Tapping into these parabolic price gains

Tuesday, 14 May 2019
Adelaide, Australia
By Bernd Struben

  • In the mailbag
  • ‘“We’ve Been Betrayed” — Support for UK Government Evaporates’

You try to keep the government out of it as much as possible.’

Former US Congressman, Ron Paul

You may not have had a chance to read yesterday’s Port Phillip Insider.

But hopefully you at least saw the subject line in your email inbox: ‘Buy bitcoin…sell oil’.

That’s how I read yesterday’s financial tea leaves.

West Texas Intermediate crude (WTI) is currently down 0.6% since I penned that headline. Notably the fall comes despite the news that four Saudi oil tankers were sabotaged in the Persian Gulf.

Granted, this drop only offers a small gain if you decided to short oil. Meaning you gain when the price of crude falls. Though you could have magnified that gain if you bought a leveraged inverse ETF.

The ProShares UltraShort Bloomberg Crude Oil ETF [NYSE:SCO], for example, gained 2.53% overnight Aussie time. SCO seeks to give you returns equal to three times the moves in the price of crude.

If you predict the next move correctly, this can really juice your gains. But be extra cautious when investing or trading using leverage. Just as SCO could triple your gains, it could also triple any losses.

The ProShares website notes this ETF ‘should be avoided by those with a low risk tolerance or a buy-and-hold strategy’.

Anyhow, that’s the ‘sell oil’ part of yesterday’s headline advice.

How about the ‘buy bitcoin’ part?

Let’s take a look at the 24-hour price chart:



chart image
Source: CoinDesk
Click to enlarge

At time of writing, one bitcoin is worth US$7,998.43. That’s up 13.4% since this time yesterday.

The latest price surge in the world’s largest crypto by market cap has seen it gain 59% over the past month. That puts it up 150% in only five months, since hitting a low on 15 December 2018.

Not surprisingly, this looks to be driving a new wave of FOMO (fear of missing out).

As CoinDesk notes: ‘In the past 24 hours alone, Messari data reveals more than $27 billion worth of bitcoin was traded across exchanges…

The boffins at CoinDesk also tweeted the following:



chart image
Source: Twitter
Click to enlarge

The previous parabolic surge they’re talking about here occurred between 25 August and 4 November 2015. In less than three months bitcoin rocketed from $198 to $499. And as we know today, it didn’t stop there.

Naysayers continue to predict the collapse of bitcoin and the raft of other cryptocurrencies. But prominent voices are increasingly seeing its appeal.

Former US Congressman, Ron Paul — quoted up top — believes cryptos could play a vital role in dealing with governments’ ultimately unserviceable debts.

From CoinDesk:

Paul indicated that the present U.S. monetary system and economy may be running on borrowed time, citing high debt levels as one example.

“The system we have today is not viable, it’s out of control, the amount of debt that’s building up we might end up with the dollar but not the system,” he said, pointing to issues such as social, military and corporate welfare as reasons for this.

“That is the system, and we are flat out broke, we’ve been broke for some time. There will be liquidation, when the debt gets this big, the debt has to disappear.” …

Asked what sort of cryptocurrency policy he might have if he was running for president, Paul said… “I can only speak for myself but I think it’s pretty important is not to come in and the first two to three options on cryptocurrency are ‘one’s better than another and we want to manage it,’ no, you turn it loose … you try to keep the government out of it as much as possible.”

Will cryptos ride to the rescue of our much abused fiat currencies?

I’m not sure.

But one thing is becoming increasingly clear. Bitcoin and some its virtual token cousins are no flash in the pan. I believe the best ones are here to stay.

That said I also expect prices will remain notoriously volatile in the foreseeable future. But you shouldn’t let that scare you away from the market. Buying the right cryptos at the right time should continue to see some investors walk away with a fortune.

You can access crypto experts Sam Volkering and Ryan Dinse’s latest crypto investing advice at Secret Crypto Network here.

If you’ve already mastered the crypto investing basics and are looking to take things to the next level, I suggest you look at Sam and Ryan’s premium crypto advisory services.

You’ll find more details on Sam’s Crypto Tech Investor here.

And you can find more on Ryan’s Extreme Crypto Trader here.

