Roubini: the 412th economist to yell at bitcoin

Friday, 19 October 2018
Melbourne, Australia
By Sam Volkering

  • Get ready for The Billionaire Trader
  • Roubini blows a fuse
  • Why being wrong once will make him wrong twice

Before we get started today, I just want to bring your attention to the essay you’ll find after my mad ramblings.

Following on from today, next Friday and for the weeks that follow you’ll find a fascinating series of essays from ‘The Billionaire Trader.

I would love to be able to reveal the identity of The Billionaire Trader to you, but I can’t. His name and details are off limits. They’re on embargo until he’s established that you’re even interested in what he has to say.

You see The Billionaire Trader is exactly that — he’s been trading money for over 30 years; for billionaires, gigantic family offices and some of the world’s biggest (and wealthiest) institutions.

Over the coming weeks you’ll hear about his methods, understand his language, and get a peek into his world as he opens the door to his moneymaking systems. Ultimately, he wants to prepare you with all the tools to trade the markets like a pro.

The reason we can’t tell you his name is that you may not be interested in learning his systems. And if you’re not, then he’ll happily go back to trading the markets for the world’s wealthiest.

But if you are interested then read his essay below and his contributions over the coming weeks. From there, the rest is up to you.

But knowing his real identity and what he’s capable of…well, I think it’ll be worth your while to hear what he’s got to say.

With that said, it’s time to rip some shreds off one of the most controversial voices in economics right now…

But first, the markets.

Markets

Overnight the Dow Jones Industrial Average closed down 327.23 points, or 1.27%.

The S&P 500 lost 40.43 points, or 1.44%.

In Europe, the Euro Stoxx 50 index finished down 31.49 points, or 0.97%.

Meanwhile, the FTSE 100 fell 0.39%, and Germany’s DAX lost 125.82 points, or 1.07%.

In Asian markets, Japan’s Nikkei 225 is down 232.63 points, or 1.01%. China’s CSI 300 is up 0.32%.

In Australia, the S&P/ASX 200 is down 10.30 points, or 0.17%.

On the commodities markets, West Texas Intermediate crude oil is US$68.80 per barrel. Brent crude is US$79.45 per barrel.

Turning to gold, the yellow metal is trading for US$1,227.81 (AU$1,726.82) per troy ounce. Silver is US$14.62 (AU$20.56) per troy ounce.

One bitcoin is worth US$6,453.54.

The Aussie dollar is worth 71.09 US cents.

Dr. Doom or Dr. Doomed?

Nouriel Roubini is a well-known name in the world of economics. He is indeed an economist by trade. He’s well educated and probably knows a thing or two about economics, business and finance.

He’s also known around the traps as Dr. Doom. Of course he’s not the only Dr. Doom of economics. Most economists who ‘predicted’ the 2008 global debt crisis usually throw ‘Dr. Doom’ into their bios at some point.

And Roubini is no different.

To his credit, he was one of the few voices floating around that said the US housing bubble was set to crash in 2007 and 2008. In fact he warned of this impending outcome earlier in 2006.

When it comes to housing issues, traditional economics, and global debt issues Roubini is probably worth listening to.

But Roubini’s recently decided to throw his hat in the ring about crypto and bitcoin. And boy, Dr. Doom sure had a lot to say!

Here are a couple of choice quotes from Roubini’s 37-page testimony to the US Senate Committee on banking, housing and community affairs:

Scammers, swindlers, criminals, charlatans, insider whales and carnival barkers (all conflicted insiders) tapped into clueless retail investors’ FOMO (“fear of missing out”), and took them for a ride selling them and dumping on them scammy crappy assets at the peak that then went into a bust and crash — in a matter of months — like you have not seen in any history of financial bubbles.

He continues:

Blockchain is most overhyped technology ever, no better than a glorified spreadsheet or database.

And why is blockchain no better than an Excel spreadsheet or database?

