One challenge with this is that it might be hard to hunt down folks who have a seed phrase and a passphrase written down on a Post-It note. Some Bitcoin success stories invested in ETFs and public equities that are somehow tied to Bitcoin and they’ll be easy to hit with Philip’s 95 percent windfall profits tax. But the richest/biggest fish may get away (renounce U.S. citizenship, pay the exit tax, move to a tax-free country, and then start cashing in the Bitcoin).
Is Bitcoin a bubble? Physicist and general smart guy Brian Keating points out that the “bubble” has lasted for ten years, much longer than tulip mania (six months) and other historical bubbles. Peter Schiff, smart enough to move to Puerto Rico in 2015 and skip on Federal taxes, points out that the Feds began inflating the stock market and housing market in the mid-1990s and the collapse didn’t come until 2008. Schiff: “If people are dumb enough to pay $50,000 for Bitcoin, maybe they’ll be dumb enough to pay $100,000.” Isn’t it a good hedge against governments printing money and inflation? “Maybe Bitcoin is a hedge against stupidity because if people are still stupid they will still buy it. If you’re worried about the dollar going down, don’t hedge it with something riskier than the dollar. Buy Swiss francs.” (watch Keating and Schiff talk)
A bad guy lair (for a Bitcoin early adopter?) under construction in Sarasota:
This has been a tough month for fans of the Efficient Market Hypothesis. GameStop (GME) started out the month at less than $20/share and is now “worth” over $300/share. The market cap for this bricks-and-mortar retailer is over $22 billion:
Why doesn’t it come back down now? Mall-based retail isn’t a lot better than it was a month ago. The Wall Street shorts who got squeezed have presumably had to close out their positions by now. Unless the company can use its current high share price to issue more shares and invest them in some super profitable business, don’t the shares have to come back down to $20?
The upshot [from looking at some money flows]: over two-thirds of all Bitcoin — $10 billion worth of it — that was bought in the previous 24 hours, was being purchased with Tethers.
This is unusual: if demand for Tethers were real, one would expect Tether Ltd. to combine together multiple USD deposits from investors into a single issuing block. Combinations like that shouldn’t add up to perfectly round numbers every time. What’s more, the supposed USD inputs (e.g., 401,431,056 USD in the top left transaction) are giving perfectly round Tether outputs (e.g., 400,000,000 USDT in the same transaction) in every block — regardless of the prevailing exchange rate or anything else.
The last nail in the coffin was when I found out about the lack of visible reserves. If Tether Ltd. really was taking in 1 USD for each Tether it issued, then it should have as many dollars in its bank account as there are issued Tethers. And it turns out we can check if that’s true! Tether Ltd.’s bank is Deltec bank in the Bahamas, and the Bahamas discloses how much foreign currency its domestic banks hold each month.
From January 2020 to September 2020, the amount of all foreign currencies held by all the domestic banks in the Bahamas increases by only $600 million — going from $4.7B to $5.3B. (The table is in Bahamian dollars, but the Bahamian dollar is pegged to the US dollar, so 1 BSD = 1 USD.) But during the same period, total issued Tethers increased by almost $5.4 billion — going from $4.6B to $10B! The implication was shocking: there weren’t nearly enough dollars in all the domestic banks in the Bahamas to back the Tethers that were floating around in the crypto market.
So this was crypto’s big short: Tether Ltd. was short of US dollars — to the tune of about $25 billion.
If you’ve been waiting for the right time to move to Puerto Rico (for the 4% tax rate) and sell those $millions in Bitcoin you’ve been keeping on a Post-It note, maybe this is the time!
(Disclaimer: I haven’t done my own research into the crypto market. I’m sure that if I were a Bitcoin billionaire I would have lost the password!)
Since the article mentions the Bahamas and it is almost MLK Day… statue of Dr. Martin Luther King, Jr. in Bimini (he was there in 1960 to write his acceptance speech for the Nobel Peace Prize):
The stock market has been up lately, perhaps in response to the Biden-Harris electoral victory. I wonder if this makes sense. Democrats promise a bigger government. The companies that are well situated to harvest contracts, bailouts, etc. are the biggest American companies. Investors could expect a disaster for small business owners and the working class (i.e., the folks who voted for Trump), but that shouldn’t discourage them from buying stock in publicly traded companies (i.e., the biggest U.S. companies).
It may turn out that Donald Trump was the one force keeping the Democratic Party together.
Trump didn’t sell out his supporters. In fact, his presidency saw something extraordinary, even if it was all but invisible from the country’s globalized cities: the first egalitarian boom since well back into the twentieth century. In 2019, the last non-Covid year, he presided over an average 3.7 percent unemployment rate and 4.7 percent wage growth among the lowest quartile of earners. All income brackets increased their take. That had happened in the last three Obama years, too. The difference is that in the Obama part of the boom, the income of the top decile rose by 20 percent, with tiny gains for other groups. In the Trump economy, the distribution was different. Net worth of the top 10 percent rose only marginally, while that of all other groups vaulted ahead. In 2019, the share of overall earnings going to the bottom 90 percent of earners rose for the first time in a decade.
