Chair Yellen is no Joe Namath

All I’m going to say is the Fed chair Yellen is no Joe Namath.

On Wednesday in a speech the Fed head said, “Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”

Namath guaranteed the New York Jets would win Super Bowl III and backed it up.

Yellen, who seems to be on the path of bursting asset bubbles with a credit-busting, rate-raising strategy, also said, “asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates.”

Even if you discount the 2.5% drop in Google yesterday on the huge European regulator’s $2.7 billion fine for skewing its search results, stocks sold off hard on her comments.

Now I’m not one to pandered to ageism, however at 70 years old, Chair Yellen has a different time horizon than the rest of us.

But if the Fed thinks it can burst stocks, art and home asset bubbles by constricting credit in a low inflation environment, then Yellen & Co are looking at a possible deflationary crisis, which they have little in their toolbox to combat.

One can think that the Fed can always lower rates again and expand its balance sheet to fight deflation, but that’s just continuing the boom/bust cycles.

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Bitcoin still seems to be blue chip in crypto market

Here’s what stumps me. Why would you invest in a newer derivative of volatile newish alternative investment?

I have written extensively on bitcoin. I’ve told readers about its soaring run up in price and its less than equally roller coaster rides down. Pointed out it reaching $3,000 and the $500 drop in the span of 18 minutes soon after.

Also questioned the exchanges that seem to have outages as prices begin to fall.

However when I wrote of the other cryptocurrencies that have popped up in response to bitcoin, such as litecoin and ethereum I was a bit more skeptical. Some of these digital currencies are not currencies at all and are based off bitcoin pricing, but not 100% correlated.

You can see this in their pricing over the last 10 days, while bitcoin is in a range between 2,550 and $2,700, these alt coins are falling faster on a percentage basis.

I still have a somewhat conventional investing philosophy, stay in the best-known entity in the space. While bitcoin’s pedigree is somewhat questionable, it still has a far longer track record of trading than any of these other instruments.

Oh, and one other thing, ethereum has an instrument attached to it called “gas”, which you can purchase with the crypto to enhance your ethereum investment. Gas is something that vaporizes quickly and that may be what happens to your investment in these other digital instruments.

FAANGs are the teeth for 2017 returns

As we begin the second half of 2017 astronomically , let’s look how the stock markets did so far.

  • The Dow Jones industrial average is up 8.3%.
  • The S&P 500 rose 8.7%
  • The Nasdaq soared 15.9%

On the backs of FAANG stocks, the tech index is a very crowded trade. The ironic part of the gains in Facebook, Apple, Amazon, Netflix and Google is held by “hedge funds” and foreign central banks.

  • Facebook: +33%
  • Apple: +25.7%
  • Amazon: +33.5%
  • Netflix: +25.1%
  • Google: +23.2%

Certainly there are losers in the tech sector during this run up in prices. Twitter and Snap are two of the once promising darlings that failed to attract investor interest.

Now why would hedgies be in these stocks, unless the hedge is not to show negative returns on their other bets.

As a point of comparison bitcoin is up roughly 64% for the first half of 2017.

Many market pros are saying this could be the top for these stocks. That makes sense from the strong first half returns, but my question is if this is true, then where will capital go to find the next crowded trade? Because that’s where you make money.

$10,000 bitcoin can’t happen with these exchange outages

While bitcoin was dropping like a stone on Monday with sellers clamoring for the exit, thereby crashing the Coinbase exchange, another digital crypto-like token, ethereum, soared to record highs.

Other exchanges like BTC-e, tweeted on Monday that it was hit by a distributed denial-of-service attack, or DDoS. Their website was back online at 4:00pm EST.

This was the second outage for Coinbase in the last three weeks and both outages were when bitcoin was falling.

So what is with the bitcoin exchanges, that they work fine when there are $200-$500 run ups in price, but fail miserably on the downside? And why can’t they get their stories straight?

For any cryptocurrency to gain broader appeal safeguards must be put in place to give each investor equal opportunity to buy and sell. The last thing anyone needs is a government to step in to regulate the market.

