First Danger, this is my biggest post (largely for my own reference throughout the year), however it might even be arguably the best tip for 2020 I share.
if you have little patience for big posts, please move on.. ;)
Provided the "stars align" (apparently in some 'normal' universe not yet discovered) this "Surge" I am talking about should be happening right now, if we had some form of Free market capitalism. (AND we don't so let's not talk about that...)
Plus the ramp I predicted in earlier blogs will have to wait until all those Spring Break holidays are booked, and the slight Fiat market losses/margin positions are covered, the primary two reasons me thinks, the BTC price has dipped below 10K US $ the past few days.
Said another way, imo investors holding lots of fiat financed stocks, bonds and the US $ Dollar will eventually need to react to the reality of supply shortages to Main St. caused by the Corona Virus Pandemic. Especially if COVID9 does behave like Dengue Fever (Read link way below to understand this better) which means there will be a second pandemic later in 2020 a factos which argues for an even bigger Surge toward crypto away from fiat for safe harbor, what next purposes.
At some point, expect the gambling casinos called "Stock Markets" NYC, FF, London, HK etc., to drop from all time highs to somewhat lower levels, a sign the surge is underway, likely after the US 2020 election, since some investors do in fact think the Financial Markets are still joined to Main St.
The stark reality is, without the intervention of the FED and other Central Banks printing more money (now hidden in plain sight in the overnight Repo markets...) the Big Zombie Banks & Big Public 'stock buy-back' Zombie Corporations would see a real collapse (and an earlier trigger of the surge) in their over inflated market values almost over night, as the facts shown by publicly reporting companies right now show only 30% of FT500 companies have enough real cash flow from Main St. operations to actually cover their debt.
The "Zombies" are hooked on cheap debt to finance stock buy backs to keep their EPS and Stock price high(and those option exit values also high when they bolt from the C Suite). Repo debt nightly is the FED 'crack' feeding the buy back addiction (TY Billy Bob C, circa 1998 as decreed by the Rfeller clan).
After all, for my US readers, Kudlow Says so...
Now that is a (long winded) definition of the triggers which will likely cause the "SURGE". ;)
The Big Divorce: Financial Markets want nothing to do with Main St. Value Generation and real GDP, a perfect backdrop for the "Surge"
The true reality of the relationship between Financial Market Valuations and Main St. Value Generation is these now estranged bedfellows are in the midst of a final nasty divorce, after a trial separation started post dotcom era (late 1990s), where the separation paper was printed as $$$ in huge inflationary quantities and served up in 2008 and, clearly now the final paper served up to erode Consumer and Main St. buying power is now being printed nightly, in previously unheard of $$ volumes by the FED, up in full view of everyone in 2020 at the Repo Window, all to keep a bunch of Zombie Banks and Corps from having their lunch eaten by bigger predators of the same type This keeps the buy cheap overnight money to sell long game (to us) in play. (Remember Lehman Brothers, anyone? When that game stopped in 2008?)
In 2020 expect Financial Markets to continue to rise, and not really even 'blink" in the face of the now emerging, supply chain choking realities of the Corona-virus (Hyundai, Nissan,factory closures due to no Chinese parts, etc..,) . Nothing is going to really stop crazy upward Financial growth (sort of like the growth of lawyer fees leading up to the court decision) UNTIL AFTER the US 2020 Election is settled and complete.
Thereafter anything could and everything will, mostly likely happen that is bad for fiat propped Stocks, Bonds and the once almighty US Petro buck. A perfect condition for the Surge to happen.
Before the Surge, Orange Man Purge? The Bloomberg $$$ vs GOP Party Faithful Match up, A Voter Battle of the Ages?
It's US Election year after all here in 2020, FED Chairman Jay Powell likes his job and President Trump approves and wants to be re-elected on top of these manufactured gains, while the left side of the political spectrum play musical chairs, literally, over and over again, scrambling to grab the Dem nomination for the honour of (once again) snapping defeat from the jaws of victory. Or so my spidey sense, outside looking in tells me, but what the hell do I know? My gut tells me Bloomberg will buy the Dem nomination and swap out Hildog at the last second with a yes man "Bernie Lite" face to try to engineer victory. If 2018 House elections are anything to go by, if the rank and file GOP followers don't show up in numbers at the polls in October 2020 to support the "Orange Man" the Bloomberg Buy just might work. If the GoP faith full do show in large numbers, Orangeman get's 4 more years... As for the Swamp its days are likely numbered if/when the latter happens
TK Note- coronavirus types grow and spread like the common cold, it's cousin. more on this is ES here..https://vichozo.blogspot.com/2013/01/coronavirus.html
Use Google Translate to get the gist... here is a picture of the general coronvirus structures shared by many variants... including the common cold
CoVID9 Investor Impact?: Building, slow and steady AND, Really ready for a post US 2020 election impact, in a 2nd form?