The reasons for Trump’s success are not yet clear. They may well have involved his unorthodox policy choices: above all, limiting immigration.
So the good times for the elites might be even better soon! That’s a great reason to purchase stock in America’s largest companies owned by elites, managed by elites, and mostly employing the reasonably elite).
A signature campaign promise of the Biden-Harris campaign is to raise the U.S. federal corporate tax rate to 28 percent or 31 percent on corporations that “offshore manufacturing and service jobs to foreign nations in order to sell goods or provide services back to the American market.” (Tax Foundation) When we add in state corporate tax rates, the typical U.S. company might be hit with roughly 36 percent in taxes. Compare this to 12.5 percent in Ireland or 19 percent for a London-based company.
The Trump tax law changes of late 2017 took a lot of the wind out of the Irish inversion sails. If high corporate tax rates are restored by President Harris, though, it will again make the best economic sense for corporations to be headquartered in Ireland, the UK, or other comparatively low-tax location. Ireland has the lowest rate in the EU and everyone there speaks English (sort of). Can investors profit from a Biden-Harris election win, therefore, by buying Irish assets? Since U.S. law discourages sham inversions, the actual senior management jobs should migrate to Ireland. This should help Irish real estate, banks, insurance, etc. Under a Biden-Harris administration, an enterprise with management in Ireland and an operating subsidiary in the U.S. should have higher net profits than one in which everything is in the U.S.
Separately, how is Ireland doing with coronaplague? After more than seven months of shutdown, they’ve now entered “Level 5” double secret shutdown. Note that essentially everything is closed except for schools. Primary schools are unmasked. Once students enter secondary school they must don the hijab of the Church of Shutdown. Universities are open. Adult education is open, which includes flight schools (yay!). I was discussing this on WhatsApp with an Irish friend and I said “This is the mirror image of Massachusetts. Here almost everything is open except for the schools. And when we had almost everything closed, it was the marijuana and liquor stores that were deemed essential and kept open. Maybe this is all that we need to know to understand the difference between Irish and Massachusetts values.”
The WHO dashboard shows that Ireland, in its island redoubt, has suffered a little more than half the COVID-19 death rate compared to the U.S. or the U.K.
Ireland was already ahead of the U.S. in PISA scores (2018 snapshot). With the U.S. in the midst of what might be a multi-year education shutdown while Irish schools and universities are operating more or less normally (see Trinity College Dublin’s plan), is that another good reason to shift investment to Ireland?
People buy snow tires because they are forced to drive in the snow, right? Workers have to get to work. College students have to get to school.
In a cower-in-place Nation of Shutdown, however, we don’t have to go anywhere on a typical day. We can stay home when the weather is nice, when the weather is mediocre, and when the weather is nasty. We can stay home, in short, nearly all of the time.
What is the value of snow tires to a worker when the office is no longer a destination?
This gives rise to my latest brilliant investment idea… short snow tires! Who in their right mind would purchase this product in 2020?
Bonus: Mindy the Crippler using her built-in snow tires…
More seriously…. In a mostly static world where the average person has a car that will last another 15-50 years (depending on what travel and business restrictions his/her/zir/their state governor decides to order), how is this company worth $400 billion? Is it the incredible lameness of Tesla’s competitors? (Do any of them have Dog Mode yet? That was an obvious idea in 2003. Tesla introduced it in 2019.)
Some of our recent helicopter flying has been with a photographer tasked with getting pictures of shopping malls in the context of highways, cities, etc. What are these for? “Everything is for sale now,” he said. “They’re all going bankrupt.”
Is it actually too late for these spaces? If schools need more square footage to do in-person learning, why not rent the vast department stores to local school districts? Because the schools aren’t actually willing to pay? In Shanghai, a typical mall might have half the space devoted to after-school programs for children, e.g., dance or English-language instruction. Perhaps that can’t work in the U.S. because at any time a governor can make it illegal to operate the after-school program.
Readers: What else can be done with these spaces? If retail and most other forms of gathering are outlawed, what is the value of a lot of climate-controlled space?
Already [in 1720] a wealthy man, Newton was usually a cautious investor. As the year began, much of his money was tucked away in various kinds of government bonds—reliable, uneventful investments that delivered a regular stream of income. He did own shares in a few of the larger companies on the exchange, including South Sea, but he had never been a rapid or eager market trader.
That had changed in the past few months, though, as he bought and sold into the rising market seemingly in the hopes of turning a comfortable fortune into an enormous one. By August, he’d unloaded most of his bonds, converting them and other assets into South Sea shares. Now he contemplated selling the rest of his bonds to buy still more shares.
He did sell nearly all of them. It was a disastrous choice. Within three weeks, the market turned. By Christmas, it had utterly collapsed. Newton’s losses reached millions of dollars in 21st-century money.