New Crypto Crackdown: A Welcome Development

  • Why Google’s crypto crackdown is a good thing — for crypto
  • Trump adviser disses gold: a screaming buy signal?
  • How junking the Iran nuclear deal could tank the U.S. economy
  • Facebook freakout (why now?)… national debt crosses milestone… what a sunspot minimum might mean for markets… and more!

Google has dealt a short-term blow to cryptocurrencies… but James Altucher believes it will prove a long-term boon.

As we mentioned last week, Google plans to ban ads for most things crypto-related — following on the heels of Facebook earlier this year.

Over the weekend, bitcoin took a short trip below $8,000 before recovering to — at last check — $8,638.

“As with the ban of credit card purchases earlier this year,” says James, “the Google announcement is not inherently a bad thing.

“As I’ve said in the past, 98% of cryptocurrencies are outright scams,” James reminds us. “Sadly, many investors in these scams will lose 100% of their money.

“So it should come as no surprise that Google and others are trying to distance themselves as much as possible from these currencies.”

Heck, James is surprised it took Google this long to crack down. “Google made it too easy for con men to set up scams and advertise their schemes to victims.

“The cryptocurrency market benefited from new investors driving prices higher. But the dust still hasn’t settled from the recent fallout. While people have been hurt by collapsing cryptocurrency prices, many of these scams still have not seen the bottom yet.

“When that happens, many of these investors will jump into solid cryptocurrencies like bitcoin and ethereum.

“And as the weaker investments shrivel and die, these stronger investments — and the market as a whole — will benefit.

“At the same time, honest businesses will find innovative ways to market themselves without Google and Facebook, creating new opportunities we can’t yet imagine.

“If you’ve been waiting to buy (or are looking to buy more), I’d buy a little now and wait a few weeks. Remember: Never invest more than you can afford to lose.”

[If you’re looking for something big that you can do right now: You can take up James on his “$36,000 income resolution.”

If you’re curious how you could pull down an extra $3,000 a month for the next 12 months, then James is making a pledge you don’t want to miss: Check it out right here before the offer comes off the table tomorrow night at midnight.]

The stock market is starting a new week on the wrong foot, with every major index down 1% or better.

The biggest drop is in the Nasdaq, dragged down by tech shares in general and Facebook in particular.

Up till now, FB has been able to shake off every bit of news about how its vast trove of customer data gets used, misused and abused. But the news about the data of 50 million users ending up in the hands of a Trump campaign consultant is getting a different reception. As we write, FB shares are down more than 6% and the Nasdaq is down 1.75%.

For its part, the Dow is down about 1% or 250 points — below 24,700.

Funny, no one freaked out about how the Obama 2012 campaign made masterly use of Facebook data. But we digress…

Gold is holding steady at $1,313 — a number that’s proven to be its floor ever since the calendar turned to 2018. It’s still up nicely from the mid-December bottom near $1,240.

Somehow we missed it last week… but one of Larry Kudlow’s first official acts after being named director of the White House National Economic Council was to go on CNBC and bash gold. “I would buy King Dollar and I would sell gold,” he said.

Given Kudlow’s track record, you might consider going out and scooping up as much of the Midas metal as you can. As we mentioned last week, Kudlow was denouncing “all the bubbleheads” in 2005 who said housing prices in hotspots like Vegas and Naples were unsustainable.

But we’ve come across even bigger hits: “The recession debate is over. It’s not gonna happen. Time to move on… The Bush boom is alive and well.” That was December 2007 — the official starting point for the “Great Recession.”

And one more about housing, from July 2008! “The reality is a possible upturn in the housing trend, and at the very least we are getting a bottom.”

What is it about Trump surrounding himself with these guys? Don’t forget he’s also got Kevin Hassett, the Dow 36,000 author.

Meanwhile, the national debt just crested $21 trillion.

It took a little over six months to get from $20 trillion to $21 trillion… although in fairness, the debt ceiling was in force from March through September last year, putting an artificial lid on the national debt’s increase.

As a reminder, the debt ceiling is once again suspended through March 2019. It is highly likely we’ll surpass $22 trillion by then.

Is the president willing to tank the economy so he can junk the Iran nuclear deal?

That cheeky question occurred to us as we perused a Bloomberg article with the headline, “Death of Iran’s Nuclear Deal Could Set Oil Bulls Loose.”

In all likelihood, the White House will pull out of the Iran nuclear deal come May. But then what? Bloomberg oil writer Julian Lee suggests Washington will put measures in place to slash Iran’s oil exports. “Iranian oil flows could begin to dry up just at the time when both OPEC and the [International Energy Agency] see the global oil market returning to supply shortage.”

Similar sanctions laid on Iran in 2012 cut down Iranian crude exports by 1 million barrels a day. “A repeat,” says Lee, “would double the expected supply deficit in the second half of this year.

2012 Rerun If Iran Nuke Deal Is Scrapped?

“Alternatively,” writes Lee, “Trump could seek to target insurers who provide cover for Iranian crude cargoes and the ships that carry them” — perhaps denying foreign insurers access to the U.S. market if they play ball with Iran.

Whatever measures Trump takes, the effect would be to “severely reduce the amount of available spare oil production capacity just as geopolitical risks are rising. That will surely be bullish for oil prices.”

