- No headlamp or canary required… but Bitcoin “mining” is hard work
- How to haul in “crypto” profits without consuming a small nation’s electricity supply
- Trump is “locked and loaded,” but Wall Street yawns
- The world’s most boring merger news
- The lawsuit that could rescue American health care… an eclipse invitation… a reader’s glowing endorsement for our highest level of service… and more!
Talk about the hard way to make money from cryptocurrencies.
As you might know, a new unit of Bitcoin or any other cryptocurrency comes into existence only when a computer whiz goes to the trouble of “mining” it.
Here’s how The Economist explained it a couple of years ago: “Every 10 minutes or so mining computers collect a few hundred pending bitcoin transactions (a ‘block’) and turn them into a mathematical puzzle. The first miner to find the solution announces it to others on the network.
“The other miners then check whether the sender of the funds has the right to spend the money, and whether the solution to the puzzle is correct. If enough of them grant their approval, the block is cryptographically added to the ledger and the miners move on to the next set of transactions (hence the term ‘blockchain’).”
If your head is already spinning, wait till you hear how much electricity it takes to mine cryptocurrency.
By one estimate, Bitcoin mining worldwide in 2014 used up as much electricity as the country of Ireland. By another estimate, it will use up as much electricity as Denmark by 2020.
Either way, it’s substantial — both the sheer computer processing power and the air conditioning required to keep the computers from overheating.
“These datacenter mines,” wrote Peter Kelly-Detwiler at Forbes last year, “can be found in numerous countries, from the Republic of Georgia to Iceland, to Malaysia and Venezuela. The largest share of the miners are located in China, close to the border with Tibet where cheap hydropower is relatively abundant.”
Even crazier than the energy consumed is the effort that goes into building ever-more powerful data centers.
Consider the rush to mine Ethereum, the second-most popular cryptocurrency next to Bitcoin. Ten days ago, Quartz reported that some miners are shipping in computer graphics processors direct from the factory on jumbo jets!
“Time is critical, very critical,” says ethereum miner Marco Streng, CEO of Genesis Mining. “For example, we are renting entire airplanes, Boeing 747s, to ship on time. Anything else, like shipping by sea, loses so much opportunity.”
“Up for grabs,” says Quartz, “is a supply of roughly 36,000 units of new ether, the digital token associated with ethereum, per day. At current prices of around $200 per ether, that translates to $7.2 million worth of ether that miners compete for each day.”
Quartz published that story 10 days ago. Since then, ether has swelled from $200 to $300. Make it $10.8 million up for grabs every day.
But again, mining is the hard way to make money from cryptocurrencies unless you have the computer know-how and the deep pockets to fly in computer processors factory direct.
Which brings us to a point our cryptocurrency evangelist Louis Basenese has been making for months now: There are literally hundreds of cryptocurrencies that miners have already brought into existence. Some of them trade for less than a buck apiece. And like in the early days of Bitcoin and Ethereum, they can explode in price far beyond anything you’ll find on the stock market.
“Whenever Bitcoin moves higher,” says Lou, “these penny cryptocurrencies erupt to the tune of 500%, 1,000%… even 10,000% when the stars align perfectly.”
Lou’s been thumping the crypto tub for a while now… but in recent weeks his research took him deep down a rabbit hole he never expected. He discovered a subniche of the cryptocurrency market he’s taken to calling “initial coin offerings,” or ICOs.
“It’s a bit like the IPO for a new stock. Except the gains can be up to millions of times higher and thousands of times faster.”
The next ICO opportunity is opening up before the end of this month — it might be the most lucrative one ever, never to be repeated. We urge you to investigate further by clicking here. You won’t be stuck watching one of those “boring, long-winded videos.”
The president once again ratcheted up the rhetoric against North Korea this morning… but now there’s no reaction to speak of in the stock market.
Yesterday’s jawboning was good enough to lop 200 points off the Dow industrials and give the S&P 500 its worst day since May.
But today? Despite Donald Trump’s “locked and loaded” talk, all the major U.S. indexes have stabilized. The Dow and the S&P are both up about a quarter percent.
The big economic number of the day is yet another inflation reading that rang in lower than expected. The consumer price index inched up 0.1% for July, compared with an “expert consensus” calling for a 0.2% rise.
Year over year, the Bureau of Labor Statistics would have you believe inflation is running 1.7%.
As always, we caution that any resemblance to your own cost of living is purely coincidental.
Maybe the more important point right now is that the inflation rate might be stabilizing after a four-month slide — which would surely give the Federal Reserve a sigh of relief.
Despite yesterday’s tumble, “The stock market shows no sign yet of repricing based on a horrendous war that’s coming soon,” says Jim Rickards.
“What’s driving stock prices are expectations of higher earnings year after year,” he explains. “This is the stuff of bubbles. These Wall Street extrapolations assume no war, no recession, no unexpected shocks and no continued central bank tightening. All four of those assumptions may be wrong. It only takes one of these events to disrupt the rosy scenarios Wall Street analysts are peddling.”
It’s the “no war” one that has Jim most concerned right now. “The U.S. has made it clear that if it is forced into a preemptive attack to destroy North Korea’s nuclear weapons and missile programs, it will not stop there. The U.S. will aim to decapitate the regime and replace it with something more reasonable.