Still, as an investor, whale or shrimp, the big burning question is "Where do you park you hard earned or cleverly speculated gains when traditional fiat financed stock and bond markets falter?" As more and more people discover the nature of the corporate stock buyback game and the FED buying anybodies' junk bonds and derivatives by simply issuing and paying with more US Treasury Bills, all accepted by the unknowing and knowing alike on the belief the US govt' will print more US $'s to cover the Treasury Bil expansion of the US money supply, based on nothing more than their word, investors will be hard pressed to find much protection in the current world of fiat, post US 2020 election, so crypto is indeed calling.
The Pandemic 2.0 Effect: It could come back Corona Virus, even stronger, later in 2020- A Surge Accelerator?
Interestingly, the anti- bodies created to defeat the corona virus also strangely and dangerously create a back door for a second on-ramp of the pandemic, like Dengue Fever, if that does come to pass, later in 2020, the SURGE will be even bigger.
TK Note- the fact you as regime, can be blocked on SWFT with the press of key, and if you as a regime persist in behavior not liked by the US you will be, as government leader of the regime, forced to dodge the red laser dot emanating from the end of a big gun, which is also a cause of concern when it comes to opting out of SWIFT and and opting in to crypto with your own Country Crypto...
Safe Harbor: Cryptocurrencies Anyone?
Today It's a tough challenge, dodging a faltering set of stock and bond markets, both way oversized and divorced from the currently poor worldwide Main St. real growth in value.
The Financial markets everywhere either directly or indirectly are running on FED embelished Keynesian fumes. Investors in the know (reading this post) are wise not to be ignoring the real supply-chain choking impact of the Corona-virus developing right in front of our eyes for the last 4 weeks. IMO its only going to get worse, finding out about who is impacted will be hard as the main street media looks largely the other way (hoping the wheels do not fall of the global economy in 2020, as that will kill their life blood ad revenue, and in the US they have an election to milk for such revenue).
And then there is the Interest Rate thing (low as its ever been heading toward negative in the US like elsewhere?) AND the gobs of cheap money printed by most banks as they let consumers pay too much for housing and cars, everywhere, while at the same time saying inflation is under control (those two big $ items , the two largest ones in any consumer household, are not found in the basket of goods calculating inflation annually, go figure.)
Oh yeah, for those pursuing higher education, those costs are soaring together with health care costs soaring as the population most developed and some of the larger developing economies are aging and living longer. (Oh they are not in the basket of consumer goods used to calaculate the inflation rate either. Hmmm. It's a Bernie Madoff moment..)
Run for the Hills? OR Park your earnings, convert your fiat assets into better hard stores of value?
Investors in the know, will start now, and over the next few summer months 'scatter' to different hard stores of value, old and new, which means Metals and Crypto AND likely, all but guaranteed returns like Utilities. (Hell now, PG & E have just emerged from Chapter 11 (after their shoddy grid torched 1/2 of California), is that perfect timing or what?)
Managing your Risk Profile Now...What is the Asset Allocation Mix you need now To stay Alive now and Thrive Post 2020 US Election?:
Diversify away from "Fiat anything..."
Let's face it, the US president, Donald Trump, has the Financial Markets "eating out of his hand" gorging on gains, driven by greed generated by stock buybacks and the FED buying "crap", in exchange for US treasuries which can be cashed in later at maturity for US $ while at the same time, creating fiat money at the Repo window nightly, to make sure we don't have a repeat of 2007-2008. Any politician/actor would do the same regardless of party affiliation to get re-elected.
With the US (left) in total disarray waiting for the US Democrat Nomination March 2020 Super Tuesday (Super Delegates votes) to either anoint Bloomberg (Saviour of the Center/Undecided Vote?) or see Sanders (Socialist Agenda) slip into the Democrat driver seat with a nomination win (anything is possible), most of us us looking from the outside in to the US political scene are likely to bet on the numbers which say, during the early primaries (IOWA and New Hampshire), Mr. Trump has 2X the support which Mr. Obama or any other president elected had heading into a 2nd term, and that doubling of support so early in the 2020 election campaign has in the past, been a pretty good investor indicator/predictor of the outcome of past elections (they all won) for predicting the outcome of the US Election October 2020.
