Winter in Phoenix

Ellen and I are back in Phoenix for the winter.

While the kids are in college at University of Arizona for the next 3-5 years in Tucson, Ellen had the idea to be closer to them and her family once again so we moved off Coronado. We are just summer Coronado people for the foreseeable future (the locals call them Zonies). Summer Coronado is better than no Coronado.

Ellen has bought into my light and mobile thinking so she was willing to spend the fall in New York so we could avoid the Phoenix heat of August and September.

I think next year we will do November in Tel Aviv and just September and October in New York.

Today, Rachel and I spent 12 hours in the car doing a round trip to Coronado to pick up the puppies. She took my Unicorn hat but did a great job driving…

I am excited to be reunited with Lindzee…

I still love the desert, especially in the winter. The colors as the sun sets are fantastic…

I’m excited to be settled in and back to work in the Phoenix Social Leverage office with Tom.

Yo Alexa…When Should I Sell my Bitcoin?

I have 14 hours of driving ahead of me this morning. Rachel and I are off to San Diego to pick up our dogs and drive them back to Phoenix. We miss them so much as we did not take them to New York for the fall.

Speaking of unconditional love…

I have been getting a lot of love from the readers of this blog and it feels great.

I am in search of LOL’s and love of course, but when it flows so regularly, the Larry David (cynic) side of me says I am due for a digital shitkicking.

Speaking of digital shitkicking…WTF is wrong with Alex Jones and more specifically the people that actually tune into his nonsense. This clip made me shake my head:

Speaking of shaking my head…I thought Josh Brown and I keynoting at a crypto conference 10 days ago would be the top for Bitcoin, but CNBC refused to let me have a moment of glory.

Instead they ran this piece Friday on ‘How to Buy Bitcoin‘ as Bitcoin hit 19,000 (and while Coinbase was busy warning their customers to stop being insane):

As I write this Bitcoin is at $13,000…hello Newman!

I expect Monday afternoon CNBC will run with how to short Bitcoin using Futures as Bitcoin hits $4,000.

It felt right to be selling some Bitcoin last week and the week before. I like selling when I can and not when I have to.

PS – Here are some great reads and listens on the subject of Bitcoin and Cryptocurrencies:

1. Is Bitcoin Just a Brilliant Wealth Distribution Machine?

2. Coinbase and Bitcoin Singularity.

3. Bitcoin is not a Ponzi Scheme or a pyramid scheme…It is a Nakamoto Scheme.

4. Decrypting Crypto – podcast.

PSS – Make sure you watch ‘Godless’ on Netflix. It was fantastic. Jeff Daniels performance was epic. Thanks to Mrs. Dittman, the lovely wife of David Dittman my Peloton editor for the reco!

The Next Winner of the Bitcoin Trend….Goldman Sachs?

I am long Goldman Sachs.

I know I know…

Hear me out on this idea…

Goldman Sachs has been basing for a long time now. The stock continues to look prime for a big breakout:

The catalyst for a leg higher may actually be Bitcoin.

On Sunday, bitcoin futures becomes a thing:

CME Group, the largest derivatives exchange in the world, as well as one of the oldest, will launch bitcoin futures trading on Dec. 18th, while CBOE Global Markets, which owns the Chicago Board Options Exchange (the largest U.S. options exchange) and BATS Global Markets, plans to beat CME to the punch by opening its own trading on Dec. 10th.

As futures markets develop, the banks will start to make the profits that only the bitcoin holders had been making.

Both the CME and the CBOE futures settle in cash, not in actual bitcoin. Just imagine the legal and logistical hassle if two reputable and regulated exchanges had to set up custodial wallets, with all the security that would entail.

So, it’s likely that the bitcoin futures market will end up being even larger than the actual bitcoin market.

Side effects

That’s important. Why? Because institutional investors will like that. Size and liquidity make fund managers feel less stressed than usual.

The bitcoin market seems to be excited at all the institutional money that will come pouring into bitcoin as a result of futures trading. That’s the part I don’t understand.

It’s true that the possibility of getting exposure to this mysterious asset that is producing outstanding returns on a regulated and liquid exchange will no doubt entice serious money to take a bitcoin punt. Many funds that are by charter prohibited from dealing in “alternative assets” on unregulated exchanges will now be able to participate.

And the opportunity to leverage positions (get even more exposure than the money you’re putting in would normally warrant) to magnify the already outrageous returns will almost certainly attract funds that need the extra edge.

But here’s the thing: the money will not be pouring into the bitcoin market. It will be buying synthetic derivatives that don’t directly impact bitcoin at all.

In english…Goldman Sachs and their cronies have their hands in your Bitcoin wallets.

The thrill of endless price rises for Bitcoin might be gone for the time being.

The next few weeks should be interesting.

I would not be surprised to see the home gamers push Ethereum through the roof in protest!

The Frenzy…

I am enjoying this ‘Bitcoin’ frenzy.

I have so many close friends that are participating. I am too of course.

As much as we ‘frenzy’ the South Koreans are making us look like wimps.

The New York Times has a good piece on Coinbase which is at the center of the frenzy.

Months ago on this blog I wrote that one of my favorite things about the bitcoin phenomenon was that no bankers were necessary. That was way back when Bitcoins were trading hands at less that $5,000.

Today Josh Brown had a fun piece titled ‘The Bankerless Bubble‘ which is along the same lines. The gist:

It’s the first ever Bankerless Bubble. And I’ve read all the market history books. There’s never been a phenomenon like this where the general public beats the Big Money in. It usually works the other way ’round – Wall Street pumps up a story, enriching themselves, finally retailing exposure out to the moms & pops when they’re ready to take profits.

They have no profits currently, because they own none of it. No one needed them to create it, promote it, trade it, package it, hype it, hold it, analyze it, manage it, custody it, store it, move it, leverage it or even talk about it.

So either the banks missed it or we’re really just getting started. I have no idea, but I find the whole idea of a speculative bubble that moved too fast for the banks to be a delicious one.

Howard here…I was a seller of some Bitcoin today. I sold at $13,200 and $14,200. They are now at $15,500. Woops!

I joked on Twitter earlier when I sold a few:

Sold a few Bitcoins at $13,200. Please don’t tell my wife …

PS – Speaking of frenzies – the US student loan market is now as big as the junk market

PSS – This Josh tweet on Trump made me laugh:

Your honor, my attorney wrote the tweet. Based on his 30 years in the legal profession, he thought it would be a good idea to incriminate me on twitter during a federal investigation.

Also, I’m above the law.

Tell Me a Story….

Professor Galloway is correct.

People who aren’t comfortable selling have to work for other people

I am not sure how I got the gift for storytelling, but I do like to tell them.

Writing here everyday for eleven plus year has helped for sure.

Traveling to meet with investors and other founders smarter than me in a face to face setting to hear their stories has made me a better storyteller.

Trading and investing has made me a better storyteller. The joy of a win and the agony of a loss are all compartmentalized to be told later. It can be cathartic to me and educational to others if a story is told well.

Galloway describes it as the go to marketing strategy going forward

If you can’t code and you can’t tell a story, life will be harder in the workforce as the robots keep keep coming.

Did the Robots Wear Out the Bears?

November marked the 13th straight month straight UP for Global markets. That is a record of course dating back 90 plus years of record keeping.

It would make sense if the bears were tired.

This weekend I mentioned the robots were resting. That continued today.

Here is Nvidia down another 5 percent

My friend Kimble had my fave chart of the day adding some context to the rotation underway at the moment from tech into financials and industrials.

This past weekend 2 am passing of the tax bill that only the lobbyists likely understand will get played out in the market as the money figures out and flows to the winners and the losers.

So far it’s mostly this banker dude winning…

Check out Schwab which I have been recommending on this blog forever:

Here is JP Morgan:

Life is not fair, but the markets are a place where you can watch unfair play out in real time and even own the people and companies you hate.

I am avoiding adding any new technology ideas for the time being.

The Seed Stage Slump…What is Next?

This morning I read Fred Wilson’s post about the ‘early stage slump‘ and felt I needed to expand on some of what Fred started. Fred shared some data showing how the early stage market has cooled since 2012 so please read it first.

So…

Way back in the olden days of web 2.0 (2005-2008), seed deals were getting done at $2 million pre-money. I know because I was writing a lot of checks. A lot of seed deals I participated in including Tweetdeck and my own Wallstrip (acquired by CBS) and Stocktwits were done at valuations under $1 million – post money!

By 2011, angel fever (not to be mistaken with crypto fever today) was in full swing and uncapped notes started to get funded. It was stupid and I called it out on this blog.

While investors chased crazy angel investing terms – which actually continues today in the ICO market – FANG stocks and Chinese internet behemoths exploded in valuations. The markets changed and rewarded large market capitalization, liquid momentum investing.

By 2013, the term BTFD (Buy The [email protected]#king Dip) took hold and the relentless buying all the S&P dips took hold.

As if BTFD being a meme is not enough tempting of the market gods…

In 2017, Donald Trump takes credit for the stock market rise. He went so far last week to say that if he had lost to Hillary, the markets would have dropped 50 percent by now. This from the guy who actually sold his stocks in June of 2016, after he called the stock market a bubble (do not bark at me about how he had to as he has ignored every other financial conflict).

The market has a way of punishing people that chase and those that confuse a bull market with brains or economic policy.

While seed stage investing returns have dropped as a whole, pretty much every single human with a smartphone and access to the internet could have bought Bitcoin and or Ethereum the last few years and trounced the best angel investors and venture capitalists.

The biggest returns moved away from seed investing and the stock market when the market got crowded and people chased returns.

In 2017 we are left with people questioning the whole angel investing landscape. As Fred highlighted:

When I talk to my friends who do a lot of angel investing, I hear that they are being more selective, licking some wounds, and waiting for liquidity on their better investments.

When I talk to my friends who started seed funds in the past decade, I hear them thinking about moving up market into larger funds and Series A rounds.

You can see that in the data. Less deals and bigger deals.

Here is the thing. Seed is really hard. You lose way more than you win. You wait the longest for liquidity. You lose influence as larger investors come into the cap table and start throwing their weight around.

It is where most people start out. Making angel investments, raising small seed funds. They learn the business and many see better economics higher up in the food chain and head there as soon as they can.

Fred is right…seed is really hard. I am glad that the great ones move up the food chain and others are moving on to the next shiny return object. Less competition for me.

I have been investing as an angel – the last 10 via Social Leverage – for over 20 years now. There are good cycles and bad. Back in 2014 I did a podcast that covered a lot of my 20 years. There is a purity to angel investing. Being a micro VC, like Jeff Clavier explains, is a category that is here to stay.

I do not think the cycles can be timed. I have learned that investing consistenly, in great founders, at reasonable valuations over a long period of time is a fantastic way to make outsized returns. It helps that I keep investing time in my network and living in the future by playing with all the toys.

I plan on doing the same for the next 20 plus years.

The Robots are Resting and the Great Bitcoin Recession of November 29, 2017 is Officially Over!

It is December 2 and I am headed out to golf with my friends in New Jersey this morning. I have Tiger fever on top of my crypto fever. Let’s just hope THIS does not happen to me.

A lot happened this week in the markets…but we learned most importantly that even robots have to rest.

Here is a look at the break the robots are taking right now:

The leader of the robot economy – Nvidia – is also resting:

While the robots rest, financials continue to act fantastic. An old time favorite of mine Schwab (I am long) continues to quietly put in all-time highs.

My guess is the robots wake up from this short slumber as Bitcoin and its brethren pulled through the great recession of November 29th, 2017. Bitcoin is back at all-time highs over $11,000.

Have a great weekend.

PS – This is really funny for many of you here reading about Bitcoin and shaking your heads!

This is not a Boat accident …The Stock Market of 2017

This is not a boat accident!

A bullish as this tape is, the price action and the market action is not normal.

Yesterday Goldman Sachs warned that we are seeing the highest valuations since 1900. Their stock jumped THREE percent.

In the year 2017 – the same bank, Goldman Sachs – is saying that Bitcoin is TOO volatile for them to trade. Ya right.

Is Bitcoin just a bubble?

OR…

Is the blochkchain bigger than any bubble

Matt Levine had this to say on the Bitcoin frenzy:

Bitcoin 10,000! 11,000! 10,000! 9,000! 10,000! Whatever!

How do you value a bitcoin? I think you can reasonably put a range around the value:

On the downside, if people decide to stop using bitcoin as a means of exchange or a store of value or a speculative instrument, then its value will be zero. There is no scrap value for a bitcoin.

On the upside, if bitcoin becomes the sole currency for all transactions in the world, you could take Dan Davies’s back-of-the-envelope valuation methodology from 2014, plug in a gross world product of about $100 trillion, and get a value per bitcoin of about $500,000. (Here is a talk from Mike Novogratz along related lines.) But that methodology treats bitcoin as just base currency; if you assume that it also replaces all financial assets then you should probably scale that number up by an order of magnitude or so.

So let’s say that in the most pessimistic scenario a bitcoin will be worth $0, and in the most optimistic scenario it will be worth $5 million. So! Great! Now all we have to do is to figure out the likelihood that everyone decides bitcoin is a fraud and stops using it, and the likelihood that bitcoin becomes the sole means of exchange and sole store of value, and the distribution of possibilities in between, where it fills some smaller or larger niche with some smaller or larger value.

Meanwhile over in Trump’s mind – his fingers and tweets – the stock market continues to go up because of him. He now also believes the stock market would be down 50 percent if he had not been elected.

The S&P is now up a historic 13 months in a row.

It’s been fun watching the market do what it wants to do this year.

My theory has been the big tech stocks here and in China are too big to be governed.

The same goes for Bitcoin.