But what if the U.S. economy can’t withstand higher oil prices?

At $61.69 a barrel this morning, West Texas Intermediate is up 45% in the last nine months. It’s up 135% from its bottom in February 2016.

As a reminder, every recession of the last 45 years has been preceded or accompanied by a big jump in oil prices. For both businesses and consumers, rising crude prices crowd out other spending. There’s only so much they can take before crying uncle.

If crude climbs into the $70–75 range, that would be more or less a triple from the February 2016 bottom in a little over two years. As we mentioned in November, a similar tripling from late 1998 through late 2000 contributed to the mild recession of 2001.

No guarantee that’s how events will play out. But keep an eye out for what Team Trump does to limit Iranian crude exports.

If we’re really headed into another sunspot minimum, markets could get mighty boring for a while.

Drudge linked this morning to an article on the Watts Up With That? website suggesting we’re on the cusp of a “grand solar minimum” — not least because the peak of the most recent 11-year sunspot cycle in 2013–14 was the weakest in a century…

Where'd The Sunspots Go?

Some essential background: On a sleepy summer day in 2016, we devoted a good chunk of The 5 to an exploration of sunspot cycles and “mass excitability” in society and the markets. In short: More sunspots, more war and more action in the markets. At least one longtime reader wondered if we were starting to lose it.

As it happens, we were agnostic about the connection, then and now. But we perked up this morning when the Watts Up With That? article invoked the specter of the previous “grand solar minimum” otherwise known as the Maunder minimum — in which case we’re in for generally colder winters and summers for several decades.

Now chew on this: The Maunder minimum ran from roughly 1645–1715. Curiously, that period was bookended by epic market bubbles — Holland’s tulip mania of 1636–37 and the twin bubbles of Britain’s South Sea Co. and France’s Mississippi Co. in 1720. History doesn’t record anything nearly as extraordinary while the minimum was in progress.

If indeed we’re approaching a new minimum, scientists would be quick to point out it hasn’t necessarily started yet. In which case, we’ve got one huge blow-off top in the markets in our near future. Hmmm…

As it happens, market manias are the topic of our first item in the mailbag — after our musings on Thursday about Theranos and Equifax.

“In his book The Big Short, Michael Lewis quotes Dr. Michael Burry as stating: ‘One hallmark of mania is the rapid rise in the incidence and complexity of fraud.’ Asset bubbles typically share what he calls specific identifiers.

“Skullduggery seems to be one of them. So here’s to the Equifax hack, the Theranos flimflam, the Wells Fargo eight-is-great scam… and all the other shady $#!+ we’ll discover as this everything bubble continues.

“At the end of the day, investors and customers are getting fleeced as always by senior managers who in turn are never held accountable. At most, a few C-level executives will be dressed down by some do-nothing, double-tongued politician — and then ‘retire’ with their big payouts. Front-line employees will lose their jobs for following orders. Corporations will pay token fines that are a fraction of the fraudulent revenues they racked up or the salaries their top brass earned in the process. Of course, those costs will also be passed along.

“The great wealth extraction continues. It’s business as usual in Corporate America!”

“I thought when I signed up I would get lots of interesting advice about stocks,” a reader writes.

[What? This again? Already?]

“All I get are videos that last about an hour only to find out I have to pay $199 or maybe $2,000 or more. Don’t think you are helping Middle America or ‘the little guy.’ Every site I have signed up for starts out promising, ‘This stock is about to take off’ or something like that… but I end up with nothing…

“I am interested in the new marijuana market… but I can’t afford the constant deluge filling up my mailbox every day. I really think you guys should take a good look at yourselves and what you are doing. It’s like a used car lot out here. I guess it’s a choice between being an exclusive, high-end, high-price store or Walmart.

“Couldn’t you actually make more money if you offered products at a price millions could afford rather than just helping the rich? Like who in Middle America has $2,000 sitting around in a savings account… plus the money you would need to actually buy these stocks? I hope you will consider this.”

The 5: We refer you to last Wednesday’s episode of The 5. We hope you find it helpful.

“Thanks for the update concerning the value of your service overall,” a reader writes in response to that episode.

“Being a longtime follower and having subscribed to many of the entry-level services, I always felt that I received what I paid for. Really, how much would one expect for a subscription that many times cost me about $4 a month? Hmmm, I generally gained more just from the insight and thoughts of the Agora community overall. It is well worth the insights that one can determine by reading between the lines. I have seen the same complaint over and over rather than subscribers thinking through what they really purchased.

“Thanks for the daily feed; it is generally very interesting. Actually, it was a bit more interesting back in 2008, 2009 and 2010 — there was so much cannon fodder to discuss and write about. You know, never let a good crisis go to waste.”

The 5: As we’ve been saying since December, we’re in the late boom phase of the boom-bust cycle. (See also our discussion of oil today.) We’re sure the opportunity will come around again for us to be “a bit more interesting.”

Best regards,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. Have you seen James Altucher’s “$36,000 income pledge”?

It’s an extraordinary promise — one that he’s already shared with 280,000 viewers.

But he can’t make this promise forever — for reasons you’ll see when you click here. The offer comes off the table tomorrow night at midnight.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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