Such an outcome really means business as usual in financial markets until the end of 2020, despite what Main St. real indicators are telling us about the Corona-virus impact on the global economy, which is factory shutdowns due to part and component shortages originating in China. Ouch. A lot.
The China Syndrome- 4% growth needs to be maintained or "the wheels fall off" for about 30% of the Chinese Banks
China is balancing on the precipice of potential financial collapse of the small bank layer, faced with forced customer plant closures due to COVID9 triggered Red Party decrees (The guys at the top of CN control/own the big Banks, get the picture?). Not good. If there is one event which will topple the global financial Markets (think 35-50% retraction in value) and send investors, governments and central banks to other hard stores of value, it's likely, imo, this is one possible outcome. China's ability to deliver parts and components to Main St. economies in other countries must not decline more than 2% to keep China's Economic growth, now 'Stagnant' at about 5.9% above the 4% mark to keep these "shaky" under-capitalized Chinese banks (holding lots of shaky Chinese company debt, some of them hit with Coronavirus shutdown orders to contain the spread of the virus) solvent.
So what really makes a Chinese "shaky" bank? How about we use a baseline measurement of the size of their reserve versus their outstanding loans and the same ratio relative to the ratio's of much bigger Chinese Banks. In the Western world of finance banks are required by law to keep at least 10% of their holding in reserve from which they loan out long, while in return buy cheaper money short at the "repo" window nightly, which they loan to first tier corporations and other smaller banks and trust companies, the latter two getting slightly better rates than the big corporations. The smaller banks and trusts then provided services and loan out to the smaller business and private individuals of lesser means (most of us). If a group of CN smaller banks get stuck with local CN bankruptcies due to COVID9 enforced closures from which these smaller CN parts suppliers/manufacturers cannot recover, nor will the Chinese government come into rescue them (they let the big CN companies absorb them at a discount) then those small CN banks falter and invariably in weird and wonderful ways get eaten by big banks. In the process the Chinese economic production has a big hiccup, and could quite well drop below 4% for an extended period of time, adversely affecting their upstream buyer markets as well. Ok that was long winded but necessary. How long it takes the CN Economy to recover from such a hiccup is anyone's guess, as CN bank holdings are quite opaque and hard to figure out, outside looking in.
2021 repeat of 2008 China Style?: A 2nd Pandemic Sweep of COVID9 might be the Trigger.
As was the case in 2008, the Big Banks in CN will decide the fate of the little CN banks, and the CN government like the US govt of 2008 will bail out the Big CN Banks first, always. As the big CN banks consolidate/write off the smaller CN bank debt, the rate at which China recovers from the CoronaVirus supply chain shock now developing rapidly will be hard to guess, especially if a 2nd pandemic hits. (Crypto is calling).
What we do know is the COVID9 infection and death count is the numbers reported by the CN govt are likely conservative, if not grossly under-estimated, which has been China's past behaviour. Past reporting honesty suggests we should expect a 10 fold increase in the actual numbers, and likewise a much slower recovery, maybe even worse than the solid red line above.
Such a shock will show up early in credit being delayed to buy materials unitl the predicted CN bank consolidation is settled, and parts to build stuff, as it is showing up now, in far greater numbers.
WUNAN has 50 Million people are now quarantined. The worst case scenario would be 500M people affected (and order of magnitude reporting error which is likely), which is 1/3 of the CN country, which translates into a 65% drop in annual GDP growth possibly as early as 4Q 2021, down below 2%, which is what the rest of the world is at today and even lower in some parts, US being the exception with GDP growing over 2% the past few years. If that happens, expect many small Chinese banks to be aborbed by bigger banks which will be bailed out with money printing by the CN govt. (just sayin...), not to mention as much as 20-33% of the CN manufacturing supply chain also being re-absorbed by the bigger players (also receiving a bailout)with likely delays of CN shipments due to layoffs as production numbers drop, creating a supply chain slow down for many parts and components relied on by Japan, Korea, Germany and the USA.
But the Debt Jubilee will Save us! lol, lol, lol... : If your a big Bank in China this is likely to be true...
Also, don't keep your fingers crossed for a debt jubilee for the debtor/consumer or small business debtor. You (and I) are not one of the creditors which will get bailed out, even if you did rub shoulders with them in business school. The "game of banking thrones" is played among the few now controlling these money institutions big and small, Central or Private. You as a small investor don't get a spot at the table nor a vote as to how that game turns out.
