That's all from us... and some final thoughts
This is the last issue of the Asia Wealth Investment Daily. Thank you for being with us. Happily, we're leaving you in good hands with Daily Wealth. In> READ MORE
This is the last issue of the Asia Wealth Investment Daily. Thank you for being with us. Happily, we're leaving you in good hands with Daily Wealth. In> READ MORE
Sometimes investors are reluctant to buy assets that have had risen significantly in price. Take bitcoin… it rose from a low of under US$3,300 to US$9,000> READ MORE
Listening to the news, you wouldn't know there was a bull market in Chinese stocks happening. All you see are headlines about the U.S.-China trade war and how> READ MORE
The U.S.-China trade war isn’t going to end anytime soon… for two reasons. First… as I’ve said before, it suits both U.S. President Donald Trump and> READ MORE
A 2006 Fortune magazine article described Bill Miller as “one of the greatest investors of our time.” At the time, the US$20 billion mutual fund that> READ MORE
The U.S.-China trade war has already impacted China's economic growth. With 25 percent tariffs on US$50 billion worth of Chinese exports (and 10 percent on> READ MORE
I've said before that bitcoin could hit US$100,000 faster than anyone realizes. But some people think that number's conservative. Wences Casares, a Paypal> READ MORE
Selling is the dark art of investing. Watch CNBC... read the financial news... listen to your broker... and you'll hear about what you should buy. Buy this> READ MORE
This is the last issue of the Asia Wealth Investment Daily. Thank you for being with us. Happily, we’re leaving you in good hands with Daily Wealth.
In DailyWealth, Dr. Steve Sjuggerud and the Stansberry Research team show you how to avoid risky investments, and how to get ahead of what the average investor is doing. They cover opportunities they see in markets… they share the world’s best wealth ideas… and also bring you strategies that will help you build a lifetime of wealth.
But before I sign off, I’d like to leave you with a few final thoughts.
1. It’s the Pacific Century.
It’s a total cliché. But it’s 100 percent true. The centre of balance of the globe – economically, politically, geopolitically, demographically – is moving east.
It’s just a question of time before China’s economy becomes the world’s largest. China has been steadily building a network of investment and infrastructure stretching the globe… and it’s still in the early stages.
One of the most amazing graphics you’ll ever see shows how around half of the world’s population lives within a relatively small radius from northern Vietnam. That’s where the action will be this century.
And meanwhile, in the wake of its willful desertion of its allies, the U.S. is rapidly becoming a spent force geopolitically. And China is eagerly stepping up to become the grown-up at the global table.
2. The blockchain is very big.
I think that cryptocurrencies are at the stage of the internet in 1994.
Back then, some people believed the internet would become explosively powerful. Others thought it was a waste of time. But most people didn’t think too much about it. Soon thereafter, anything internet related went through a period of massive speculation (see: Pets.com… and the 1999-2000 internet bubble), followed by a massive bust.
Now, nearly two decades later, the internet is an essential fabric that weaves together society and civilisation. It’s found its way into nearly every realm of life and many of us even have more than one internet device that we use for hours a day. Vast fortunes were gained and lost along the way. But anyone who doubted the appeal of the internet in 1994… well, they were wrong.
Where the internet has come today is how I think the evolution of blockchain will unfold over the next 20 years (or less… since – thanks in no small part to the internet – everything moves so much faster today). But today, some people think blockchain will be huge… others think it’s silly… and most people haven’t really noticed it. Sound familiar?
I don’t know whether any of the coins or tokens around today will be in existence five, 10 or 20 years from now. (How many of the hot internet stocks from 1999 are still traded? Not more than a handful.) But I think blockchain will be as much a part of the lives of our children as the internet is of ours today.
However, few people understand cryptos today. Just one example… in an article in the New York Times earlier this week about Facebook’s new crypto effort, cryptocurrencies are said to be “best known for speculative investments through digital tokens like bitcoin and outside-the-law e-commerce, like buying drugs online”.
You can do a lot of things (good and bad) with currency, cash or crypto. To focus on how cryptos are “best known” for buying drugs online?… that’s ridiculous. And it reflects how little (even, or especially, journalists) understand cryptos.
3. You should macroversify.
If you keep all of your eggs in one basket, you’re setting yourself up for big losses – and possible disaster.
The idea behind diversification is simple. It means putting your eggs in different baskets. That is, spreading your risk across different types of assets, so that a decline in value in any one holding isn’t so bad – because there will likely be other holdings that rise to help balance out the losses.
But diversification goes beyond just holding a number of different assets… what about your “personal equity”? Is it diversified?
Equity is what’s left after you add up the value of everything you own, like stocks and stamp collections and your flat. Then you subtract what you owe (on your mortgage, to the taxman or to your ex-spouse, for example). What’s left is your net worth, or your equity.
So when I say “personal equity,” I’m talking about a much more broad definition of your assets. It includes everything from financial, personal and professional experience to prospects and earnings power. Personal equity measures how you’re going to build your equity in the future.
It’s about where you’ll be earning your living and adding to your savings in coming years. Where is your paycheck coming from? What other sources of income do you have? Where is your professional network – and how strong is it? How transferable are your skills? How many languages do you speak – and how easily could you work in a different country?
Most people work in the same country where they have almost all of their assets. And even if you do hold some foreign shares or own real estate in another country… when you factor in where and how you’ll be earning money in the future, you’re probably a lot less diversified than you think.
4. Always manage your risk.
Easy things can keep you out of trouble.
It’s only difficult if you don’t do these things. So do them.
5. It’s not too late to save and invest. If you haven’t… start now.
All the best and good investing,
Publisher, Stansberry Pacific Research
Sometimes investors are reluctant to buy assets that have had risen significantly in price.
Take bitcoin… it rose from a low of under US$3,300 to US$9,000 from December 2018 to May 2019.
That massive rally has given many investors pause. But if you haven’t invested in bitcoin yet, you’re running out of time.
As I’ll explain today, Wall Street is coming to the crypto space. And there won’t be enough bitcoin to go around.
This will send prices soaring faster than anyone expects…
Just about every big bank on Wall Street is working on a way to enter the cryptocurrency space. The most visible of these is the upcoming bitcoin exchange Bakkt.
Created by the team that operates the New York Stock Exchange (NYSE) – Intercontinental Exchange (ICE) – it could launch as soon as this quarter. It’s exactly what the cryptocurrency space needs.
Finally, Wall Street money managers will have a place to buy and store bitcoin that’s as trusted and secure as the NYSE itself.
As soon as it launches, massive amounts of money could start flowing through it. For a lot of institutional (or big money) investors, this will be the first time they can safely and easily buy bitcoin.
And Bakkt is only the beginning.
Asset manager Fidelity, which has US$2.5 trillion under management, is working on a similar platform. Meanwhile, investment bank Goldman Sachs has partnered with BitGo (a blockchain security company)… and Japanese investment bank Nomura has partnered with Ledger, which makes hardware to protect cryptos. Several stock exchanges will soon offer crypto trading, too, including TDAmeritrade and E*Trade.
In short, trillions of dollars are headed for the crypto space. This will push prices up rapidly.
But I believe they’ll climb faster than anyone expects because of one big bitcoin misconception.
You’ve likely heard the term “market capitalization.”
Stock investors rely on market capitalizations for a quick check of the size of a company. (Market cap is the total dollar market value of a company’s outstanding shares.) Bigger companies have been around longer and may be more successful.
It’s a useful, if basic, parameter for crypto investors too.
It’s very easy to calculate market cap of a crypto: multiply the current price by the supply of coins or tokens in the market. However, that measurement may turn out differently based on who is doing the calculation.
Generally, when we talk about market cap, we’re discussing the price of the token multiplied by the circulating supply of the token. “Circulating supply” is the total supply of tokens currently available to the market. Price is determined by looking at real-time data from many different crypto exchanges.
Circulating supply is difficult to determine because most cryptos are designed to continuously issue new tokens or coins on a routine basis.
For example, the bitcoin network rewards miners with 1,800 newly created bitcoin every day.
But the big reason circulating supply is hard to calculate is because even though most cryptos are on public ledgers (which means that anyone can track them), there’s no easy way to determine how many cryptos are truly circulating.
Because bitcoin has a fixed supply, there will only ever be 21 million mined. Right now, there are over 17 million bitcoin in existence.
So let’s say two investors each bought one bitcoin a few years ago. One of the investors plans to hold onto his bitcoin as a long-term investment. His bitcoin is safely tucked away into a cold wallet, and he won’t sell or spend it for a very long time – if ever.
The other investor is careless and loses his private key. So he can no longer access his bitcoin. In other words, he can’t sell it or spend it, even if he wanted to.
According to the CoinMarketCap.com website – the most popular place for crypto investors to get information – the circulating supply of bitcoin includes the holdings of both of these investors. After all, there’s not a great way to determine who can still access their bitcoin and who can’t.
This is important because we’re not just talking about two investors. We’re talking about potentially millions of coins worth billions of dollars.
Around five million bitcoin are in the hands of investors who have no intention of ever selling.
Another nearly four million bitcoin have been lost, according to software company Chainalysis.
They were put into safes where someone lost their passwords, or they lost their wallets or laptops completely. There’s no recovering from this.
That’s nine million bitcoin altogether. That works out to be over half of the 17 million bitcoin that have ever been mined.
But these are still included in the “circulating supply,” and the market cap calculation is based on that.
That means the calculations are misleading, considering that many of those tokens are likely lost forever.
The crypto space is working on different ways to take this into account. But it has to figure out a new way to calculate market cap that would be accepted as reasonable by investors.
Just to be clear, this would have no effect at all on the underlying technology and development of the cryptos.
But what would investors do if they suddenly realized there were half as many bitcoin available than they previously thought?
One possible reaction would be to buy bitcoin as these coins become scarcer – sparking a rally in the crypto space. That could happen as this knowledge spreads.
And no matter whether the circulating supply of bitcoin is 17 million or nine million… Wall Street is investing in the crypto industry. Very soon, crypto will see a flood of new investors, and there won’t be enough bitcoin to go around.
So if you haven’t invested yet, now is the time.
Lead Crypto Analyst
Listening to the news, you wouldn’t know there was a bull market in Chinese stocks happening.
All you see are headlines about the U.S.-China trade war and how much U.S. President Trump’s tariffs are expected to damage the Chinese economy.
But Chinese stocks quietly climbed 32.7 percent from January 3 to April 19, 2019.
Since then, they’ve fallen11.5 percent. But they’re still up 17.3 percent from their lows in January.
The S&P 500 Index is up just 14.2 percent over the same period.
And I think Chinese stocks are about to go a lot higher…
Three reasons Chinese stocks could soar
1. Valuations are compelling
Back in February, I wrote about how a reliable indicator was signaling a 41 percent move up in Chinese stocks.
The price-to-book (P/B) value of the MSCI China A-Shares Index had fallen below 1.6 times.
For a market or index, the P/B ratio is the total market capitalisation of all the included listed companies divided by their total book value (net assets). The P/B ratio is a useful tool for valuing markets because it relies on book value, which is more stable than earnings, and gives an indication of how much more (or less) an investor is paying relative to the underlying net assets.
Since 2010, the P/B value of the MSCI China A-Shares Index has gone below 1.6 times five times. And each time was followed by a large increase 12 months afterwards. The average increase was 41 percent.
So investors tend to buy Chinese stocks when the P/B value falls below 1.6 times.
Today, even after the 17.3 percent increase in China’s stock market, the P/B value of the MSCI China A-Shares Index is at 1.72 times – which means the market is close to becoming attractive again to value-driven investors.
Meanwhile, another valuation – the cyclically-adjusted price-to-earnings (CAPE) ratio – is also indicating China’s market is undervalued. (The CAPE ratio uses real earnings over a 10-year period to smooth out fluctuations in corporate profits that occur over different periods of a business cycle.)
China’s CAPE ratio of 16.4 times is almost half that of the U.S., which trades at 30.6 times, and nearly a third cheaper than the world average CAPE ratio of 24 times.
While China’s stock market has been weak since Trump restarted the trade war last month, valuations are reaching a point where investors are starting to look for bargain opportunities. That’s bullish for the market.
2. Stimulus is kicking into high gear
Beijing has been busy implementing a stimulus programme designed to help the economy weather the trade war storm.
It includes freeing up funds banks can lend out to borrowers and consumers through reductions in the reserve requirement rate (RRR).
The RRR is the percentage of total deposits that the nation’s banks are required to keep in reserve and not lend out. The less money that banks have to keep in reserve, the more they can lend – which boosts economic growth.
That amount of reduction in the RRR frees up an estimated US$300 billion, which can be used for new loans.
Beijing also cut the value-added tax (VAT) on key industries, including manufacturing, by as much as 3 percent.
Then on June 11, China’s finance ministry said it would ease restrictions on the spending of proceeds from bond sales by local governments, allowing more money to flow into infrastructure-related projects.
3. The full impact of MSCI inclusion hasn’t been felt yet
As I’ve written about before, MSCI is quadrupling its weighting of Chinese stocks in its global indexes. MSCI is one of the top providers of indices for emerging markets. An estimated US$14 trillion of assets are benchmarked against these indexes.
The announcement in March to hike China’s weighting in the MSCI indexes is expected to result in as much as US$125 billion of funds flowing into 448 selected Chinese-listed stocks.
This weighting change is going to happen over three phases, the first of which happened on May 28. That doubled the inclusion rate from 5 percent to 10 percent.
Two more phases will take place this coming August and November – eventually doubling the inclusion rate to 20 percent.
These staggered MSCI inclusion phases will act as a steady, rising tide that lifts the Chinese stock market.
That’s why I expect the Chinese bull market to continue.
If you want to set yourself up to profit, a popular vehicle to invest in China A-Shares that trades on the Hong Kong exchange is the iShares FTSE A50 China Index (Exchange: Hong Kong; ticker: 2823).
It tracks the performance of 50 of the largest Chinese companies that trade on the Shanghai or Shenzhen exchanges. It’s currently up 23.6 percent year-to-date.
Singapore also has the United SSE50 China ETF (Exchange: Singapore; ticker: JK8), which tracks 50 of the largest China A-shares. It’s currently up 18 percent since the start of the year. But the trading volume is low, so be careful if you buy and sell.
Editor, Stansberry Pacific Research
The U.S.-China trade war isn’t going to end anytime soon… for two reasons.
First… as I’ve said before, it suits both U.S. President Donald Trump and Chinese President Xi Jinping – and their political objectives – to be the big strong man with each other. Trump gets to be tough on China, which appeals to many of the Americans who voted for him. And Xi can show that he’s the boss by not backing down in the face of American threats.
But there will be a truce at some point soon.
Trump doesn’t want the trade war lingering into the U.S. presidential election season. American farmers, along with people who buy cheap stuff at Walmart, are slowly realising that it’s them – not China – who are paying higher prices. That won’t help Trump win states.
And even worse, according to the Council on Foreign Relations, the higher tariffs on Chinese goods are actually costing the U.S. government more than the increased revenues from the tariffs, in the form of trade relief payments to upset American farmers.
In China, American tariffs are hurting the Chinese economy at the margins, but it will get worse. And meanwhile, foreign (as well as Chinese) companies are moving production out of China. Because they’re wary of becoming collateral damage in the trade war, companies are increasingly looking at moving production facilities into markets like India, Vietnam and Bangladesh. That could hurt the Chinese economy a lot more in the long term than Trump’s tariffs.
That runs contrary to Trump’s claim that manufacturing jobs will move back to the U.S. And it lays the foundation for another future trade skirmish – this time with other low-cost manufacturing nations, because the U.S. trade deficit with China just got transferred to other countries.
So eventually the “trade war” will have to experience a truce. Markets might rally. Trump and Xi will take victory laps. Everyone (except for voters and farmers in the U.S and people in China) wins.
But a truce in the trade war won’t change anything.
The real war is coming
The second reason the trade war isn’t ending soon? It’s just a battle that’s part of a bigger war – one that isn’t ending for a very long time.
I think we’re about to see a multi-generational “war” between China and the U.S.
You see, a generation ago, China was a poor, developing country with lots of people. Today, China’s economy is the second-largest in the world, and it’s just a question of time before it overtakes the U.S.
China has been using its newfound wealth to extend its geopolitical influence to the far reaches of the earth. The biggest proof of this is Beijing’s historic Belt and Road Initiative (formerly called the One Belt One Road Initiative), where US$4 trillion is being spent connecting China to the rest of Asia, Africa and the Middle East via an intricate network of land, air and sea transport infrastructure.
This means dozens of Chinese state-owned companies, along with hundreds of billions of dollars in Chinese loans – and the influence these loans carry – are being mobilised to align these regions’ development pathway with that of China’s.
China’s military isn’t competitive with that of the U.S., but it’s getting there. Technological advances (in part thanks to technology transfers from the U.S. and elsewhere – and hefty subsidies from the Chinese government) have made China genuinely competitive in a range of sectors. China is big and strong, and it’s getting bigger and stronger – and it’s not content to play second fiddle to the U.S.
What does it all add up to? The U.S. and China are going to be competitors – economically, politically, geo-strategically, militarily, technologically, and in a lot of other ways – for decades to come.
So any kind of band-aid trade deal that Trump and Xi come up with might boost short-term stock market sentiment. It will give Xi some political breathing room, and it will boost Trump’s re-election chances. But a deal won’t change the underlying fierce competitive dynamic between the two countries.
Remember… China has been around for a lot longer than the U.S. – and knows how to play the long game (that is, it has patience) in a way that’s completely foreign to the American political (and economic) system. Americans think in terms of decades, and politics happen in chunks of four years (for the U.S. presidential cycle). In China, centuries are the currency of time… and leaders come and go when they please, rather than according to the calendar.
How to prepare for the real war
China will continue to grow fast… and there will continue to be lots of ways to invest in China to capitalise on that growth. But for a long time to come, there is going to be friction between the world’s two largest economies.
The dynamics will change when China becomes the world’s largest economy in the next 10-15 years. As the balance of economic power shifts, so will the terms of any negotiation in the trade war. What would have worked for the U.S. before (like tariffs, or banning Chinese tech companies) will not work when China’s global economic footprint eclipses that of the U.S.
For now… expect a trade truce in coming months. But don’t celebrate too much, because the war is coming. It still makes a lot of sense to invest in China… but with the looming war it’s all the more important to diversify – and don’t be afraid to hold lots of cash.
Publisher, Stansberry Pacific Research
A 2006 Fortune magazine article described Bill Miller as “one of the greatest investors of our time.”
At the time, the US$20 billion mutual fund that Miller managed had outperformed the S&P 500 for 15 straight years, a feat never before accomplished. If there was such a thing as an investment genius, it seemed like Miller was it.
Unfortunately for those who invested in Miller’s fund in 2006, it lost over 30 percent over the next five years. During that period, fund research firm Morningstar ranked Miller’s fund dead last among the 1,187 similar U.S. equity funds it tracked.
Did Miller change his investment strategy in 2006? No. For both the winning streak and the losing streak, Miller used the same strategy of focusing on stocks from a few large companies. Maybe Miller somehow lost his skill, or a key analyst left his team? Or perhaps the markets somehow changed?
Those things didn’t change. But what did change was Miller’s luck. It’s possible that both his success and his failure were due to luck, both good and bad.
Miller’s story points out an underlying truth about successful investing…
The thin line between good luck and skill
Let’s say that there’s a tournament to determine “the world’s greatest coin flippers”. 50,000 people from all over Asia are invited to a stadium. Everyone flips a coin at the same time.
After each coin flip, those who flip “tails” must leave, until the only people left in the stadium have flipped 10 consecutive heads. Basic statistics suggests that we could expect about 50 coin flippers to remain at the end of the contest.
Why? The odds of flipping heads 10 times in a row are (1/2)10 = 1/1024. So around one out of every 1,000 coin flippers would be left in the stadium.
On the back of their success, these 50 “skilled” coin flippers get millions of “likes” on Facebook. Their Twitter accounts blow up. Those with the best smile and social media skills will write bestselling eBooks about coin flipping. They’ll teach seminars for thousands of dollars a day about how to become a world-class coin flipper.
Maybe that’s an absurd example. But often, the performance of money managers is not much different.
Every year, the best performing fund managers are praised, and attract more clients because of their superior returns. Managers who beat the averages for 10, or even 15 years, like Bill Miller did, receive the most glowing accolades, and are hailed as geniuses.
The key is this: If money managers had no special skills, if their performance was entirely random (like the coin flippers), at the end of 10 or 15 years, there would still be a small number of managers with exceptional track records. Statistics say this has to happen. (And Bill Miller happened to be the lucky guy.)
So, even if a select few investment managers have rare skills that lead to amazing performance, it’s impossible to distinguish the skilled from the lucky by analysing performance.
And because it’s so easy to confuse luck with genius, investors tend to pile into top- performing funds. Anyone who understands mean reversion knows that extremely good performance, over any timeframe, tends to be followed by less spectacular results. Performance is mean reverting.
A consequence of confusing genius for luck is that investors tend to think it’s easy to be a successful investor. The ultra-successful, even though they are few, have an outsized effect on us. We believe we can succeed – because they did.
This tendency to base decisions on observed success, while ignoring unobserved failure, is called survivorship bias. Lotteries exploit the survivorship bias to rake in billions of dollars. Lottery ticket buyers are motivated by the stories of the few jackpot winners who become instant millionaires. The millions of ticket buyers who never win receive little attention.
We’re all familiar with the stories of day traders who made millions trading stocks from their living room table or the local Starbucks. These wildly successful traders even publish brokerage statements on their websites, and sell their strategies proclaiming that “you, too, can day-trade your way to riches.” Their success is highly visible, creating a strong impression that short-term trading can make you rich.
Meanwhile, none of the thousands of losing day traders have websites promoting their failures. The losers may have also had great trading plans, and were also aggressive and optimistic. But they were unlucky. It’s just that these numerous losers aren’t around to tell their stories, and nobody really wants to hear their stories anyway. It’s the few survivors we see that influence us.
The world of investing, like most things in life, produces success stories and failures. It’s human nature to wish to copy success. However, an ironic truth is this: To accept success at face value without acknowledging the role of luck is a strategy for failure.
Publisher, Stansberry Pacific Research
The U.S.-China trade war has already impacted China’s economic growth.
With 25 percent tariffs on US$50 billion worth of Chinese exports (and 10 percent on another US$200 billion) bound for the U.S. since July 10, 2018, China’s manufacturing activity has been contracting.
Its manufacturing purchasing managers index (PMI) – a key gauge of manufacturing activity – slid to 49.4 in May from 50.1 in April. (A reading below 50 signals contraction.)
The trade war intensified in May, as the U.S. accused China of reneging on trade commitments made during previous negotiations. So as of June 1, 2019, tariffs went up on those US$200 billion of Chinese exports from 10 percent to 25 percent.
US$250 billion of Chinese exports are now subject to 25 percent tariffs as they come in to the U.S.
The U.S. has also banned China’s major technology companies, such as Huawei and Hikvision, from selling to the U.S. market and even accessing U.S. technology vital to make their products.
Huawei, China’s largest smartphone and mobile communication equipment manufacturer, is no longer able to use Google’s (Exchange: New York; ticker: GOOGL) Android smartphone operating system – which is used on 75 percent of all smartphones sold around the world.
Surveillance camera manufacturer Hikvision is now completely shut out from the U.S. market.
Memory chip manufacturer Fujian Jinhua Integrated Circuit is also prevented from purchasing crucial U.S. and Japanese-made semiconductor equipment for its products.
So in the short term, the trade war has definitely impacted Chinese businesses. But I think China will be just fine in the long term…
China is innovating
Many Chinese companies are developing ingenious solutions to overcome the trade war.
For instance, companies are relocating their operations to other parts of the world unaffected by tariffs – like Vietnam and Cambodia. These countries have lower labour costs and the companies can eventually repatriate their profits back to China.
Other companies are reportedly shipping their goods through neighbouring countries like Vietnam – making them appear to have been made or assembled there – to skirt tariffs.
Meanwhile, Chinese tech companies are pouring large sums of money into developing their own proprietary systems and products.
Huawei has already advanced the development of its smartphone mobile operating system that will rival Google’s Android and Apple’s (Exchange: New York; ticker: AAPL) operating systems.
Called HongMeng, Huawei’s operating system is said to be compatible with all Android applications, making it more attractive to consumers who have grown accustomed to Android applications.
This new operating system has enormous potential.
Nearly 1 billion smartphones were manufactured in China last year, equivalent to 70 percent of the world total. And many of the world’s largest smartphone manufacturers are Chinese.
If Beijing mandated that all Chinese-branded smartphones use Huawei’s new operating system, Android could lose more than half of its market share almost overnight… while HongMeng becomes the world’s most popular OS by default.
China is creating new markets
In 2013, Chinese President Xi Jinping launched a grand infrastructure programme called the Belt and Road Initiative (BRI) (previously called the One Belt One Road Initiative).
It’s a US$4 trillion program to integrate – through the largest buildout of infrastructure ever seen – the markets of more than 65 countries spanning three continents.
If it goes according to plan, by 2030 nearly all the economies in Asia, Europe and Africa will be connected to China via an intricate network of high-speed railways, superhighways, seaports and airports.
For example, a high-speed freight railway linking Finland to Xi’an, China, will bring Chinese electronics from China to Poland. A 12,000-kilometer freight train service will link the southern coastal Chinese city of Yiwu to London.
The world’s largest dry port – a port that handles cargo transported over land (usually by trains) – was opened in 2017 in Khorgos, Kazakhstan, just on the border with China. It already facilitates the transport of nearly 100,000 TEUs (twenty-foot equivalent containers) of goods between China and Europe per year.
The trade war will only speed up the development of the dozens of BRI projects designed to improve the land, sea and air access of China to a region comprising 60 percent of the world population and 40 percent of global GDP.
China isn’t slowing down
China today is much different than the China before the dot-com era. Today, China is an economic juggernaut that comprises the world’s largest consumer market by population and the second largest by value.
It’s also an innovation powerhouse. The number of Chinese STEM (science, technology, engineering and mathematics) graduates dwarfs the number of U.S. graduates by a ratio of four-to-one.
China also has the second largest number of global patent filings, next only to the U.S. In 5G (5th generation of mobile communications) technology, China has the most patent applications (one-third of the total) and will launch commercial 5G services by the end of 2019.
So while the U.S.-China trade war may cause some headaches for Chinese companies (and Beijing) in the short term, it will only accelerate their creative avoidance of tariffs and development of new technology.
In short, China will be just fine – despite this trade war.
Editor, Stansberry Pacific Research
I’ve said before that bitcoin could hit US$100,000 faster than anyone realizes.
But some people think that number’s conservative.
Wences Casares, a Paypal director and the CEO of bitcoin wallet and storage company Xapo, believes bitcoin could hit US$1 million in seven to 10 years.
That might sound insane.
But here’s how it could happen…
How bitcoin could hit US$1 million
Growing up in Argentina, Casares saw his family lose their life savings three times – through a large devaluation of the national currency, hyperinflation and the government confiscating all bank deposits.
“My memory of these events is not economic or financial but very emotional,” he says. “I remember my parents fighting about money, I remember being scared, I remember everybody around us being scared and returning to desperate, almost animal-like behavior.”
Bitcoin solves the problem that led to those crises. Bitcoin can’t be devalued. It can’t be hyperinflated. And it can’t be stolen by the government.
With those characteristics, bitcoin could become a global store of value and the primary way of settling international transactions. If that happens, bitcoin’s eventual value could land somewhere between gold’s US$7 trillion market cap and the US$40 trillion that all the currency in the world is worth.
To get to a specific forecast for the total value of all bitcoin, Casares uses a simple formula:
US$7,000 x the total number of people who own bitcoin
Why US$7,000? Because that’s the historical average for bitcoin’s market cap over time (US$7,000 x the total number of bitcoin owners). In other words, every new bitcoin buyer invests an average of US$7,000. Some invest a lot more, some invest a lot less.
That means if 3 billion people ever own bitcoin, its market cap could be around US$21 trillion (~US$7,000 x 3 billion) or US$1 million per bitcoin.
US$21 trillion is an enormous number.
It’s slightly more than the U.S. gross domestic product (GDP)… the total value of all the goods and services produced in the U.S. in a year.
But we’ve already seen an asset class hit more than 100 percent of U.S. GDP. During the dot-com bubble during the late 1990s and early 2000s, tech stocks were, at their peak, worth 101 percent of U.S. GDP.
Bitcoin could get there too… assuming Casares’ formula holds true and bitcoin keeps adding more users at a feverish pace.
Bitcoin is about to get a lot bigger
More than 60 million people around the world have invested in bitcoin. That number grows by about 1 million every month, according to Casares. And already, bitcoin moves US$1 billion around the world every day.
But bitcoin is about to get a lot bigger.
Bloomberg recently reported that online trading company E*Trade Financial Group will soon launch trading for the top two largest cryptos, bitcoin and Ethereum. That means E*Trade’s nearly 5 million existing clients will have the ability to buy and sell cryptos.
Trading firm TDAmeritrade is allegedly preparing to do the same. TDAmeritrade has 11 million users.
Fidelity, one of the world’s largest financial services and investment firms, also said last month it would launch crypto trading “within a few weeks.” The company has US$6.7 trillion in customer funds and has nearly 30 million customers.
Add them all together, and 41 million investors could soon have a simple way to buy bitcoin.
Those are huge numbers considering just 24 million Americans (about 9 percent of the adult population) are believed to own some bitcoin. That means bitcoin’s potential investor base will grow sharply overnight.
The operators of the New York Stock Exchange (NYSE) will soon launch a crypto exchange called Bakkt too. That will make trading crypto as easy as buying shares of Apple.
So we’re standing on the cusp of the biggest leap forward in access to crypto since bitcoin launched more than a decade ago.
That access could mean we’ll see tens of millions of new bitcoin buyers this year. With bitcoin’s fixed supply, new users can only mean one thing: higher bitcoin prices. If millions of new buyers turn into billions, Casares’ prediction might not be so insane after all.
The biggest risk now isn’t buying bitcoin… it’s standing on the sidelines. Take a small position in bitcoin and forget about it. You’ll likely be glad you did.
Cryptocurrency Analyst, Stansberry Pacific Research
Selling is the dark art of investing.
Watch CNBC… read the financial news… listen to your broker… and you’ll hear about what you should buy. Buy this stock, buy that market, buy, buy, buy.
But you almost never hear about selling. Sure, when markets are falling, you hear theories about why other people are selling. But it’s a rare thing for someone to tell you “you should sell this stock” or “you should sell that market”.
Why don’t people talk more about selling an asset? Selling doesn’t sizzle. There’s no thrill to it. Selling signals the end – rather than the beginning. Selling is sad.
Of course, this is absurd. You only make money on your investment when you sell. Until then, it’s all on paper. And if you don’t sell at the right time, or if you don’t know when to sell, those paper gains can turn into real losses.
Selling is the most important skill in investing. It’s also one of the least appreciated.
So here are five reasons to sell… to help you develop the underappreciated skill of selling.
1. You’ve hit your stop loss
I talk all the time about stop losses. A stop loss is a pre-determined level at which you’ll sell your shares.
The best type of stop loss is a trailing stop loss.
A trailing stop means that you sell your shares at a pre-determined level below the current market price. This price level is adjusted if the share price moves up. That way, you know exactly how much you stand to gain (or lose) as long as you sell at your trailing stop level.
Here’s an example of how it works: If you bought a stock at US$2.00, you might set your trailing stop at 20 percent below that level, or US$1.60. In this case, as long as you stick to your trailing stop, you’ll protect yourself against far greater losses.
On the other hand, let’s say that same stock climbs to US$2.20. As the shares rise, you would continually adjust your trailing loss level to 20 percent below the market price. At US$2.20, your sell level would be US$1.76. If the shares rose to $3.00, your trailing stop would stand at US$2.40.
If you own shares, you need to have in mind a stop loss for every stock you own. Just as important, if a stock you hold hits your stop loss level, sell. Don’t second-guess your stop loss, because it’s almost guaranteed you will end up taking bigger losses over time. And you can’t make money investing if you don’t have any money left to invest.
2. The reason you bought is no longer valid
Even if a stock hasn’t hit your stop loss level, you should sell it when the investment thesis has changed for the worse… that is, if the rationale behind your purchase no longer holds. Companies change direction all the time – an expansion plan doesn’t work, a growth strategy falls flat, a new product doesn’t sell. If these things happen, it’s time to re-evaluate your investment. You need to step back and decide if you want to stick around for the new approach. If not, it’s time to move on.
3. You want to hedge
When markets are falling and you want to limit your downside, cash is the best hedge.
You see, in the short term – today, tomorrow, next month, next year – the value of your cash remains constant, no matter what is happening in the markets. (Except if you’re in 1940s Germany, or recent-day Zimbabwe, or present-day Venezuela… but those are the rare exceptions.)
Today, cash is yielding more than it was just a year ago. It’s not going to make you rich – but at least you won’t be losing money if you stay in a falling market.
And sometimes, staying still – that is, not losing money – is enough.
4. You no longer want to “hold” (or: buy)
It’s easy to forget that when you own an asset – whether it’s a stock or a house or a Rolex – you’re actually buying it, every day.
You see, everything you own is taking up capital – actual cash. If that cash wasn’t being used for that item, it could be available to buy something else. So, by holding a position, you’re really “buying” that position – each and every day that it’s in your portfolio.
So think of what you own – all of your assets – and ask yourself: “If I had the cash in my hand to buy this right now, instead of the thing itself (whether it’s a stock, a bond, a house, or a car), would I still buy it today?”
The point is – every day that you’re allocating capital to something, you’re actually “buying” it… and every day, you should be questioning whether that asset is worth buying (or, continuing to hold… and continuing to use your capital). Always consider if the potential returns to be made from holding is equal or higher to an alternative investment given the risks associated with owning it. If it’s not… sell it.
You want to be ready in case you see money lying in the corner
Legendary investor Jim Rogers has said, “The way of the successful investor is normally to do nothing – not until you see money lying there, somewhere over in the corner, and all that is left for you to do is go over and pick it up.”
This means that when you see a clear roadmap to a cheap asset rising in price, you want to make sure you have the cash to buy. Selling gives you the chance to invest in these opportunities
In short, when you buy an asset, you probably don’t know exactly when you’re going to sell (and in fact, you probably shouldn’t). It’s not going to be a date on the calendar, circled in red one day in the future. But the day you buy something, you should know what your criteria will be for selling – and be ready to sell when those criteria are met.
Publisher, Stansberry Pacific Research
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