12 January 2021

1) The cryptocurrency Bitcoin plummets the most since March as a stronger dollar and investor nerves strip off nearly $140 billion in the cryptocurrency market cap, renewing fears that Bitcoin may be a bubble waiting to burst. But Bitcoin is still up roughly 89% over the past month. Other cryptocurrency coins, such as XRP and Litecoin, have shed about 18% each. Bitcoin hit a record high last week above $41,000, driven by the combination a weaker dollar, economic optimism, and a wave of bullish sentiment toward cryptocurrencies as big-name investors and investment banks touted a potential for huge gains this year, with the stronger dollar and higher bond yields triggering a plunge in Bitcoin and gold prices.

2) Trump has been permanently barred from the platform Twitter, resulting in$5 billion dollars in losses in market value, with Twitter stock dropping after the barring of the President. Twitter stated they permanently suspended the account due to the risk of further incitement of violence. Trump, who had about 88 million followers, generated enormous publicity for the platform with his controversial and incendiary tweets over the past six years. As a result, Twitter’s stock fell as much as 12% on Monday thus the decline of $5 billion dollars from Twitter’s market capitalization. Investors are worried that the Trump ban will erode interest in the platform and lead to boycotts among those who see the decision as politically motivated and a way to silence a major conservative voice.

3) Fears are growing that a bigger stimulus may be seen as the ‘peak of this bubble’ resulting in a market correction or worst. Some think that with the Democrats set to take control of both the House and Senate, perhaps President-elect Joe Biden will be less likely to spook markets with tax ambitions. Biden has promised $2,000 stimulus checks if the Senate turned blue, so now the question is what will happen? For millions of Americans, it’s been a painful waiting game already, they having subsisted with minimum money since losing their jobs from the pandemic. Joe Biden made the promise that if Jon Ossoff and Raphael Warnock turned the senate blue that would end the block in Washington and allow the $2,000 stimulus checks to immediately go out the door to people who are in real trouble.

4) Stock market closings for – 11 JAN 21:

Dow 31,008.69 down by 89.28
Nasdaq 13,036.43 down by 165.54
S&P 500 3,799.61 down by 25.07

10 Year Yield: up at 1.13%

Oil: down at $52.18

11 January 2021

1) Boeing Aircraft Co. has reached a $2.5 billion dollar agreement to settle the criminal charge that it defrauded the U.S. government by concealing information about the troubled 737 MAX. This is the ill-fated jet airliner involved in two fatal crashes that killed 346 people. The airline manufacturer entered into a deferred prosecution agreement and in turn, the Justice Department will dismiss the charge against Boeing. This settlement caps a two-year criminal investigation into the two MAX crashes. This settlement will have no bearing on any pending civil litigation. In addition, Boeing will pay a $243.6 million criminal penalty. With the penalty and the fund for relatives, Boeing says it expects to pay an additional $743.6 million dollars for the fourth quarter of 2020.

2) The cryptocurrency Bitcoin is at an all-time high in 2021, one coin now worth $36,000. It has doubled its value in 30 days. Bitcoin is the first and biggest cryptocurrency, which started up in January 2009, and eleven years after its invention, the total value of all Bitcoins in the world is around $359 billion. The Bitcoins are long, unbreakable codes stored in clouds or computers. Bitcoins were invented at the height of the 2008-9 financial crisis. The idea is a type of money that didn’t depend on the traditional banking systems. Cryptocurrency is popular in countries with inflation.

3) Venture capital backed companies in the United States raised nearly $130 billion dollars last year, setting a record despite the COVID-19 pandemic, up 14% from 2019, while the number of deals is down 9% to 6,022. The so-called mega-rounds, which are deals that are $100 million dollars or higher, also hit a record amount and number, with $63 billion dollars raised in 318 deals. However, there is a big drop in the very early stage investment called the seed money stage. The trend of big investments doesn’t look like it will slow in 2021 as there is a lot of capital chasing investments. It’s expected that 2021 is going to be a banner year for many tech companies.

4) Stock market closings for – 8 JAN 21:

Dow 31,097.97 up by 56.84
Nasdaq 13,201.98 up by 134.50
S&P 500 3,824.68 up by 20.89

10 Year Yield: up at 1.10%

Oil: up at $52.73

9 November 2020

1) Missouri, in what some are calling the lawsuit heard round the world, is suing China, to hold the global heavyweight responsible for the losses of life and commerce from the COVID-19, which originated in Wuhan, China. Other states are also filing class action suits in U.S. federal courts, but Beijing is aware that sovereign nations, including the U.S., have wide immunity from such claims. Experts warn that a potential decoupling of the world’s largest economies, the United States and China, is causing further concern. Even before the pandemic, there were concerns as China took dramatic steps in recent decades to grow its reach in the world. China is part of massive shifts in the balance of global powers, with some countries reasserting themselves and others finding it difficult to keep up with technological advancements and reap their economic rewards.