You do however get to jump to another playing field, and it is not gold and silver, which have long been rigged by same, its crypto.
One investor market signal which is certain as China's GDP invariably slows down due to the CV effect, the closer China's GDP annualized growth rates gets closer to f4% the more difficulty the smaller banks will have securing cheap over-night money to sell long to their corporate clients look for China to step in an print more money to support the Repo window needs (a la the US FED nightly shenanigans we see today, every day) for cheap over night debt which means the CN currency will be devalued further, making it "ironically" cheaper for the larger trading partners like the USA to buy goods from China. This cheaper priced supply of goods coming out of CN will be requiring more purchases from importing companies to keep the CN GDP about 4%, when guess what, there isn't strong export demand for those goods at current over-inflated prices (witness the stock buy backs propping up FT500 EPS and stock prices, not sales volume on Main St.).
Worse still, the internal CN consumer demand numbers will also shrink due to the CV effect (Quarantines, limited movement, forced factory shutdowns, likely vastly understated in today's press). So generally all those products made in China for EU and EU markets could see the FAANG companies and similar have their margins rise at the same price points (good in the short term) however it's likely these same FAANG types will lower their prices to keep the markets going, with such lowering of price also lowering margins and returns which result in lower EPS and stock prices, which will certainly trigger some investors to move their assets from FAANG and similar elsewhere ( A Trickle now, a flood after 2020 US elections, only time will tell how quickly that happens.)
IMO these above likely outcomes will see Bitcoin, Ethereum and several quality altcoins and metals become the "safe store of value with upside" refuge of choice for most smart fiat investors looking to protect gains, as the FAANG fiat backed assets are likely to take the biggest hit given their dependencies on Chinese Main St. production.
Those crypto exchanges with the best liquidity positions (deep pockets) will see their fiat to crypto $ volumes sky-rocket.
Corona-proof Crypto: Big SURGE will be into Crypto, away from Fiat, and maybe we get a 'Flippening' too..
First the Bitcoin Maximalists will disagree with the ETH believers on the possibility of the "Great Flippening" ever happening (it's Bitcoiner's own reality distortion bubble, they are entitled to it), the Flippening in practical terms really means to most of us, the differences in total 'crypto-system' US Transaction volume (measured in US $) as to who will be Number#1 in the crypto world. I say the more cryptos and blockchains the merrier, which tends to favour the ETH Ecosystems of ERC20 altcoins, provided ETH 2.0 actually shows up some day and really works (fast TPS would be nice., nb- The security token surpassing other tokens in value is another likely "Red Herring" angle on the Flippening, in the link also a an interesting take..)
My bet, post US 2020 Elections is we will get a SURGE into crypto from fiat AND the altcoins, especially ERC20 coins, will be the BIG early Benefactors in US $ Volume first, then Market Capital later... (and maybe EOS too..)
TK note- The Flippening is every ERC20 based Ethereum blockchain believer's answer to the question posited In the long term "Who will be Number #1 in the crypto space". The simple, well known definition of the Flippening promoted by the ETH faithful simply adds up all the US $ Volume daily handled by Ethereum based Blockchains supporting the ERC20 format (allowing coins of the ERC20 type to be transacted easily on exchanges and now even via Blockchain Gateways like Chainlink).
Personally and its worth saying again, the more blockchains of each type, the merrier. It adds TPS "Transactions Per Second" capacity, where exchange is inter-crypto liquidity is improving daily in both camps, all ready to convert your fiat currency into crypto, absorbing the inflation madness of fiat along the way.
Also who really cares if the raw TPS is only 15 on Ethereum 1.0? There are plenty of other forks of Ethereum running ERC20 format altcoins which can now be easily transacted between such blockchains in parallel to ETH 1.0 's blockchain. When ETH 2.0 shows up all the better.
Conversion to Crypto by supply chains to handle transactions will start to become an important aspect of "Main St. Survive and Thrive" actions, and those introducing crypto into the supply chain are likely to do so both during and after Corna-virus wreaks its havoc on our populations and their fiat based hard stores of value.
Getting high flying companies such as Tesla to accept bitcoin for cars is one classic example "B2C" of such "survival of the fittest" moves we are seeing Main St. make in anticipation of Financial Armageddon" post US 2020 election. It's a wise move.
