Bitcoin and the Theory of Money; Hedge Fund Quiz, csinvesting

Bitcoin and the Theory of Money; Hedge Fund Quiz

Bitcoin is not only irredeemable, but also unbacked. That is a big difference—in favor of the dollar. (Keith Weiner of Monetary-Metals)

Read an analysis of Bitcoin as money (Bitcoin has no backing. I think of Bitcoin as “Token” money. What are your thoughts?

Also, the developer of Bitcoin provides his understanding of the theory of money. As a review read: On the Origins of Money_5 Menger

For those who are interested and are in NYC:

Blockchain Technology Versus Fiat Currency

The next CMRE event will be held on October three at the University Club in Fresh York City: Blockchain Technology Versus Fiat Currency. Speakers will include noted author George Gilder, co-founder of Etherium Joe Lupin, thought-leader Saifedean Ammous, and more.

Topics will range from an introduction of blockchain technology, economic implications, the politics surrounding private currencies, and the role of gold. Total program to come.

Check back on www.cmre.org for more information and to purchase tickets.

QUIZ: What has caused or one of the MAIN reasons that companies like Amazon keep gaining strength? Hint: What Bezos does is meaningless.

four responses to “ Bitcoin and the Theory of Money; Hedge Fund Quiz ”

I’m with Peter Schiff on Bitcoin. Right now, it’s a speculative asset, not a currency, and undoubtedly not money.

For Amazon, what do you mean by “gaining strength”?

My question was too cryptic. Amazon “gaining strength” through the consolidation of banking and effortless credit. Too big to fail banks grow thicker and lend to large companies based on assets while community banks close or merge. The little dude’s cost of capital is much higher. The financialization of the economy lends toward monopoly. On top of that you have the index craze where more money HAS to go to the thickest (mkt. Cap) companies.

Take a look at the Russell Index vs. SPY, for example.

The highest market cap. weighted companies have benefited greatly from the shift to more passive investing. Also, the popularity of exchanged traded funds benefits those equities with high mkt. cap. weighting. The market gains have been driven by too few stocks. There are one hundred seventy nine ETF’s holding Amazon’s equity. One hundred two of those ETF’s have AMZN as a top fifteen holding. Apple,

with the highest weight in the S&P five hundred at near 4%, is held in two hundred forty five ETF’s and is a top 15% weight in 150. Apple, Microsoft, Facebook and Amazon make up 0ver 10% of the S&P 500. It will be interesting to see what occurs when these ETF’s begin to practice significant outflows. ETF’s hold very little cash, if any, and must liquidate holdings to raise the funds. Companies purchasing their own stock, largely with borrowed funds, have been one of the largest buyers in the market. What happens as their purchases are beginning to decline. Will they comeback to the market in a downturn to resume buybacks or have the vast majority shoved their leverage ratios beyond their respective convenience zones. We have seen relatively covenant lite bonds issued recently, but I wonder if the covenants that do exist will restrict future borrowings. I’m fighting to ascertain where future equity purchasers will show up. Brief sellers have been squeezed hard and brief interest is at a low, pensions and endowments have been starved of interest income and have become net sellers to meet liabilities, central banks emerge ready to halt purchases of securities (tho’ the markets have their doubts), retail investors appeared to be leveraged to max with margin loans at highs and cash balances at lows. The coordinated efforts of central banks across the globe have propped up the markets thus far and endangered capitalism, essentially turning the equity markets in a giant leveraged buyout. This is evidenced by the declining number of equities on the exchanges. If central bankers were to withdraw liquidity it could be look out below. However, the market still believes the central banks will proceed to rail in on a white pony and prevent significant declines. The continued shorting of volatility underlies this belief and represents a cause of concern. A sustained, elevated VIX level or backwardation of the VIX term structure could quickly spiral out of control. However, this would most likely be muted by those selling long VIX positions. I believe capital has been allocated enormously poorly over this period of low interest rates and money printing. The central bankers have chopped off the invisible forearm and the piper must eventually be paid. You cannot proceed to borrow incessantly and believe you are growing wealthy. Negative divergences are beginning to emerge within the U.S. equity market, but we have seen this before with Brexit, the election of Trump, the so-called earnings recession, taper tantrum, etc. Are market participants being lulled into a false sense of security? Is complacency growing too strong? Unluckily, investing today has been diminished to following the deeds of central banks. I believe the end comes when the central bankers determine, in earnest, to eliminate liquidity. Obviously, the Fed believes that it can step by step liquidate excess liquidity and guide the economy to a soft landing, but their record of doing just that isn’t so good. Additionally, we have witnessed the capability of the central banks to switch roles course at the very first sign of trouble. The most recently released Fed minutes exposed a divide. I’ll be watching come September to see if they commence to reduce their purchases. Another point of interest will be the potential end of Janet Yellen’s term and the potential replacements beginning in early 2018. Two thousand eighteen will be an interesting year for the markets with all the potential activity occurring at the Fed and the end of effortless year over year comparisons for earnings (current earnings comparisons are being made to depressed earnings during the earnings recession).

Jesse Felder brings up an interesting point, in his most latest blog post, concerning weighting companies according to free float. This penalizes companies where insiders own a significant portion of the equity. Personally, I would choose the founders and executives have a substantial portion of their private wealth invested along side mine.

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