The Coming Sell-Off (A Giant Misunderstanding)

  • Why Chris Campbell says: “I’m hoping there’s a sell-off”
  • European industry powers down…
  • … while powers-that-be stand by
  • 1956: The queen’s gambit
  • An egregious instance of Twitter censorship… The porcelain throne… Finders, keepers? (gold coins)… And more!

It’s the most hyped — and perhaps most misunderstood — event to hit the crypto world in years.

As Emily mentioned in yesterday’s edition, next week brings “the Merge” in Ethereum.

The precise timing is up in the air for technical reasons we won’t get into here. The point is that when it happens, Ethereum will switch from a “proof of work” model relying on mining (like Bitcoin) and adopt a much less electricity-hungry “proof of stake” model instead.

The first misconception comes from skeptics who say the Merge won’t happen.

“I think they’re wrong,” says Paradigm Press Group’s Chris Campbell. Chris is part of our dynamic crypto duo, serving as senior analyst for James Altucher.

Like James, Chris has been following the crypto space for over a decade now. If he says the Merge is happening, count on it.

The second and more dangerous misconception can be best summed up as ETHEREUM MERGE WILL MAKE PRICE SKYROCKET BUY ETHEREUM NOW DURR.

“I think they’re also wrong,” Chris avers. “I happen to be in the camp that believes there will be a small run-up toward the Merge… and then a sell-off.

“In fact, I’m hoping there’s a sell-off,” Chris adds.

“A sell-off will be a huge opportunity to get into not just Ethereum… but also several other tiny coins we believe will benefit big in the post-Merge world.”

See, many tiny coins are built on the back of Ethereum’s architecture. These are coins that aim to solve real-world problems that traditional finance cannot.

These coins are the key to the future of “decentralized finance” — a world that cuts out all manner of financial middlemen.

If you can imagine banking without banks, stock trading without brokerages or exchanges, insurance without giant insurers… that’s the kind of future we’re talking about.

Long story short, the Merge will — in one fell swoop — bring us a huge step closer to that future.

To bring you up to speed on this ground-floor opportunity, James Altucher is organizing what he calls the Crypto Disruption Summit. It’s set for this coming Monday at 1:00 p.m. EDT. He’ll lay out everything you need to know so when the time comes to pounce on Merge opportunities… you’ll be ready.

Yes, we ask that you register in advance. Click here, enter your email address and you’ll be good to go.

The week is winding down with a decent little stock market rally.

On the heels of yesterday’s gains, the Dow has hefted itself back above 32,000… the S&P 500 over 4,000… and the Nasdaq over 12,000. Volatility as measured by the VIX has sunk below 23 for the first time in nearly three weeks.

Reminder: On the S&P 500, 3,900 marks the midpoint between the June lows and the August highs. In addition, 27.5 on the VIX marks the midpoint between the June highs and the August lows.

“So these ceilings and floors are holding for now,” observed our options-trading maven Alan Knuckman yesterday in The Profit Wire. They remain “critical levels to watch on this pullback.”

In the bond market, the yield on the 10-year Treasury note has pulled back slightly to 3.29%. But that’s still lower than many shorter-dated Treasuries… and only a quarter percentage point higher than a three-month T-bill. If that portion of the yield curve inverts, there will be no debate left about an incoming recession.

Crude has popped more than two bucks to nearly $89. Gold is flailing at $1,715, but silver’s making a quiet run toward $19, the bid as we write $18.70.

As European industry steadily powers down for lack of affordable electricity, companies are begging governments for relief measures — except the one that would actually make a difference.

With 50% of European Union aluminum and zinc production offline, the industry group Eurometaux has issued an open letter to EU Commission President Ursula von der Leyen.

According to the Reuters newswire, “Eurometaux wants the EU to raise the 50 million euro threshold for the relief that EU countries can offer to struggling companies, provide support by capping taxes and surcharges on power and gas and create an emergency EU relief fund for energy-intensive industries.”

Note what’s missing from this laundry list: an end to the EU’s economic warfare against Russia.

Lifting sanctions would get Russian natural gas flowing again. But it appears the 40 CEOs who signed the letter fear running afoul of the conventional wisdom among Western politicos that no sacrifice is too great if it means sticking it to Putin. That’s even though legions of everyday Europeans feel they’ve already sacrificed plenty, thank you, and they’d have the CEOs’ backs.

EU leaders met today to discuss the crisis. The Dow Jones Newswires tell us “they failed to agree on any concrete solutions for now” — even the money-printing solutions demanded by the captains of industry. Oy…

Here’s another midterm election “wild card” we can add to Jim Rickards’ list that we shared on Tuesday.

In fact, we daresay it’s a strong candidate for this year’s “October surprise” — a U.S. and/or Israeli attack on Iran.

As you might be aware, talks about Iran’s nuclear program have been underway for most of Joe Biden’s term — talks that aim to revive the Obama-era deal that Donald Trump walked away from in 2018.

But Team Biden hasn’t been trying very hard — refusing to lift the Trump-era sanctions, indeed adding new ones. Yesterday, the White House started making military noises in the event that talks break down completely.