2) The giant ExxonMobil has low debt, high yield, and commitment to its dividend. Chevron is like ExxonMobile having a relatively low leverage (in the industry), and long histories of annual dividend increases behind them. But then the pandemic upended the supply/demand dynamics of the oil industry which sent company’s shares tumbling. This has brought the two oil companies dividends into question, and therefore the desirability of the stock as an investment. Major foreign oil companies are facing the same dilemma. Royal Dutch Shell and BP (British Petroleum) have both said they plan to also cut their dividends because of the shift. The dividends can be supported as long as the average oil price sticks around the $40 level.

3) US government has seized a $1 billion dollars in bitcoin as the cryptocurrency rockets past $15,000 per coin, the highest value since January 2018. The organization Silk Road was the most notorious online criminal marketplace of its day, until its founder was prosecuted in 2015 leaving a billion-dollar question of where did all the money go? It remained in the digital wallet for many years before a unit within the Internal Revenue Service, that tracks digital currencies, noticed 54 new transactions from the wallet, prompting the seizure of currency. Analysts noted the movement of more than 69,000 bitcoins in a single transaction from a digital wallet tied to Silk Road founder Ross Ulbricht, which held the fourth-highest bitcoin balance of any in the world. But the Silk Road founder is serving two consecutive life sentences in a maximum-security federal prison, which prompted the government to seized the money, however, the government must prove its case before it can keep the forfeited assets.

4) Stock market closings for – 6 NOV 20:

Dow 28,323.40 down by 66.78
Nasdaq 11,895.23 up by 4.30
S&P 500 3,509.44 down by 1.01

10 Year Yield: up at 0.82%

Oil: down at $37.49

20 July 2020

1) The international British Airways has announced they are retiring their entire fleet of Boeing 747 jets, a direct result of the Convid-19 crisis. Once one of the biggest airlines using the iconic jumbo jet, the contraction of the airline industry and the likelihood that air travel will not return to its previous size is forcing all airlines to abandon their jumbo jets early. They are going to the more modern fuel efficient Airbus A350 and Boeing 787 in their place. British Airways now has 31 Boeing 747s, about 10% of its total fleet, with an average age of 23 years.

2) What appears to be a massive attempt to embezzle monies from the general public has come to light with the social media Twitter confirming that 130 accounts were targeted in a hack. The accounts of a handful of prominent users were compromised that allowed criminals to gain access to prominent users such as Joe Biden, Barack Obama, Elon Musk, Bill Gates and Kanye West to post solicitations for money. The attackers were able to gain control of accounts then send Tweets from those accounts asking to send money via Bitcoin to commit cryptocurrency fraud. Wire fraud is a federal felony crime, so the FBI immediately began an investigation of who and how the fraud was perpetrated.

3) Delta Airlines is proposing a 15% cut to minimum pay for pilots to avoid furloughs for a year. This would have to come after the first of October when federal aid terms expire. This is in view that a quick recovery in air travel is becoming increasingly remote because of the rise in new coronavirus cases. More than 60,000 airline employees across several carriers have been warned that their jobs are at risk, including more than 2,500 of Delta’s 14,000 pilots. As financial losses pile up, employees are urge to take early retirements, buyouts and other forms of leave in a attempt to slash cost as financial losses pile up. So far, more than 1,700 pilots have signed up for early retirements. This is just another indicator how the air travel business is probably fundamentally changing.

4) Stock market closings for – 17 JUL 20:

Dow 26,671.95 down 62.76
Nasdaq 10,503.19 up 29.36
S&P 500 3,224.73 up 9.16

Year Yield: up at 0.63%

Oil: down at $40.57

4 March 2020

1) In an emergency move the Federal Reserve has cut the interest rates by half a percent, in a effort to stem slower economic growth as a result of the coronavirus outbreak. This action was two weeks before the Fed’s scheduled meeting where business was expecting a reduction of the rate anyway, but because of the volatile stock market, it was decided to move more quickly. The announcement sent the markets into wild gyrations over fears the state of the economy is worst than feared.

2) Walmart, the retailing giant, is experimenting with a new health center. People can receive routine checkups and ongoing treatment of chronic illnesses, such as diabetes and heart disease at discount prices, with or without insurance. Services include lab work, x-rays, dental care, behavioral health counseling and eye and hearing exams. A checkup for an adult is $30, eye exam is $45 and dental exams for $25. Healthcare is 15% of the economy, and if the two test facilities prove successful, then Walmart is expected to expand the service to other stores. This service would also bring increased foot traffic to boost in-store sales.

3) The trading smartphone app Robinhood is experiencing a system wide outage on both its website and its app. Users are reporting issues on the platform, logging in and even trading. Equities, cryptocurrency and options trading are among some of the functionalities experiencing a major outage. Some users are demanding compensation for their losses during down times.

