How to run the most profitable hedge fund on earth

Wednesday, 20 December 2017
Melbourne, Australia
By Bernd Struben

  • Strike while the iron is hot
  • If bitcoin’s 15% tumble worries you…you’re in the wrong market
  • Do you know the answer to this?

This week Port Phillip Publishing brings you quant trading guru, Jason McIntosh’s ‘Trade Secrets’ training series.

The five-part video series is entirely free to you. An early Christmas gift to our paid subscribers, if you will. We’re releasing one video each day in the lead up to the holiday weekend.

In part two, which I mentioned yesterday, Jason tells you exactly how you know when to take profit on an open trade.

My apologies, however, as the link in yesterday’s Port Phillip Insider only provided you with the first video of the informational series. In that first video Jason explains why many people buy stocks at the wrong time. Don’t let that be you!

The correct link to access the first two videos — plus the third instalment released today — is here.

In today’s informational session, Jason takes a look at how to deal with stocks that are falling. For example, how do you know if a stock you own is tanking, and not just correcting in advance of an upswing?

And he explains the mistake that 99% of traders make. A mistake which can see them sell too early and miss out on potentially huge profits.

You can access the first three parts of Jason McIntosh’s ‘Trade Secrets’ for free by clicking here.

Now to the markets.

Markets

In a classic case of ‘buy the rumour, sell the fact’, US and most European markets closed lower in Tuesday’s trading.

Investors drove all three US indices to new record highs on Monday, buoyed by the prospect of Trump’s massive corporate tax cuts passing the House of Representatives. Now that the House has passed the measure, investors moved to take some profits off the table.

Overnight, the Dow Jones Industrial Average closed down 37.45 points, or 0.15%.

The S&P 500 fell 8.69 points, or 0.32%.

In Europe, the Euro Stoxx 50 index finished down 27.20 points, or 0.75%. Meanwhile, the FTSE 100 bucked the trend to gain 0.09%, and Germany’s DAX fell 96.51 points, or 0.72%.

In Asian markets, Japan’s Nikkei 225 index is up 10.95 points, or 0.05%. And China’s CSI 300 is up 0.06%.

In Australia, the S&P/ASX 200 is up 9.51 points, or 0.16%.

On the commodities markets, West Texas Intermediate crude oil is US$57.67 per barrel. Brent crude is US$63.80 per barrel.

Gold is trading for US$1,261.91 (AU$1,648.48) per troy ounce. Silver is US$16.13 (AU$21.07) per troy ounce.

One bitcoin is worth US$17,019.73.

The Aussie dollar is worth 76.55 US cents.

Strike while the iron is hot

Not every stock involved in blockchain is going to shoot the lights out.

That would be too easy!

But here’s an indication of just how massive the revolutionary potential of the distributed ledger technology is.

In yesterday’s Port Phillip Insider, I wrote the following about small-cap stock LongFin:

Shares in microcap stock Longfin Corp [NASDAQ:LFIN] surged more than 2,600% over the past week. Prices peaked on Monday (US time) before giving back some of their gains in intraday trading. Although they still closed up 228% for the day.

What sent the share price rocketing?

The company’s move into blockchain — the distributed ledger technology behind cryptocurrencies.

Those are phenomenal gains. And not something you’d expect to be repeated by another blockchain connected company the very next day.

Yet that’s exactly what happened with Crypto Co [OTCMKTS:CRCW].

The once tiny company trades in the over-the-counter (OTC) securities market. It’s seen gains of 2,700% over the past month. And 17,324% since it began trading in September.

Have a look at the chart below:



chart image

Source: Bloomberg
Click to enlarge


Not surprisingly, the rapid price rise caught the attention of the SEC.

From Bloomberg:

U.S. regulators temporarily suspended trading in Crypto Co. over concerns that the stock is being manipulated after it surged more than 2,700 percent this month, making paper billionaires out of top executives.’

Crypto Co’s president, James Gilbert, is an Australian. Last week his holdings in the company were reported to be worth US$1 billion.

Good on ya, James!

According to The Australian Financial Review (AFR):

‘[Mr Gilbert] co-founded LivingSocial Australia before moving five years ago to California where he has been involved in a series of tech start-ups.

Crypto Co specialises in providing business and individuals exposure to the revolutionary blockchain technology, the infrastructure platform that bitcoin is traded on.

Crypto Co did not immediately respond to requests for comment about the SEC’s actions. There was no suggestion that Mr Gilbert had done anything wrong.

And it’s not just LongFin and Crypto Co enjoying rapid-fire 10 and 20-fold gains. Far from it.

You can add Riot Blockchain, Digital Power, MGT Capital, and Overstock.com to the list of companies that have seen their share prices soar. And it’s all thanks to their involvement in blockchain technology.

See for yourself:



chart image

Source: Bloomberg
Click to enlarge

None of this comes as a surprise to our in-house crypto expert, Ryan Dinse. It’s what he predicted back in early October. A share price explosion in select stocks from what he calls the ‘blockchain collision’.

Here’s what he wrote to subscribers of his small-cap investing service, Exponential Stock Investor, in an update yesterday:

In 2017 we’ve seen many technology parallels with big historical moments. As big as the “microchip moment” from the late 1950s.

There’s no doubt in my mind that there’s more big changes coming in 2018. Socially, politically, technologically…Some good, some bad, all interesting. All of them both an opportunity and a threat. Depending on how you position yourself.