National Security Council spokesman John Kirby said the president “has conveyed to the rest of the administration that he wants to make sure that we have other available options to us to potentially achieve that solid outcome of the no nuclear weapons capability for Iran.”

The likelihood of an attack is still low, but not outside the realm of possibility. It would require some sort of provocation (false flag?) — but it would be the ideal wag-the-dog thing to polish Biden’s “war president” credentials going into November. Just sayin’…

So… What can we say about the death of the queen that’s adjacent to the economy and the markets?

Well, it occurs to us that not even five years into her reign, something happened that definitively marked Britain’s economic enfeeblement.

The story was retold in the 2008 documentary I.O.U.S.A., produced by The 5’s founding editor Addison Wiggin.

In 1956, Egypt’s strongman leader Nasser had nationalized the Suez Canal — much to the consternation of the old colonial power, Great Britain. So London hatched a scheme along with French and Israeli leaders to invade Egypt and carry out regime change.

In Washington, President Eisenhower was furious. He saw the invasion as a reckless gambit. He feared the Soviet Union would come to Nasser’s defense and the globe would stumble into World War III.

Ike had leverage over the British. The United States held much of Britain’s debt, and he threatened to sell it off. Within weeks, the British relented and withdrew from Egypt.

Yes, the British pound had already lost its reserve-currency status after the Bretton Woods agreement of 1944… and the British Empire lost its crown jewel with Indian independence in 1947.

But the Suez crisis was uniquely humiliating for a country that ruled a quarter of the Earth’s landmass less than 40 years earlier.

What might America’s Suez crisis look like? Because sooner or later, it’s coming…

To our surprise, the queen’s death has also brought about an egregious instance of social-media censorship.

While Elizabeth was still breathing her last yesterday, an avowedly “anti-racist” modern language professor at Carnegie-Mellon University did not exactly wish her well…

uji

Twitter took down the post for violating its rules. Which rules, we can’t figure out for the life of us. Would Anya have committed a violation if she’d wished ill of the queen before the news came out that she was on her deathbed? Anya wasn’t wishing violence on the queen — does tasteless timing violate the rules?

We imagine there’s a great deal about Ms. Anya’s worldview with which we’d take issue. But it’s her First Amendment too.

As we’ve chronicled for four years now, social media companies have been exercising broad powers of censorship under the threat of government regulation — and it’s not only people on the right-wing side of the political spectrum who get the ban hammer.

That said, “Twitter bans tacky rot-in-hell wishes against the queen” is a development we did not see coming…

From the sublime to the ridiculous, here’s one more 5-ish remembrance of the queen.

With all the media mentions of her “70 years on the throne,” your editor’s mind wandered to one of the classic satirical “letters to the editor” published by National Lampoon. It’s from October 1977…

Sirs:

I am fully aware that in the vernacular of the common people, the word throne means “toilet.” Consequently, when the newspapers featured headlines that read, “Queen Celebrates 25 Years on the Throne,” we all had a good chuckle. Mum is a bit of a potty hog, so we found this doubly humorous!

Charles
P. of Wales
B. Empire

To the mailbag, and an emendation to our item about the gold coins found under the floorboards of a home in northern England: “I’m sure everyone else has mentioned it but a quarter of a million British pounds would be about $288,000, not million.

[Gaah… nostra culpa…]

“But there is another point: With the adverse cases of Odyssey Marine and the like, if I were to find a bunch of rare coins under the floor or anywhere else, the media would not be apprised of such information.

“Who knows who would suddenly come out of the woodwork and claim ownership?”

The 5: The reader refers to a years-ago case we followed closely: The State Department under both Dubya Bush and Obama colluded with the Spanish government to hose the publicly traded treasure hunting company Odyssey Marine (OMEX) out of $500 million in gold and silver coins found by the company’s explorers off the coast of Gibraltar.

[The world would have never learned about this appalling act of duplicity were it not for WikiLeaks — yet another reason the Justice Department’s jihad against Julian Assange is such an outrage.]

Anyway, the homeowners were extremely circumspect. There’s an extensive “disclaimed property” process in the U.K., and it appears the homeowners ticked all the appropriate boxes — seeing as it took more than three years between the time they discovered the coins to the time the coins are going up for auction…

Have a good weekend,

Dave Gonigam

 

 

 

Dave Gonigam
The 5 Min. Forecast

P.S. The pre-Merge rally in Ethereum appears to be materializing, with ETH up 5% at last check, back above $1,700. Bitcoin is rallying even harder, up nearly 10% and over $21,000 again.

But as we mentioned at the top of today’s 5, today’s pop might be the prelude to a drop — setting up a much better entry point in the days ahead.

And many smaller cryptos built on the back of Ethereum could make truly stratospheric moves.

To help you get ready, our resident crypto evangelist James Altucher is organizing a Crypto Disruption Summit set for this coming Monday at 1:00 p.m. EDT.

You can look in on this event for free; all we ask is that you sign up in advance — which takes mere moments when you follow this link.

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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