BTC vs. ERC20: the real battle for supremacy in the face of the "Supply Chain Choking" CoronaVirus 2.0- Will the SURGE be a factor?
Ok Tesla is all "B2C" business to consumer glitz and glamour focused, I will give them that, however, what about helping out B2B "Business to Business" survive and later thrive through this obvious choking of the supply chain caused by the coronavirus spreading beyond China's borders as we speak?
Taking the Hyundai and Nissan supply chain delays caused by the coronavirus as the prime two examples, how can either BTC and 'fork mates" or the ERC20 faithful" help?
The short answer in a quick 3 month time frame is: they can't help very much.
Helping Main St. make the switch to crypto transaction and payments and build a Bigger SURGE!
It takes developers at least 8 weeks to get a integration fully tested and secured of such "blockchain" transaction/payment support logic for any crypto implementation, which in itself is not all that difficult .
The big job is tediously having software developers, QA engineers and Devops experts work together with a Project or Product Manager to best design and optimize the adaptation of existing Accounting and ERP "Economic Re-order Point" system buy/sell actions for Purchase Order Issue, Accounts Payable, and Likewise Invoice issuing and Accounts Receivable to operate safely on "blockchain" distributed public permissionless ledgers like Bitcoin and Ethereum via well known and trusted APIs "Application Programming Interfaces" developed and tested by their relevant open source communities (lots of eye balls checking the quality of the code, so really hard to hijack the code and modify it with rip-off hooks)
In the medium term, say three to 6 months, such adaptations of existing B2B systems handling such transactions is all but a certainty, there are no real technical hurdles, just existing business partner contracts which need to be adapted, which adds in lawyer delays and government interference. so as they say in the world of software development, double the expected elapsed time and ad 50% buffer. So medium term in this case really means 12 to 18 months.
so in the context of the Corona-virus, which , if we use SARS as an example in history, expect 2021 to be a year of faltering in both the Financial and Main St. markets. both values and volumes will be down at least 3%-5% "Triggering" the growth of both B2B crypto camps BTC and ERC20.
Essentially those that adapt their existing B2B system of American centric partnerships to make use of BTC or ERC20 transaction technology are really saying good-bye to SWIFT (facilitated today by #Chainlink APIs and Smart Contracts) for some if not all of their bi-directional transaction volume AND, of course, the politicians surrounding such partnerships (most of the world governments in fact) are to say the least, VERY WARY of existing cryptos, while at the same time looking into their own centrailzed crypto currency creations (you can also use Chainlink or similar to also firewall your crypto offer from such beasts).
Such a switch will contribute the Surge I am talking about post 2020 US election.
Incoming Regulatory FUD with no place to hide, so use crypto blockchain to blockchain gateways...(Not SWIFT)
Expect these elected jesters to ramp their regulation rhetoric rather rapidly post US 2020 election and slow everything down to crawl when it comes to SWIFT augmentation (More SWIFT Transaction gateways enabling to/from ERC20 crypto transactions like Chainlink), it will be the ultimate bad fintech SWIFT 'boob' job. ;)
Will the crypto markets Surge even more in 2020 in light of such a boost in transaction augmentation activity? Absolutely imo, however such a second acceleration or surge in valuation is likely to began post US 2020 election and not before with surge in $ volume of transactions building up first to the Flippening event...,and we will really need to see both the BTC and ERC20 fork camps deliver some real adaptation successes with some more big names beyond Tesla.
The SURGE: Pulp Crypto Fantasy or Reality?: The US Dollar WildCard...
If all the conditions are right, including a much predicted fall in the value of the US $, then expect the Surge to have stamina well into 2022 and maybe event beyond.
Until then, The Surge is just an untested theory of mine and should be treated as such, just watch for the event indicators, if they stack up in any number then the surge is on...
Be Safe, and if your a business, be sure to quickly adapt your B2C and B2B transaction behaviour to accept BTC and ERC20 altcoin payments and,
please take your own health precautions seriously to avoid the Coronavirus. (Stay away from crods, shop at odd hours with few people, and bleach you touch surfaces in your abode regularly...)
TK Over and Out!
PS- Brief note, its worth noting Shopify, the global leader in shopping cart software for Web business sites, has several add-in methods for your shopping cart app that lets you take Bitcoin and altcoins as payment, so check it out here. Any company, big or small can perk up their retail sales with Bitcoin volume, after all BTC is US$ 170B and doing about 15% of that on average daily in transactions, where as ERC20 transactions are almost at the same level of volume (within 80% of BTC volume on most days).