4) Stock market closings for – 3 MAR 20:

Dow 25,917.41 down 785.91
Nasdaq 8,684.09 down 268.08
S&P 500 3,003.37 down 86.86

10 Year Yield: down at 1.01%

Oil: down at $47.10

BITCOIN & CRYPTOCURRENCY: The Profusion of Cryptocurrencies will Change the Monetary-Banking System Enhancing Economies For the Millennials!

Economic & Finance Report

By: James Lyman BSAE, BSEE, MSSM

I just got my January issue of Scientific American with a collection of articles about the future of money detailing how new technologies promises to profoundly change the monetary and banking systems and hence the economic system which millennials are already struggling for a place in.  This special report of four articles is very interesting giving a glimpse of how the world of the millennials and Z-generation is changing such as stopping the concentration of wealth, increased transparency while reducing risks, but increasing risks to our digital identities.  This issue is a good introduction to the ‘what and particulars’ of the new technologies of money, but leaves the reader with the question: How will the millennials fair in a new economy when they’re now struggling so much in the old one?

                       

First, just what is cryptocurrencies such as Bitcoin and Tradecoin?   Well, as the articles explains, cryptocurrencies are just as the name implies, money or currency that is data bits in computer systems instead of the traditional metal coins and paper bills we’ve come to think of money as.  This allows individuals and companies to buy and sell physical assets across the internet using cryptocurrencies instead of traditional money.  These cryptocurrencies are not like credit cards used to transfer money, which are in fact just another manifestation of tradition money issued by nations that we use every day.  Instead they are a money or currency created by individual private companies.  These use the technology of blockchaining to give a peer-to-peer digital payment system without any central authority.

 

Immediately there is the obvious problem of what gives this kind of  money any value? The money of a nation represents the cumulative value of a nation. The sum value of a nation’s factories, farms, mineral resources and infrastructure, coupled with the value of all the personal property such as houses and cars is what gives money its value.  The sum total of all the assets of a nation!  So the money from a rich nation is more valued, considered more stable, than one from a poor nation.  During World War II and several decades after, the American dollar was more valued than gold.  It was more sought after, more readily accepted than pure gold, because of the vast wealth that stood behind the dollar.  People across the world wanted American dollars above all else.

 

But cryptocurrencies is the creation of money out of thin air . . . there is no physical assets to back Bitcoin and Tradecoin.  (Tradecoin does used commodities to back their currency, but commodities are perishable, and so its value can be questionable.)  One only has to look briefly at history, at the Weimar Republic after World War I, when the defeated Germans decided to pay reparations to the Allies by simply printing more money.  Quickly inflation became ramped with a wheelbarrow of paper money needed to buy a loaf of bread.  The paper used to print the money on, cost more than what the money was worth.  And this opened the door for the National Socialist and Hitler to step in and gain total power.  Cryptocurrencies lack hard tangible wealth for their money to represent.

 

Creating money is a finicky endeavor.  Prior to the great depression of the thirties, the American dollar was on the gold standard, that is a dollar bill could be redeemed from the American government for a set amount of gold.  It had value because it was backed by gold which most people consider to have value.  The paper dollar bill was a light weight convenient way to carry gold around and exchange for goods and services.   But there was a fixed amount of gold that America had, which in turn fixed how much money the government could issue.  That put a limit on how big America’s economy could be, so to have room to grow further and get America out of the depression, President Roosevelt took America off the gold standard.  Some people say we should return to the gold standard to return stability to the dollar and America’s economy, but there simply isn’t near enough gold for all the money now needed for our economy to operate. 

 

Therefore, if you create too much money, then you risk inflation with its value falling away, while if you create too little, then you risk strangling the economy which can be just as bad.

 

That’s the real risk with cryptocurrencies, the creation of money out of thin air, without any consideration over the consequences of too much or too little money, coupled with no anchor to real material wealth.  This translates into Trust, one of the most important factors of any currency.  To use a currency, to accept it in exchange for some material item of value, both parties must have trust that the currency will be accepted and trust that the currency has value to warrant trading something of value for.

                                                           

As with any new technology, many have plans to revolutionize banks, economies and money.  Some think they can use cryptocurrencies to cut the banks and governments out of the financial world and thus make the world a better place, others that they can fix a flawed system.  For instances, Venezuela is trying to cure its hyper inflation by creating a cryptocurrency.  One thing is for sure, the future economies, which millennials will have to live in and with . . . are now being formed and remade.  But what’s in it for them?  Will the new cryptocurrencies mean more opportunities for them with a brighter future, or will there be more technology displacements of millennials?

 

These are a set of financial articles each millennial needs to read and ponder, since they are the ones who’s world will be changed one way or the other.