Another question is how is it that a digital currency exchange is developed that is not robust enough to handle spikes in traffic? The exchanges are built with the express purpose of having scalability. It’s not like you built a physical market and then people started trading it online and you were caught short.

The exchanges by using the ploy of server outages due to traffic or DDoS attack at a critical junction are setting themselves up for comparison with Mt. Gox and its implosion some years ago.

If you want to see a $10,000 bitcoin price, these exchanges — and there are about 10 of differing sizes on bitcoin — must come together to execute sales for each other if one exchange goes down.

You can’t expect neophytes, new to the cryptocurrency markets, to be able to manage navigating different exchanges to find one to buy or sell on.


The Federal Reserve is schedule to announce Wednesday the result of its two-day meeting on whether to raise rates another quarter point.

I’ve written numerous times that Yellen & Co. will not raise again this year.

So I’ll stand by that and say the Fed will stand pat and wish to monitor the markets and inflation and stand ready to raise at upcoming meetings, but will stand pat today.

While the low rates have created numerous asset bubbles from stocks to bitcoin, the tightening of credit will have a disastrous effect on the overall economy. GDP is looking at below 2% for the quarter after coming off a sub 1% first quarter.

That’s my call we will see at around 2PM EDT whether I am right or not.

Climate on Wall St. over Trump nixing Paris Agreement

The US participation in the Paris Agreement, which is the United Nations-backed pact on reducing greenhouse gas emissions to combat global warming, was nixed last week, by the Trump Administration as it is written now.

First, let me say I do not agree that climate change is “settled science” since I am old enough to remember when climatologists said in the 1970’s that we were headed into an ice age due to human development .

Secondly, climates don’t change in decades, climate takes 10’s of centuries to work through its progressions. The climate science we are looking at now is similar to looking at one photograph of a marathon runner.

You have no context of how long the race is, or how the runner did in the race. It’s one step in a 26-mile race. And yet some scientist look at this photo and not only know who won the race, but also the time it took the runner to finish.

Thirdly, the climate cycles we have experienced over the last 50 years have all been attributed to man-made emissions whether it was drought or flooding, cold temperatures or warm temperatures, strong hurricanes or weaker storms.

It’s my belief that the sun and the reduction of sun spot activity over the last decade has more influence over our atmosphere than anything we are doing on Earth. However you don’t see that mentioned too much in this debate and I’ll get to why in a second.

So that’s my take on climate change and this is why I agree with the White House on not signing on to the pact as written.

One thing the Paris Agreement does do well is create one of the greatest wealth transfer in history. Through what’s called carbon credit trading the pact sets up an exchanged — run by Wall Street banks — to take cash from US firms and so they can by third-world carbon credits to offset the companies emissions.

It’s a tax on productivity, with Goldman Sachs, Morgan Stanley and other firms taking its piece. Why do you think Goldman’s chief Lloyd Blankfein broke onto Twitter for the first time to denounce Trump’s decision?

Not for fear of warming, but because Goldman is working with former Vice President Al Gore and David Blood, who is the former chief of Goldman Sachs Asset Management, to jump-start this trading platform through their firm Generation Investment Management. And if the largest buyer of your credits is not in the market, how do you make money?

Why would Tesla boss Elon Musk quit the White House advisory role? His whole company is created and funded by no emission vehicles. And if there’s no subsidies or future carbon credits for you and I for his cars than why buy them.

You see the Paris accord is not only aimed at US companies, it will get down to you and I and how we “manage our own carbon footprint”, through additional government fees and taxes.

So why is science not looking at the solar cycle as a cause? How can you tax the sun?

While the Paris Agreement is a feel good issue — who wants to destroy the planet — its mechanisms and funding structures are too one-sided against the US. China has very little restrictions on growth and emissions, despite being the No. 1 consumer of coal in the world.

So for the White House to say no we want a better deal than ex-President Obama agreed to is not out of the question. Besides if this is a treaty, Congress would have to approve it, before Trump could sign off on it.