A true white-knuckle ride

Wednesday, 10 January 2018
Melbourne, Australia
By Kris Sayce

  • Confirming our bias
  • Putting the emotion into trading
  • Look to the sky for the next possible downturn

If you joined the priority access list for Sam Volkering’s Crypto Tech Investor service, make sure to check your email inbox.

Despite the volatility (or perhaps, because of it), cryptos are white hot.

Everyone seems determined to call the top of the market. Even so, any drops have soon been followed by white-knuckle rallies.

According to Sam, this isn’t going to change anytime soon. It’s a wild ride, but it’s a potentially profitable wild ride too.

As an update, here’s how Sam’s current crypto recommendations are performing right now:

  • Crypto 1: up 893%
  • Crypto 2: up 389%
  • Crypto 3: up 1,833%
  • Crypto 4: up 2,385%
  • Crypto 5: up 683%
  • Crypto 6: up 1,177%
  • Crypto 7: up 1,095%

That’s four quadruple-digit percentage gainers. To give you some idea of what those gains mean, an investment of $100 in each of those, for a total investment of $700, would now be worth $9,158!

There’s no other way to describe it other than extraordinary.

Again, if you joined the priority access list, make sure to check your email for your special invitation.

Now, on to the markets…

Markets

Overnight, the Dow Jones Industrial Average gained 102.8 points, or 0.41%.

The S&P 500 closed up 3.58 points, or 0.13%.

In Europe, the Euro Stoxx 50 index added 6.42 points, or 0.18%. Meanwhile, the FTSE 100 gained 0.45%, and Germany’s DAX index added 0.13%.

In Asian markets, Japan’s Nikkei 225 index is down 29.54 points, or 0.12%. China’s CSI 300 is up 0.49%.

In Australia, the S&P/ASX 200 is down 31.81 points, or 0.52%.

On the commodities markets, West Texas Intermediate crude oil is US$63.47 per barrel. Brent crude is US$69.18 per barrel.

Gold is trading for US$1,310.09 (AU$1,674.42) per troy ounce. Silver is US$16.92 (AU$21.64) per troy ounce.

The Aussie dollar is worth 78.24 US cents.

Bitcoin is US$14,280.45.

Confirming our bias

You know your editor by now. We’re guilty of confirmation bias. That is, we seek out stories and events that conform to our preconceived ideas.

Pleasantly, we are not alone. Catching up on our backlog of reading material over lunch today, your editor finally got to reading the 1 December issue of Grant’s Interest Rate Observer.

The author, James Grant, admits:

Many of us — your editor does not absolve himself — tend to predict what we root for. In like vein, we pluck from the news those signs and sightings that reinforce our prior convictions. These gleanings we tend to call “data.”

We consider ourselves to be in good company.

We do root for the things we believe in and predict. We predict a stock market crash. So when we see, to use Mr Grant’s word, ‘data’ to support that view, we shout it as loud as we can.

When the Dow Jones Industrial Average was at a high, and the Dow Jones Transportation Average was not, we warned that it was a…well…a warning of bad things to come.

Now that both Averages are at a record high…well…we have nothing to warn you about…except that we believe that in itself is worthy of a warning.

If you get our drift.

When 18 months ago we warned you about falling US company earnings, and how Wall Street had unrealistic expectations of growth, it was because we didn’t believe 20% earnings growth was possible.

Now that US companies have achieved something close to 20% earnings growth on a per-share basis…we suddenly tire of looking at US company earnings growth.

But while being wrong may knock us down, it doesn’t keep us down. We still search out things which confirm our biases. In this instance, it’s the bias that surely the crypto market must collapse at some point.

Is this our clue that perhaps the collapse may soon come? From Bloomberg:

Kodak’s latest moment has it joining the cryptocurrency frenzy.

Shares in Eastman Kodak Co. more than double after the former camera and film heavyweight said it would launch the Kodakcoin, “a photocentric cryptocurrency to empower photographers and agencies to take greater control in image rights management.

Hmmmm. We wonder. Genius, or opportunism? Maybe both.

The news certainly helped arrest the alarming slide in the Eastman Kodak Co [NYSE:KODK] share price:



chart image

Source: Bloomberg
Click to enlarge


Of course, even after doubling overnight, the share price is still down 81.7% from the recent high in 2013. That’s not the all-time high. This is the share price performance after the bankruptcy.

While Kodak’s announcement may have done wonders for the company’s share price, we’re not sure the crypto community would be quite as thrilled with the company’s endorsement of crypto and blockchain technology.

We feel it must be similar to the reaction you have when a creepy old uncle tells you that you have a pretty girlfriend. It just seems wrong.

Anyhoo, what do we know? Kodak launches a cryptocurrency, and the stock price more than doubles. We look forward to the launch of Kodakcoin. We can’t say for certain that Sam Volkering won’t recommend it in his Crypto Tech Investor service…but something tells us he won’t.

Remember, if you’re on the priority access list, check your email inbox. You should have received your latest invitation by around noon today.

Putting the emotion into trading

Almost every trader we’ve met tells us that they take the ‘emotion out of trading’.

In practice, almost every trader we’ve met actually seems to put the emotion into trading!

