about gold or silver. Instead he was asked to share his expertise on crypto currencies.

It was my first time to attend this annual conference. And also the first time the conference opened its ears to the booming potential in the crypto market. Which in itself should tell you something.

Addressing bitcoin, Sam pulled no punches. This is one crypto that’s here to stay, he told the crowd of 300 gold bugs. He called it a ‘disruptive force of new wealth creation…not of wealth redistribution.

Sam already uses bitcoin to pay directly at select merchant outlets. Like buying a coffee in Dubai, for example. And he’s confident that — sooner than you or I would likely believe — merchants all over the world will widely accept bitcoin as payment.

As bitcoin becomes ever more entrenched, global governments will have little choice but to embrace it. And attempt to regulate it, of course.

With the total amount of bitcoin limited to 21 million (there are around 12.5 million in virtual circulation today), that should see the price keep heading higher. Although as the plunge last weekend showed, not in a straight line.

Timing can be just as important in the crypto market as it is in the stock market. And knowledge is everything. That’s why Sam launched his entry level advisory service, Secret Crypto Network earlier this year.

To discover how and when to buy bitcoin, alongside a collection of other core cryptocurrencies, this should be your very first stop.

Far more than bitcoin

Of course, the potential on offer in the crypto world is far greater than just bitcoin. Although bitcoin is the biggest player, the entire crypto network has rocketed 1,500% this year alone.

That brings the value of the whole crypto market to US$160 billion…or 2% of the global currency market.

Now these statistics tell me two things.

First, cryptos have gone from almost nothing, to more than three times the value of the entire Ford Motor Company [NYSE:F] virtually overnight.

Second, with only a 2% slice of the global currency market, there is a lot of room left to grow.

While bitcoin will likely remain a dominant — if not the dominant player — for some years to come, some of the biggest gains are being made in the brand new coins joining the market.

You’ve probably heard of initial coin offerings (ICOs). This is where a new crypto officially launches to the public. And it’s where a lot of money can be made…or lost…depending on the new crypto you choose to invest in.

Make no mistake. ICOs carry plenty of risk for the massive potential rewards on offer.

Generally, an ICO will see new cryptos priced in the pennies.

You may have heard of Monero. It’s the eighth largest crypto in the world. It first saw the light of day back in May 2014. On 1 January this year, it was trading for US$0.46. As at writing, it’s trading for US$131.26.

That’s a gain of 28,534%…in less than 12 months.

It’s with an eye on just these types of opportunities that Sam launched his new premium service, Crypto Tech Investor.

Now to be clear, this service is not for the fainthearted, or crypto novices. But if you’re on the hunt for some truly outsized gains — and have the stomach for the risk involved — you’ll want to check this out.

And you’ll want to do so before midnight this Wednesday, 22 November. That’s no arbitrary date. It’s your last chance to get in on the ground floor of a promising brand new crypto before it goes public.

Get all the details here.

Cheers,
Bernd