Fintech Week …The Economist Versus The Venture Capitalist on Bitcoin and The Blockchain

Just yesterday, three seasoned investors told me (without prompting) that Bitcoin was going to zero.

One of the investors actually took a phone call mid conversation and made an options bet on Apple earnings (that were an hour away).

Smacks forehead!!!

Because it is my first fintech week on the blog, I might as well get an updated post right now on Crypto and The Blockchain. Currently I personally own some Bitcoin, Eos, Zcash and Ethereum.

Our fund, Social Leverage, is an investor in Etoro, Robinhood and Civic.com which are very tied to Crypto and The Blockchain and one new investment that is stealth.

Other than Civic (identity and the blockchain), we have kept our thesis on this sector very simple. If we truly are headed for a revolution with crypto, we want to be investors that focus on the onboarding of the next generation and lightweight access to the masses that may start investing and saving.

On the more technical side, Fred Wilson just posted his update on how he sees the revolution progressing …perfect timing for fintech week! The gist:

This frenzy of entrepreneurship and investment has unleashed thousands of crypto projects all around the world.

And many of these teams, projects, companies are shipping things now.

Which is leading to an incredible amount of innovation coming to market in a very short period of time.

Like any early market, most of these projects and companies will fail. Some will fail to ship. Some will ship things that don’t work. Some will ship things that work but aren’t adopted. And some will ship things that are adopted but are surpassed by something better. The failure rate of these thousands of projects will be very high.

But inside this cohort of companies and projects will be the next Google, Amazon, Facebook, Twitter, Dropbox, Uber, and Airbnb.

And so the job of a crypto investor is to sort through all of them and decide which ones have the best chance of emerging as a winner.

We have been doing that for seven years now, since we first started poking around this sector in 2011.

And it has never been harder.

It is like drinking from a firehose right now.

There are so many high-quality projects, high-quality teams, and blue-chip financings happening in the crypto market right now.

It makes my head spin just trying to stay on top of it all.

On the other side of the spectrum I give You Paul Krugman, ‘famous‘ Economist who sounds very smart from his perch at The New York Times about the Blockchain and has good timing for me with this piece ‘Why I Am a Crypto Skeptic‘. He basically rails against Bitcoin and the Blockchain and than covers his ass at the end (as all Economists seem to do) with:

But if you want to argue that I’m wrong, please answer the question, what problem does cryptocurrency solve? Don’t just try to shout down the skeptics with a mixture of technobabble and libertarian derp.

Paul should meet/watch my friend who is trading Apple options around earnings over a smartphone to say that as long as Bitcoin is trading it at least solves the same problems that trading Apple earnings calls does. Almost nothing, but something.

Momentum Monday – Utter Disaster?

Here is this week’s episode of Momentum Monday.

It is fintech week on my blog but Momentum Monday is on a roll and the show must go on. I will get back to fintech week tomorrow.

In this weeks episode I do walk through the charts of all the fintech public market leaders to keep with the theme of the week.

I also walk though about 100 leading names with some new ideas that seem to be working. Hope you enjoy.

As a backdrop to the episode I think this one picture says it all with respect to leading technology stocks the last few days:

I can’t do this week’s Momentum Monday without a quick mention of Facebook. Pretty much everything has already been written. It was a staggering one day black swan loss for the stock. The largest one day drop in market value for any stock…ever.

The most level headed piece I have read comes from Ben Thompson and he made it available to everyone if you click here. For those too lazy the gist:

To insist that Facebook will die any day now is in some respects to suggest that humanity will cease to exist any day now; granted, it is a company and companies fail, but even if Facebook failed it would only be a matter of time before another Facebook rose to replace it.

That seems unlikely: for all of the company’s travails and controversies over the past few years, its moats are deeper than ever, its money-making potential not only huge but growing both internally and secularly; to that end, what is perhaps most distressing of all to would-be competitors is in fact this quarter’s results: at the end of the day Facebook took a massive hit by choice; the company is not maximizing the short-term, it is spending the money and suppressing its revenue potential in favor of becoming more impenetrable than ever.

“Utter disaster” indeed.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Fintech Week…It’s Like Shark Week But Drier.

Shark week is over which means it’s time for fintech week on my blog.

I have never done a full fintech week, but I have a lot of thoughts to organize as I (through our fund Social Leverage) continue to invest in the earliest stages of this sector.

A huge amount of money continues to flow into early stage fintech. The public markets love fintech right now as well.

Square, Visa, Mastercard, Paypal, JP Morgan, Silicon Valley Bank are a sampling of companies at all-time highs.

The Nasdaq, Envenstnet and Greendot are also considered fintech and at or near all-time highs.

Alibaba and Tencent have pulled back, but likely not because of WePay or Alipay which are dominating Asia.

I follow all of these companies in public markets so that I have a feel of the mood of fintech in general, but when it comes to angel investing, my focus is much more narrow.

What’s so exciting about fintech?

For one thing…the Registered Investment Advisor Industry manages/controls over $70 trillion. Josh Brown discusses it here.

That is a lot of money.

A giant shift has long been underway as people leave wirehouses/banks to set up RIA’s and it will continue.

