These eye-popping gains stirring FOMO embers

Tuesday, 25 June 2019
Adelaide, Australia
By Bernd Struben

Pssst.

Not to stir the embers of FOMO…but have you checked out the price of bitcoin today?

At time of writing one bitcoin is fetching US$11,168.42 (AU$16,035.06).

That’s up another 4.6% since I wrote to you yesterday.

If a 4.6% overnight gain doesn’t get the old fear-of-missing-out bug itching, have a look at the one-month price chart below:



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Source: CoinDesk
Click to enlarge

Since its recent low on 10 June, bitcoin is up 47%.

Year-to-date it’s up 202.6%.

It could certainly pull back from here. But the stars appear to be aligning for a prolonged run higher.

On the more distant horizon we have the halvening coming up on 20 May next year. I mentioned that yesterday.

In a nutshell it will see bitcoin miners’ rewarded for minting new coins cut in half. This happens every four years. Past halvenings have generally seen the price of bitcoin — and other cryptos that use a similar process — surge.

(You can learn all about the impacts of halvening and the range of other factors affecting the price of cryptocurrencies here.)

More immediately, Facebook is getting much of the credit for putting cryptos back onto the mainstream radar.

You’ve probably read about Facebook’s plans to launch its own cryptocurrency, the Libra.

The social media giant is still up against a lot of red tape from global governments. And it’s lost a fair bit of trust from users concerned over privacy issues. But the Libra will most likely overcome — or steamroll — these hurdles.

Either way, its garnered a lot of headlines, bringing crypto back into the spotlight for the mainstream.

And as much as we like to pan the mainstream, it’s not until the herd cottons onto a new trend and begins to pile in that we see the biggest price rises.

Sure, this can lead to a bubble. One where latecomers are left holding hefty losses once it begins to deflate. But from an investor’s perspective, there’s nothing wrong with bubbles, so long as you get in fairly early and exit on time.

And it’s far more than bitcoin enjoying rocketing prices.

Have you heard of Insight Chain?

Don’t worry if you haven’t. It’s one of the smaller cryptocurrencies, currently ranked 55 in terms of market cap. And it’s up 46.8% over the past 24 hours. It’s also up 98.4% since last Tuesday, according to data from CoinMarketCap.

Insight Chain is today’s biggest gainer.

On the other side of the scale, GXChain is the biggest 24-hour loser, down 10.4%. As for its year-to-date performance? GXChain is up 345%.

Clearly 2019 has rekindled crypto mania.

Whether you’re considering investing in cryptos or just want to educate yourself on what’s going on, I highly recommend you pick up a copy of crypto pro Sam Volkering’s new book, Crypto Revolution. You can secure your discounted copy here.

We’d also be interested to hear our readers’ thoughts on the resurgence of cryptocurrencies.

Do you invest in cryptos? If so, did you get in early, late, or right on time? If not…why not?

Send your replies to letters@portphillipinsider.com.au with the subject line ‘cryptos’. If I get some good responses I’ll publish them here later this week.

Now for a look at the markets…

Markets

Overnight, the Dow Jones Industrial Average closed up 8.41 points, or 0.03%.

The S&P 500 closed down 5.11 points, or 0.17%.

In Europe, the Euro Stoxx 50 index finished down 11.35 points, or 0.33%. Meanwhile, the FTSE 100 gained 0.12%, and Germany’s DAX closed down 65.35 points, or 0.53%.

In Asian markets, Japan’s Nikkei 225 is down 171.52 points, or 0.81%. China’s CSI 300 is down 1.93%.

In Australia, the S&P/ASX 200 is down 6.24 points, or 0.09%.

On the commodities markets, West Texas Intermediate crude oil is US$57.88 per barrel. Brent crude is US$64.90 per barrel.

That puts WTI up a few cents per barrel and Brent down a few cents since this time yesterday.

Both crude benchmarks are still trading within the range I forecast for 2019. That’s US$50–60 per barrel for WTI and US$60–70 for Brent. But as tensions flare with Iran amid a spate of attacks on oil tankers in the Gulf of Oman, you may be wondering why jittery traders haven’t sent the price of oil far higher.

Additional isolated tanker attacks and a limited military response by the US could see prices tick higher. But failing a full scale shooting war, which could disrupt oil shipments through the crucial shipping corridor for months, crude is likely to slip from here…not fall.