There is no institution under the sun — bank, corporation, non-profit, government, charity — who would put on public, decentralized, peer-topeer permission-less, trust-lees, distributed ledgers its balance sheet, P&L, transactions, trades, interactions with clients and suppliers. Why should all this information — mostly proprietary and highly valuable — be on a public ledger and authenticated by some random, not transparent and shady group of “miners”? No reason and thus there is NO institution whatsoever using a public, permission-less distributed technology.

He doesn’t hold back, does he?

The problem is that Roubini has clearly decided that he should be relevant in crypto. Being Dr Doom, you need to have something doomy to talk about or you fast become irrelevant.

Except his plan of attack is just that, full-on attack. Now, he’s not actually making up lies. The themes he covers in his full testimony are valid points. But rather than properly explore them, he makes grandiose claims and aggressive and superficial arguments to make his case.

To deep dive into his 37-page essay would be somewhat a waste of time. But we should easily point out that companies like DocuSign (implementing Ethereum into their platform), IBM (implementing Stellar into global remittance), Amazon, Microsoft and Samsung (all developing blockchain-as-a-service products) would disagree that blockchain is no better than an Excel spreadsheet.

Ironically, Microsoft (who invented Excel) is one of the members of the Enterprise Ethereum Alliance. This alone is enough to prove to you that Roubini has a screw loose. But we know why.

Clearly he’s achieved what he set out to achieve. Roubini will get more paid speaking gigs at crypto conferences now than he would have had before this outburst.

That’s how he turns a buck. And by being Mr. Controversial, he’s brought attention to himself in a way he probably hasn’t had before. Heck, we’re even writing about him!

His angle is to remain relevant in a new world. And while he’s grabbing headlines now for losing his bottle over crypto, the facts are he’s repeatedly been wrong about it.

For example, in 2014 Roubini thought he’d have a crack at bitcoin:

So Bitcoin isn’t a currency. It is btw a Ponzi game and a conduit for criminal/illegal activities. And it isn’t safe given hacking of it.

At the time bitcoin was trading around US$618. This was after it had come from US$117 in October 2013, peaked to over US$1,100 in November 2013 and then ‘crashed’ back to US$500 just before Roubini made his comments.

We all know how that played out in the next four years. Today bitcoin still trades for over US$6,400.

In fact in my book, Crypto Revolution: Bitcoin, Cryptocurrency and the Future of Money, I look at that period in time and unwrap exactly why it occurred and what it meant for crypto markets moving forward.

And what we see today after the boom and peak and crash of crypto and bitcoin (from October 2017 to today) is an almost perfect repeat of history.

Of course Roubini’s recent comments are almost a perfect replica of his 2014 comments. OK, there’s a little more of it, and it’s a lot more aggressive. But it’s the same dung pile, different smell.

For those of us that live on the inside of the crypto world we know that punters like Roubini will come and take swings at crypto and bitcoin. They’ll almost always, inevitably, miss by a country mile.

The crypto world will move on and continue to do what it does. And if our experience and analysis tells us anything, it’s that we’re right at the beginning of it all.

We fondly look back on 2013 and 2014 as the tiniest blip on the radar. Soon enough we’ll look back on 2017 and 2018 in the same vein.

And for Roubini? He’ll be as irrelevant to crypto and the development of this revolution as he was in 2014.

So good luck to him. Another old guy yelling at crypto — nothing new to see here.

Regards,
Sam


Fire in the Hole!
By The Billionaire’s Trader

Allow me to introduce myself…in a way.

I’m looking forward to writing to you over the coming weeks and months, in order to give you some insights into a different way of seeing the markets. But it will involve some time investment from you. I will teach you my language. My trading language.

It’s a language that is the result of a huge amount of time and energy put into trying to understand market behaviour. The language involves a model that attempts to overcome the sea of gray that is price action. It forces us to overcome our own biases and stick to what the model is telling us. 