Blockchain technology is at the heart of this.’

At Exponential Stock Investor, Ryan looks to steer you clear of those threats, and into the opportunities.

Since launching the service on 24 October this year, he’s done remarkably well. If you’d invested in all six of the ASX listed recommendations he’s made, you’d be sitting on a gain of 46.17%. And that’s in less than two months.

You can get the full story on Exponential Stock Investor here.

If bitcoin’s 15% tumble worries you…you’re in the wrong market

Without bitcoin, arguably, blockchain technology might not exist. At the least, it would be running years behind where it is today.

Yet while LongFin and Crypto Co surged this week, bitcoin itself has taken a bit of tumble since it toyed with US$20,000 on Sunday.

At time of writing one bitcoin is worth US$17,019.73. That’s down about 15% in four days.

In the stock market that kind of move would be alarming. With bitcoin…who knows? It could shoot back above US$20,000 by the weekend…or fall below US$15,000 by tomorrow morning.

In the long run, however, crypto guru Sam Volkering is confident bitcoin is here to stay. And he still predicts prices will top US$50,000 within the next few years…or sooner.

And let’s not forget, Sam did make the call for a US$20,000 bitcoin price back in mid-2016, when it was still selling for around US$600.

Bitcoin’s explosive potential slipped under the radar of most other analysts. And it certainly didn’t get much traction among hedge funds.

Fortunately for investors in the Pantera Bitcoin Fund, Dan Morehead, founder of Pantera Capital, wasn’t afraid to stray from the herd. The results have seen the fund return a staggering 25,004% since its launch in 2013.

From the AFR:

‘[The Pantera Bitcoin Fund], one of the first in the world to dedicate itself to virtual currencies, released its returns in a letter sent to investors on Tuesday. The figure for the life of the fund, which was set up in 2013, is eye popping: 25,004 percent.

A significant portion of the gains have come this year, thanks to the sky rocketing price of an individual bitcoin, which hit $19,000 on Monday. (The fund’s 25,004 percent figure was actually counted back when bitcoin was at $15,500, a week ago.)

For comparison, the top performing hedge fund in the world last year returned 148 percent, according to Preqin, a hedge fund tracker. Since 2013, the Pantera Bitcoin Fund’s compound annual returns have been around 250 percent.’

250% compound annual returns, for five years running.

It’s those kinds of stellar gains that saw Sam Volkering launch Secret Crypto Network in July this year. Together with Ryan Dinse, they have since recommended nine cryptos to their readers.

The top performer is up 595.56%. The second best is up 588.97%. Most impressively, the worst of the lot is up 13.25%.

That’s right. Not a single one of their nine crypto recommendations is down.

If you haven’t checked out Sam Volkering’s Secret Crypto Network yet, you can do so here.

Do you know the answer to this?

Aside from its stellar price gains, you may have also heard that bitcoin mining and verification is drawing on an increasing amount of power. And in today’s hyper-environmentally sensitive world, that’s drawing some flak.

As Bloomberg notes:

‘…the laborious creation of each digital bitcoin by private computer networks has real-world consequences in the form of massive energy use — including from fuels that cause the most pollution…

The global industry’s power use already may equal 3 million U.S. homes, topping the individual consumption of 159 countries, according to the Digiconomist Bitcoin Energy Consumption Index. As more bitcoin is created, the difficulty rate of token-generating calculations increases, as does the need for electricity.

“This has become a dirty thing to produce,” said Christopher Chapman, a London-based analyst at Citigroup Inc.’

They way I read it, this is just the power used for bitcoin. Meaning if you include all the cryptos in existence — some 1,300 of them — the total energy use might be enough to power 5 million US homes.

And we know the Americans like their appliances oversized…and their aircons set on extra cool.

I bring this up for two reasons.

One, no matter what you may read elsewhere, if something is going to derail cryptos it won’t be rising energy use. Not even if their computers are hooked right into the oldest coal fired power plants on the planet.

Two, in my rather brief research, I wasn’t able to find any comparable statistics related to the energy used to fuel the world’s fiat currencies…including all credit card transactions.

Part of that would surely include the energy and physical materials going into creating notes and coins. But the computers running the world’s banking systems — not to mention the lights and heating/cooling systems of said banks — need to be thrown in to the mix as well.

As I’m out of time…and over word count…we’ll leave it there for today.

But if you’ve got any idea as to the energy consumed by global fiat currencies and credit transactions, drop us a line at letters@portphillipinsider.com.au. Just put ‘fiat money energy’ in the subject line, so that I’m sure to see it.

And finally…

In today’s Australian Tribune: ‘Who Is Stealing the Murray River’s Water?

Adam Smith, the father of economics, explained “the tragedy of the commons”.

It’s a scenario where the free market fails. And it occurs when an asset, like a common grazing field, can be freely accessed by all. In the case of a community field, the result tends to be overgrazing. And a poorer outcome for all.

In the case of rivers, it’s people using too much water. And the battle between upstream users and those living downstream is one that’s long raged around the world.

Australia’s Murray River is no different…’

The Australian Tribune is Port Phillip Publishing’s new, politically oriented newsletter and website.

If you’re fed up with reading sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

Or visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above and all the latest uncensored political news from around the world.

Cheers,
Bernd