Part of the downward price pressure comes from lower growth forecasts on the demand side. The simmering global trade wars cop much of the blame here. If Trump and Xi make some encouraging statements following the G20 meeting this week, it should support oil prices in the short term.

But the real issue remains on the supply side. And that’s the tsunami of oil waiting to flood the market, driven by record production in the US.

All eyes will be on the OPEC+ meeting next week. If the cartel fails to extend its production cuts into the second half of 2019, crude will likely fall hard. And as I’ve pointed out to you before, Russia (the ‘plus’ member) may well choose not to play ball this time around.

Just yesterday Russia’s Energy Minister, Alexander Novak, wouldn’t comment on whether Russia will support extending the cuts. And the meetings kick off on Monday, mind you…

Turning to gold, the yellow metal is trading for US$1,425.15 (AU$2,046.26) per troy ounce. Silver is US$15.47 (AU$22.21) per troy ounce.

As you can see in the chart below, that’s the highest close for gold in US dollars since August 2013.



chart image
Source: Bloomberg
Click to enlarge

What the chart doesn’t show is that gold closed at a new record high in Aussie dollars.

Part of the price surge comes from its age old appeal as a haven asset. In times of uncertainty, of which we have plenty, investors seek out gold.

But gold bugs mostly have the US Fed and its global central bank cousins to thank. As interest rates around the world head lower, gold shines brighter. Topping that off, the world’s central banks bought 145 tonnes of gold in the first quarter of 2019, according to the World Gold Council. That’s the most since 2013.

And it’s most welcome news to investors in some of the leading gold stocks. With a market cap of $7.5 billion, Northern Star Resources Ltd [ASX:NST], for example, is up 11.2% over the past week. That puts its share price up 24.9% over the last month…

In the world of cryptocurrencies, one bitcoin is worth US$11,168.42.

The Aussie dollar is worth 69.65 US cents.

Cure all…or snake oil?

Moving on…a few questions.

Are you in pain? Anxious? Not sleeping well? Stressed? Feeling less than your natural beauty potential?

I ask because a junk email in the Port Phillip Insider inbox this morning had me pondering the same questions.

Now normally I click all junk mail straight into the spam folder never to be seen again. But you can see why this one caught my eye. Here’s a screen shot of the email header:



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Source: Port Phillip Insider inbox screen shot
Click to enlarge

I’ve written to you about CBD here before. In some circles, it’s being touted as a medical miracle.

As you likely know — and can see from the plant in the above image — it’s derived from cannabis. But unlike the kind you might smoke to get high, CBD contains no THC.

It also remains to be proven that it’s effective at treating the full range of ailments (and cosmetic issues) that this particular vendor is spruiking.

It has, however, already been approved to treat childhood epilepsy. And it’s very promising in dealing with the side affects of chemotherapy among a range of other medical trials still underway.

And as Bloomberg Businessweek reports:

CBD has exploded in popularity as a way to reap the supposed health benefits of marijuana without the high that comes with it…

Almost 7% of Americans polled in January by investment bank Cowen & Co. reported using CBD as a supplement. Big chains such as CVS, Walgreens and Kroger are now selling CBD lotions and other products. Cowen estimated that U.S. retail sales were as high as $2 billion in 2018, and analysts at Piper Jaffray & Co. estimated that the U.S. CBD market could be worth as much as $15 billion in five years. The research firm Brightfield Group estimated that CBD was a $318 million market in Europe in 2018.’

Cure all…or snake oil?

From the research I’ve seen to date, I’d say a bit of both.

But here’s the kicker, also from the above article:

According to a report by the World Health Organization, it hasn’t exhibited any potential for abuse or dependence, and there is no evidence of any public health-related problems associated with its use.’

CBD oils, pills and eyedrops may not cure every disease from foot fungus to brain tumours. But if it helps even a fraction of the ailments it’s purported to — and is essentially harmless — you can see how Piper Jaffray & Co’s 650% five-year market growth forecast may actually be pessimistic.

And you can see how the stocks providing the raw materials to produce CBD could have their own share prices grow as much…or more…in the same time frame.

Short on time and long on word count, we’ll leave it there for today.

If you’d like the inside scoop on Sam Volkering’s top Aussie-listed pot stock plays enmeshed in the global CBD markets, you can find that here.

Cheers,
Bernd