Except one person — Phil Anderson. Phil isn’t emotional about trading. He lets the charts and history do the talking. The only thing that Phil is emotional about is the work and study that has gone into developing his trading system.

To say he’s passionate is an understatement. If you haven’t yet come across Phil’s work, make sure you check out his latest guest essay below. As always, we’re sure you’ll find it revealing.

Cheers,
Kris


Look to the Sky for the Next Possible Downturn
By Phil Anderson

Visitors to the Empire State Building have often asked whether the weight of the building (over 360,000 tons) is forcing Manhattan to sink lower into the water.

It’s funny they say that.  

In the very early 1800s, a Manhattan carpenter named Lozier came to the startling realisation that the city was dangerously lopsided. Having too many buildings, taller buildings especially, on its lower end.

If any more went up, he warned, the island would sink into the Hudson River.

To steer away from this disaster, Lozier suggested a chunk of Manhattan’s northern end be hacked off, towed down the Hudson River and attached to the southern tip. This would redistribute the island’s weight.

The mayor was so impressed with Lozier’s ingenuity, that he commissioned him to commence work at once. The mayor handed over wads of cash from the City Treasury.

Lozier advertised for workers to help him with his plan. More than 500 showed up, braving the winter cold to wait for the boss.

They waited a long time. Lozier made off with the cash he received.

One of the major topics I’ve spent studying over the last 30 years is what I call the 18-year real estate cycle. It’s a regular pattern that’s repeated throughout over 200 years of US history, and even longer in the UK.

This makes the economy a lot more predictable than most people assume. It also gives incredible insight into which sectors you should be trading.

And a very valuable timing guide — when to be in and out of asset markets. I was 100% in cash immediately prior the global financial crisis, thanks to this.

And then I bought up some prime London property throughout 2010 and 2011.

US real estate bottomed out in 2011. Real estate cycle history suggests we’ll get an overall 14-year up move in US real estate, until around 2024/5.

Then we’ll get another collapse around 2026, as we did in 2008. The boom bust cycle comes from the property market.

I can tell you one thing. The real estate cycle continues to turn. It’s all happening right before your eyes, and as per my Cycles, Trends and Forecasts property clock.

One effective way to judge where we are in the cycle is by the construction of tall buildings and their completion dates… It might sound odd at first, but there’s very good evidence to show that tall buildings usually open in recession. You can read my book The Secret Life of Real Estate and Banking for the full rundown on this.

The current cycle we are in — started in 2010 — has also been unusual in the way there has never been so many ‘talls’ on the drawing board so early in a cycle.

This tells us just how big the cycle could really get. I think a major boom is developing worldwide. I’m on record as having pointed that out years ago.

Just take a look at some of the record ‘tall buildings’ due to open as we go into 2019–2020:

  • Kingdom Tower in Saudi Arabia (World’s tallest, Due to open 2020)
  • Suzhou Zhongan Center (China’s tallest, 2020)
  • 1 Vanderbuilt, New York (second-tallest in City, due to open 2020)
  • Vista Tower, Chicago (third-tallest in City, due to open 2020)
  • Australia 108 (Melbourne’s tallest, due to open 2020)

There’s plenty more major developments due around this time too. We can expect a mid-cycle slowdown.

But markets are funny things, at times. This ‘tall building’ indicator is known to quite a few people now.

It’s highly likely around 2019 people are going to notice all the completions, look at the history of this, and then forecast total collapse and calamity.

If enough people do this, we could conceivably use this indicator as counter cyclical — if enough say it. It might even suggest there won’t be much of a downturn to speak of.

A mid cycle peak looks to be brewing. History is repeating. We’re now getting all the classic signs of an economy starting to overheat, just like in 1999, the late 1970s, and every time before that.

Paul Newman’s ‘Paul Newman’ Rolex Daytona sold for $17.8 million last month. That’s a record for a wristwatch at auction.

Paris Hilton is making a comeback. She was all the rage back in 2007 when everyone — and I mean everyone — just had to have a piece of her.

Ms Hilton, the celebrity famous for being famous, jumped on the ICO bandwagon over the past several months by taking to Twitter to back a new cryptocurrency called Lydian.

And markets are waiting on several blockbuster IPOs in the next 12 months too. Uber, the US ride-sharing company is one. Then there’s the even bigger Saudi float of their oil company, Aramco.

These things are a reminder that the mid-real estate cycle peak is not far away, now.

However, much more dangerous will be the real estate cycle peak due around 2026. Again, we can use major buildings and developments to ‘time’ the economy.

Let’s take a look at some projects either under development or proposed due around 2026.

  • Melbourne Metro Rail Tunnel (2026)
  • Tower 1, Basra, Iraq (World’s tallest, 2026)
  • Japan’s tallest building (Due 2027)

There are plenty more.

I am now in my third real estate cycle over my lifetime. I can assure you the dynamics behind this are something you should be studying. You can do that here, if you wish.

So keep any eye out for more ‘tall buildings’ or record developments. Once you ‘see’ the cycle at work, you will never look at the world the same way again. That’s been true for me, and thousands of my subscribers.

Best wishes for 2018,

Phil Anderson,
Trader and Editor, Cycles, Trends and Forecasts