“North Korea has made it equally clear that any attack by the U.S. will result in massive artillery and missile bombardment of South Korea, and possibly Japan and U.S. bases in the region… Despite the logic of diplomacy and negotiation, the war with North Korea is coming.”
[Ed. note: Jim just recorded a short and urgent video update on the situation and its potential market impact. You can watch it right here.]
The day’s merger-and-acquisition news doesn’t excite us. In fact, we urge you to run the other way.
The merger involves two players in a sector of the stock market that didn’t exist a decade ago — rental housing.
We spotted the advent of this market at its dawn in early 2012 — a seamy and shameless exercise in crony capitalism.
At that time, Fannie Mae, Freddie Mac and the Federal Housing Authority were sitting on millions of foreclosed homes after the Panic of 2008. In a scheme called “REO-to-rental,” the feds dumped these properties at fire-sale prices to hedge funds and private-equity firms with government connections. The investors then began managing these properties as rentals.
Everyday Americans were shut out of these deals: If you as a middle-income peon merely wanted to buy the foreclosure property down the block and rent it out in hopes of generating a bit more income than you could get from a 5-year CD, well, sorry — you didn’t qualify.
Fast-forward a few years, and the big-bucks investors in these rental properties started cashing out.
In a development we anticipated from the outset, they formed real estate income trusts (REITs) that were made available on the stock market — for middle-income peons.
“Alas,” said our executive publisher Addison Wiggin, “by then the easy money will have been made.”
Indeed it has. The rental REITs have been a miserable place to put your money, and today’s merger news will do nothing to alter that. Here’s the performance of the two companies involved, from the day they started trading, compared with the S&P 500…
Yeah, you might as well have been in an S&P 500 index fund. And income? Forget it. INVH yields 1.46% — less than a 5-year Treasury note. And SFR has no yield at all.
We doubt the combined company will be any better an investment, “operating efficiencies” notwithstanding…
From California comes word of a lawsuit we can get behind. In fact, a few more of them and it might be the best thing to happen to health care in decades.
A woman named Megan Schultz is suing the pharmacy chain CVS because she was charged $165.68 last month for a prescription through her insurance; had she not used insurance, it would have cost only $92.
“CVS never told her that paying in cash would allow her to pay 45% less for the drug,” says the lawsuit; “instead, CVS remained silent and took her money — knowing full well that no reasonable consumer would make such a choice.”
What happened to Ms. Schultz is a microcosm of everything wrong with American health care today — control by a cartel that’s obscured any sort of price transparency. The financial blogger Karl Denninger has an excellent analogy: Imagine pulling up to a gas pump, and the price you’re charged depends on who furnishes your auto insurance. Worse, you’ll have no idea what you’re paying out of pocket until you’re done pumping!
We have no idea whether this suit will restore any sort of sanity to the system. But as we often warn, health care costs threaten to bankrupt Uncle Sam faster than any other line item in the federal budget…
To the mailbag: “Hey guys, I’m a day or two behind on my reading — no mention of the eclipse from you.”
[Well, no. Although we’re aware it’s coming up a week from Monday.]
“I am seriously inviting you to close shop and come to my backyard. We are five miles from the prime viewing path. The big shots are saying half a million people will invade eastern Idaho — our usual population is 100,000! So it will be a circus! After that we can all take a ride to Jackson Hole to see the other circus, only a hundred miles away.
“Hey, be sure to bring the guy who drives a Suburban, my kind of guy! We only have a four-man/person tent, so bring your own. You might have to go to church with me. Let me know. Local motels are going for $500–1,000 per night. I won’t charge that much. See you soon? Love The 5!”
The 5: We’re a little surprised we haven’t encountered more chatter online about how the eclipse might trigger some sort of market turmoil — sort of like the blood moon silliness of two years ago, which furnished much quality entertainment here in The 5.
In any event, it’s a regular business day. Most of us at Agora Financial, whether in our Baltimore headquarters or our far-flung home-based offices, will have to content ourselves with stepping outdoors at the appropriate moment to enjoy the experience. But thanks for the invite!
“Recently became a Platinum Reserve member — I love it, so much great information,” writes a happy reader.
“My success has been mixing a couple of recommendations and techniques — I used Alan Knuckman’s techniques with Ray Blanco’s recommendations. I bought short-term call options on [a biotech company] for $220 and sold for $710. Then after the share price ran up, I bought put options for $70 that I sold less than 24 hours later for $170.
“My trading experience is very basic — learned everything from the Agora Financial family in less than 15 months. I am well on my way. Thank you!
“Anyone who thinks they might buy more than one service and can swing it should just get the Platinum Reserve, so worth it. Saves you big money!”
The 5: Wow, thanks for that glowing endorsement.
If the reader has piqued your curiosity, you can learn more about our all-you-can-eat package at this link… although the best way to learn more about the privileges and benefits of membership is to call the toll-free number listed on that page.
Have a good weekend,
The 5 Min. Forecast
P.S. An urgent note from Louis Basenese…
“Silicon Valley ‘hackers’… Wall Street insiders… even high school dropouts… they’ve all been fortunate enough to pocket fast millions by trading digital cryptocurrencies. Like Bitcoin (released in 2009) and Ethereum (released in 2014).
“This is the hottest market in recorded human history. And we believe you’ll see your last – and best – chance to profit from it just a few short days from now.”
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