But, as Josh also points out indirectly in this piece about State Street, Schwab, Black Rock and State Street, much of asset management and gathering has become commoditized.

It is for this reason I have long avoided the ETF and Robo Advisor space at the early stage.

Other than Acorns, I have not seen any 10x better products come along that get me excited to invest. I am not knocking anyone for trying but there is only so much software can do when it’s humans on top that will make the difference.

A lot of what’s written above is why I have been insanley focused on do it yourself investing and trading.

I look at the world in my own wierd way. I love what I do and assume that a next generation will want to do what I did but with better tools. It’s also much easier for me to invest where my passion lies and where I continue to build domain experience.

I need to find these next great founders and I am on the phones making calls, flying around the world to see pitches and events to press the flesh to make sure people know what we do and what we want to invest in.

Part of my job today job is to put my thoughts out there as loud as possible so that people working on these problems have a better chance of finding me as well.

The good news is as we head into year three or year ten of this boom (depending on who you ask)…tens of millions of new investors have been onboarded into the world that matters to me.

Hundreds of millions more are playing video games together on YouTube and Twitch, participating in e-sports and playing doing fantasy drafts which are all just onboarding opportunities to the world investing and trading.

I have not even touched on Bitcoin or the Blockchain yet, but it’s not just trading coins anymore on the exchanges that you need to think about. Consider Augur…

A couple of weeks ago, Augur’s decentralized network for preidiction markets was launched.

Augur was created by the Forecast Foundation and funded through an ICO in 2015. It is an uncensorable platform where users can create prediction markets based on the outcome of any verifiable event, from World Cup games to elections to cryptocurrency prices to the weather.

Augur became one of the most popular applications on ethereum shortly after launch. At the time of writing, it has nearly $1.5 million staked on over 600 markets, according to Predictions.Global, a site that displays data on Augur markets (and has censored the assassination markets).

Since Augur consists of smart contracts on ethereum, a blockchain network that is not controlled by any single party, users from around the world can place bets on its prediction markets – without governments being able to stop them.

Global financial markets are not going to be ruled by the same Nasdaq’s NYSE’s, Goldman Sachs, Visa’s and Fidelities of the world.

The stage is set for a wild era in global financial markets.

Keep An Eye On Homebuilders and Some Good Reads

My friend Chris Kimble shared this chart of the homebuilders index and it caught my attention:

I could dig into the fundamentals for days of course, but I don’t care to own these stocks or even trade them.

I doubt history repeats here with a another financial crisis led by the homebuilders, but history might be rhyming.

PS – My friend OM Malik is back writing daily about technology. You can subscribe for free here.

PSS – If you like to follow media and technology – my favorite email is Jason Hirschhorn’s which you can subscribe to for free here.

PSS – If fintech is your thing…I like the Fintech Revolutionist (also free) which comes weekly.

The Grind…

In hindsight, Twitter was doomed this morning.

After the Facebook debacle, I should have sold all my Twitter and gone short.

I will never be that good.

The machines will never be that good.

Founders go through the grind. There are no overnight successes. I have invested in over 100 startups and never seen it.

The grind is what investors and traders go through as well. The goal is to get your accounts to all-time highs. You do it by saving and investing and if you like the game…trading.

Along the way there will be setbacks to the markets and your stocks and you are back in the grind trying to get your account back to all-time highs.

I don’t mind the grind because it cleans out the wantrepreneurs as well as the lazy investors and traders.

I am off to New York for the week and hope everyone has a great weekend.

Investing Best Practices and Price Targets

I love this investing quote from Michael Martin:

Price targets cut your profits at the exact moment you should be either adding to your winners or just letting them run. Let the market tell you when the move is over. Price targets are about predicting the future and human beings are horrible at prediction at best.

He goes on:

When you let go of price targets, you’ll focus on “best practices” and that means financially letting your winners run, emotionally letting go of control (you don’t have any in the first place), and spiritually living a life that’s worth living.

I joke about price targets and Wall Street all the time…here is a recent one:

When it comes to stocks, I keep my best practices pretty simple….

Don’t let trades become investments and it’s ok to let investments become trades.

Seed Investing, which I do for a living, is much different when it comes to best practices. There are no boundaries for how businesses can grow in a global, mobile, social connected world.

I follow smart people, grow my network, build a thesis, deepen my domain experience (and in my case strong opinions about certain industries) and find founders doing things that get me excited about the future.

Unlike the stock market, there is no Wall Street to set prices.

Of course if a company gets big enough and does not get acquired you have to make selling decisions – Lifelock, Tubemogul, Robinhood to name a few over the years.

In these cases there are no price targets just best practices. There is no perfect set of rules and best practices, just consistency of implementing rules and best practices.

Nasdaq 10,000 is a Lock…But Can You Handle Nasdaq 5,000 On The Way?

It’s all fun and games until Facebook misses their revenue number…

Tonight Facebook has lost approximately 20 percent of it’s value.

Let’s give it some context….Facebook is down FOUR full Twitter’s tonight or $120-$140 BILLION.