Now let’s have a look at the trade war battered markets…

Markets

Overnight, the Dow Jones Industrial Average closed down 617.38 points, or 2.38%.

The S&P 500 closed down 67.53 points, or 2.41%.

In Europe, the Euro Stoxx 50 index finished down 40.27 points, or 1.20%. Meanwhile, the FTSE 100 fell 0.55%, and Germany’s DAX closed down 183.18 points, or 1.52%.

In Asian markets, Japan’s Nikkei 225 is down 152.88 points, or 0.72%. China’s CSI 300 is up 0.37%.

In Australia, the S&P/ASX 200 is down 57.19 points, or 0.91%.

On the commodities markets, West Texas Intermediate crude oil is US$61.14 per barrel. Brent crude is US$70.28 per barrel.

Turning to gold, the yellow metal is trading for US$1,299.44 (AU$1,867.55) per troy ounce. Silver is US$14.80 (AU$21.27) per troy ounce.

One bitcoin is worth US$7,998.43.

The Aussie dollar is worth 69.58 US cents.

In the mailbag

I spilled a fair bit of digital ink last week digging into the outlook for the Aussie property market. And for good reason.

If the housing market continues to slide it will almost certainly take the stock market and wider economy down with it. If, on the other hand, it rebounds then that storm could be avoided.

This issue is at the crux of today’s debate between cycles gurus Phil Anderson and Harry Dent.

If you registered for that debate and didn’t see it earlier today at 4pm AEST, don’t worry. You can still watch it anytime this week via the link we provided to your email address.

With so much focus on the ups and downs — well, downs really — of the property market, I wanted to get our readers’ take on their outlook. On Thursday I asked, ‘Adding up today’s ripples do you think the Aussie property and stock markets are in for calm waters…or a tsunami?

Remember to send your correspondence on the housing market, bitcoin, oil or whatever is keeping you up at night to letters@portphillipinsider.com.au.

I’ll share one of the responses we’ve gotten to date. This one comes from reader Blaise:

Dear Bernd,

I am normally a half glass full person – always on the positive side.

Unfortunately, I cannot see any easing of pain in the residential market for some time to come.

If we sail into calm waters, that would be the best possible outcome and defy gravity.

I cannot see any positive indicators for a soft landing.

There are too many layers of things that can go wrong.

In Sydney we have pockets where prices have already fallen 25% in the west.

Depending on where you live it is fair to say the declines from the peak sit between 10% -25% off.

This means anyone who bought from 2015-2016 on could be in negative equity.

If these new homeowners can service their loans – no problem, unless they lose their job.

Will the banks tap anyone on the shoulder to top up their equity to bring them in line with their contracted LVR’s?

When investors realise to get out early rather than later, it will produce an oversupply of heavily discounted stock.

This will set new benchmark lows.

It will get very messy when everyone rushes for the exit – it will become a very narrow indeed.

Buyers who commit to contracts today are already pricing in further falls to the end of 2019 at least.

Even with the current price corrections, the reality is young buyers will not be able to afford to buy.

This will, in my opinion create a vacuum for the future as there are fewer buyers getting on the first rung of the ladder.

The natural cycle of people selling and upgrading in the future over many years in their lives to the next price bracket will have to slow as there are less people at the base of the ladder.

As you have already stated, construction has slowed and all the associated businesses attached to construction, materials, workmen, and to the scaffolder and truck driver and so on. 

I hope I am wrong.’

Thanks Blaise. I reckon most of us hope you’re wrong.

Even Harry Dent would probably be (grudgingly) happy if his forecast of 50% property price falls Down Under doesn’t prove out.

But I’m not so sure this story has a happy ending for over-indebted home buyers who entered the market near its late 2017 peak.

Finally, here’s the latest from The Australian Tribune:

‘“We’ve Been Betrayed” — Support for UK Government Evaporates’

On 23 June 2016, almost three years ago, 52% of British voters decided the UK should exit the European Union bureaucracy.

Since then deadlines have come and gone with nothing to show for it. Fear campaigns have been launched to scare voters into changing their minds in a potential second referendum. And the UK appears no…

If you’re fed up with 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.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd