Thursday, December 6, 2018

3s-5s inversion 2s-10s on the watch list

I mentioned a possible inversion this year back in January: "I'll be looking to see if we have any curve inversion as rates move up.".

And here we are with the 3 year note (2.81) yielding more than the 5 year (2.79) . The classic inversion is the 2 year (2.80) and 10 year (2.863). That's pretty close and a reliable recession indicator, although there is usually a long lag time, sometimes up to 2 years. The Fed's December rate decision will be very telling. If they continue to hike and also stay on course with quantitative tightening (not rolling their treasuries and/or MBS), it could be a bumpy ride for stocks in 2019.

Wednesday, January 10, 2018

MarketWatch skewers Jamie Dimon


Oh so delish. Get woke, Jamie.

Tuesday, January 9, 2018

Bill Gross Says Bond Bear Market Confirmed

I am not as sure about a bond bear market as Bill Gross. Today, the 10-year treasury closed above 2.5%, but I would not call a bear market until it breaks 4.0%. With a fair amount of my IRA in a bond ladder, higher interest rates just mean the next rung on my ladder will earn a higher rate. I own individual bonds, so even though the market price will move inversely with interest rates, I plan to hold all of them to maturity. It doesn't make any difference what the market price of the bonds is as long there are no defaults. I don't own crazy synthetic mortgage tranches, just A and AA corporates and AAA treasuries.

If we do have a bear market in bonds, the higher rates should attract more money and that might drain money from other investments. It could mean a bear market in stocks and/or other asset classes. High rates killed the stock market in the late 70s and early 80s. The Fed is rumored to have 2-3 more rate hikes in store for 2018. I'll be looking to see if we have any curve inversion as rates move up. It will be interesting to watch.

Monday, December 25, 2017

The frozen money of cryptocoin dust

I have taken profits on my ethereum from back in August and went one level deeper, a dream within a dream. Coinbase is considered the "safe" exchange in the US. They have state of the art security (nothing is guaranteed), cold storage, and clean interface. They only offer trades in 4 cryptocoins, so if you want to get in on what are termed "altcoins", or alternative crypto projects, you have to find another exchange.

A little research led me to Binance. After creating an account, I found the ETH address of the online wallet there and was able to do a direct transfer of ETH from my coinbase wallet. The ETH network was a little clogged and my first direct transfer through the blockchain took 3 hours. During that time, my money was in limbo, it didn't exist in either place. Since then, transfers have only taken a couple of minutes. That's a pretty big time gap. With a wallet full of ETH, I was able to do quick and low cost cryptocurrency swaps on binance. I got in and out of a few coins reaping small profits and eventually some small losses, too.

What I didn't expect was for fractions of crypto to be left behind when I sold it. Most of the currencies and tokens use ledgers that go to 6 digits, ten millionths of a unit. For example, in one of my wallets, I sold as much as I could to convert back to ETH and ended up with 0.00670500 ICX. Most blockchains require a transaction fee so I didn't have enough ICX to convert back to ETH or anything else. It was left over coin dust. I have about 8 wallets with dust that are just sitting there. The only way they would ever be unfrozen is if the coin rose enough in price to allow a conversion. It just a funny side effect of the trading platforms and 6-digit precision.

Tuesday, December 19, 2017

The Blockchain delivers

Well, that escalated quickly. When I wrote my first post about blockchain, the price of bitcoin was $4,549. Now, less than 4 months later, it is $18,600. A nice 400%+ return. Bitcoin futures (disconnected from the underlying) are now trading on two US exchanges. I hear about cryptocurrencies every day on Bloomberg. Marketwatch.com added a "crypto" column to their tickers. I am still not convinced that bitcoin is "the" long term solution, but it has had an amazing run. I don't think most people even understand the implications of the hard forks this year.

Since August, I have dabbled in several cryptocurrencies and made huge percentage gains (with small dollar amounts). It's easy to feel smart when everything is going up. It feels a lot like the Napster days before the lawsuits. It could certainly all crash as fast as Napster, too. However, blockchain, or a successor technology like the Iota Tangle (which I don't think will work as designed), will survive and get applied to hundreds of finance problems to reduce costs and speed services. I am wasting some time researching all the development projects going on and enjoying the fresh takes on the technology.

Meanwhile, the S&P has made more records than any other year in history. Real estate is booming. It's seems hard to lose money on anything right now. I wonder how long that will last.

Thursday, August 31, 2017

Blockchain Believer

Bitcoin was born in 2008. I watched it with mild fascination when it was an infant and remember the milestone of being able to buy pizza with bitcoin. But I was never persuaded that bitcoin was more than a curiosity. I had seen early attempts at digital currency come and go as far back as the early 1990s. Maybe it gained some traction because it was born out of the ashes of the 2008 mortgage fraud crisis, aka the Great Recession. It has survived many scandals, online exchange thefts, a dirty reputation as a currency for criminals, and a recent hard fork (with another one probably coming up at the end of the year). It also gave birth to a thousand copy cats, some with new and improved features.

This was the first year that my curiosity and the skyrocketing price nudged me into really researching it. I am still not persuaded that bitcoin itself will be more than a launchpad, but do believe that one of the technologies used in bitcoin, the blockchain, is destined for greatness. The way the distributed ledger works and the problems that were solved and proven over many years is genius. How it eventually evolves is hard to predict, but I am believer in blockchain technology and the promise of distributed trustworthy applications in the future.

Here is a great short intro video on bitcoin technology:


And here is a longer more technical intro from the same author:


Disclosure: I have a small wager on ethereum and own some ether coins.

Tuesday, March 28, 2017

Cullen Roche's Biggest Myths in Investing

Cullen Roche is currently my favorite financial blogger for many reasons not worth elaborating. He published a list of investing myths that really covers a wide swath of the investing world and I thought worth repeating. Grab a cup of coffee and see if you agree. Good Stuff!

Biggest Myths in Investing