I joked that it was in bad taste that Zuckerberg played the Russian national anthem to start the conference call.

I have no idea what happens tomorrow or next week. Facebook is still well above the price when of the last scandal and it has 2.2 billion people using it. I’ll keep it on my 8 to 80 list but I do want to replace it with a brand I have more faith in over the next 10-20 years. I did make a ton of calls this afternoon and evening to people in tech industry for opinions and thoughts. Zuckerberg does not want to be some value stock CEO. They have bought their way out of trouble before and I would bet they will at least try to do that again. This next time it SHOULD be an acquisition that puts them in the transaction – so for example Shopify and or Coinbase (already plenty of rumors in the blogosphere).

All armchair quarterbacking aside, gaps like this scare people. They should. It’s my job to harness the volatility and position myself for the calm that eventually follows.

One thing I do know, is that a generation of new options traders/investors on Robinhood are going to get hooked on action like this.

In the big scheme of things, not much has changed tonight with respect to Nasdaq 10,000 being a lock. I’ve been silly optimistic because of how I get to live my life and my eyes, ears, feet and network that I rely on to make investment decisions. What everyone needs to remember is that the Nasdaq can go to 5,000 on the way to 10,000 and try to visualize what their portfolio would like like if the Nasdaq was at 5,000.

Just yesterday, I sold down some stocks because of how optimistic I was behaving.

Everyone has different styles and I try to stay true to some best practices. One of them is selling on the way up and using my blog as a thermometer to how I am feeling and behaving.

I make huge mistakes along the way (I have chronicled them here too). The mistakes are how and why you create best practices.

The actual price action and breadth of the market says that we have little to worry about and I see a lot of new stocks that I am willing to buy if the market stays strong.

Google…$900 Billion and Counting

Google did close at all-time highs today.

In January of 2017, I was on this Google is the only technology ETF you need to own. Google’s market capitalization was $570 billion.

So far I have been wrong about Google getting into the insurance business, but that’s actually good news since the stock is up 60 plus percent and still has the insurance business to get.

Last week in my Nasdaq 10,000 series, I talked about YouTube as Google’s upside driver.

Today, I was reminded about how big and bold Google Maps really is in this great post from Michael Batnick.

Something new I learned today that is in no way fully priced into Google’s future is just how big Google translate is and could be.

One trillion is inevitable… #GIG (Google is Great).

Momentum Monday – Records are Made to Be Broken

Money continues to pile out of active investing, but it is individual stocks that continue to blast off all over the place.

Before I get to this week’s episode some backdrop on the relentless boom we are witnessing…

The Nasdaq 100 has closed above its 200 DMA for 516 consecutive trading days. That is by far the longest streak since the index began in 1985.

The S&P 500 ETF (total return) has not closed below its 200-day moving average in over 2 years. 5 more days for the record.

This is the Cal Ripken of booms.

Tonight, Google reported earnings that pleased the gods. It gapped up a mere $50 billion (1.5 Twitter’s) in the after hours to more all-time highs. All of a sudden they could win the race to $1 trillion.

My friend Brian Norgard coined ‘Google Maps is air‘ back at Stocktoberfest earlier this year. India, Indonesia and Nigeria are now in full agreement:

In this week’s episode Ivanhoff and I discuss the $GOOG in greater detail and cover A LOT of new ideas (you have to watch to get them):

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Another Open Letter to Twitter

Dear The Twitter:

Be bolder.

Sincerely,

@howardlindzon
Happy, greedy, frustrated shareholder.

_____________________________________

Let me keep this high level and simple because the analysts and experts that will drone on endlessly this being earnings week will have as much chance of being right as me.

Twitter is a $36 billion company, which of course is fantastic, but it is massively undervalued. Not in the Warren Buffett way of valuing businesses, but in the networked, software world way.

Why?

Two words…financial markets.

Twitter continues to be the global mood ring.

To monetize the global mood ring best, Twitter should be all in on financial markets. This weekend, their CEO Jack was chatting it up about journalism and discussions being the NUMBER ONE area they need to improve:

As a shareholder I bigly disagree with this focus.

For $5-6 billion they could buy The New York Times at a nice premium and give Fat Nixon a heart attack. Journalism would be fixed (for a brief moment). That would be bold.

Back to financial markets…

I do not see even an inkling of a strategy other than underselling the data to Bloomberg and Goldman et al.

Buying Tweetdeck was genius at the time (I was an angel investor), but if you use Tweetdeck today you are a journalist, a PR person, a prosumer trader or an overpaid _________ with too much time on your hand. I have not used it in years.

Meanwhile, Twitter sits on the best financial data of all time and can’t even seem to make good investments.

I would argue that Twitter has better information that Google and here is what Google does with their data.

Jack is bullish about Bitcoin, but that only seems to matter to him for Square. On Twitter, Bitcoin means crypto scams and yelling.

In the meantime, Google is a Robinhood investor.

It’s not too late to pay $10 billion for Robinhood, tell Bloomberg, Goldman and the rest of Wall Street to enjoy twitter on a 140 second delay and goose Twitter to $100 billion overnight.

Disclosure – Long Robinhood, Google and Twitter.