I’m not averse to spouting my own views on the larger macro-economic settings. I can go toe to toe with the best of them in describing why the breakout in US 10-year bond yields is causing huge market volatility.

But I have no interest in making sweeping claims that can’t be pinned down in the future. I’ll leave that to the wafflers.

So who am I? Patience. That will come. I’ve told the people here at Port Phillip Publishing that until I’m convinced the investors I’m writing to are really interested in learning about investing, I have no intention of revealing my identity.

I don’t need to do this. If I don’t feel you’re seriously interested in learning, I’ll quietly go back about my business as a successful trader. But if I feel you’re willing to learn, I’ll open up. I’ll teach you everything I know.

For now, just know this. I’ve been in the markets for around 30 years. I’ve worked for some of the world’s biggest financial institutions. I’ve traded funds for one of the top 10 richest families in Australia, have been an adviser to many boutique hedge funds over the years, and have traded my own funds. It’s why, for now, I write under the nom de plume of The Billionaire’s Trader.

If we are going to start this journey towards speaking my language rather than the generic double speak of most financial commentators, I have to start by rattling a few cages and shooting down some of the accepted truths.

Truth is, your long-term view, based on reading every news item you can find, and listening to experts who are quick to spout their hazy views with zero accountability, is actually getting in your way of making money.

If you don’t accept that, you will fail as an investor and trader.

You don’t know the future. Neither do the prognosticators. Neither do I. We never will, no matter how hard we work, or how many trades we get right in a row.

Does that mean we should throw our hands in the air, buy an index fund and hope for the best?  I would say yes to that if we are talking about investing for the long term. But if we’re talking about shorter term trading opportunities, the answer is no.

A total acceptance that we don’t know the future just allows us to ask different questions of the market. We no longer need to go down the rabbit hole and read the daily financial press, searching for an insight from some bozo who says ‘the market is up today’ because of whatever reason, and ‘we think that it will continue to go up/down/sideways’ because of some other reason.

It’s all noise. Usually spoken with utter confidence, because they know that no one is going to call them up in six months and say, ‘Hey, you said it was going to do this but it did that.’

That’s the lack of accountability I mentioned earlier.

With each passing day, if the market is up, the press wheels out a bull. If the market is down, they ask a bear. They need to fill up their pages and airtime. As investors, we want to feel comfortable that there is a reason why the market moved…and that someone out there knows and can tell us why.

Meanwhile the market goes on, whipping both the bulls and the bears out of their positions by tempting them into trades and then tearing their hearts out.

Savage.

That’s why I want you to understand that my model of market behaviour has a lot of moving parts. But once I outline some of the key concepts, you will begin to understand the logic. You will see that the model is a reflection of actual market behaviour.

The opportunities created for traders who understand them, are really just taking advantage of the errors made by 95% of traders. You don’t need a degree to understand the concepts I’ll explain. You will just need the ability to step outside of your own world view for a minute to see a different way. 

So, let’s get moving. To find out if you’re serious about trading, there are a few questions that I want you to think about until I write again:

  • What does a market look like when it changes direction?
  • Is it possible to work out where markets usually change direction based on past price action?
  • If so, can we use this knowledge to enter trades that give us a good probability of being able to take profit fairly quickly? This will create a ‘free option’ so we can see what happens from there without risking our initial capital.

To explain, when I say ‘free option’, I mean that once we have taken, say, half profit on a position, and adjusted our stop loss to a breakeven level, from that point on we are playing with ‘house money’, so to speak.

In other words, we can sit back and see what happens from there without breaking into a sweat every time the price ticks up or down. We either breakeven or make money.

How do we get to that point?

That’s what we will explore, and what I will aim to teach you (if you’re willing to learn) over the coming weeks.

Until then, I’d like you to show me your level of commitment. I’ve created a survey at this link here. There are only three questions. It shouldn’t take you more than a minute to answer them.

Click the link, answer the questions, and show me your commitment to learn. I look forward to hearing from you.

Until next week,
The Billionaire’s Trader