- The 2017 hype cycle (pot, FAANG and crypto)
- Does the market have a hope deficit?
- James Altucher: “The catalyst for every big economic boom”
- Three favorable catalysts for gold’s price
- “Cash is freedom”: Swiss-style direct democracy in action
- #ISaidYesAtCrackerBarrel
“It feels a little like 2017 in the market right now,” says an article at Yahoo Finance.
In case it’s tough to recall the days before pandemic times (and we know it is), the New England Patriots were Super Bowl champs that year — Lady Gaga was the halftime show performer — and Star Wars: The Last Jedi was the top-grossing film.
As for the U.S. stock market, the Dow, S&P 500 and Nasdaq yielded outsized returns around 25%… 19%… and 28% respectively.
And just glancing through The 5’s voluminous archives that year, we find marijuana, FAANG stocks and, of course, cryptocurrency were a few top-of-mind financial topics.
“That was the height of the rush for companies to slap ‘blockchain’ on their corporate name,” Yahoo Finance reminds, “or throw the term around in press releases hyping new products and partnerships.”
Notably, in 2017, beverage company Long Island Iced Tea rebranded itself as “Long Blockchain Corp.”… causing LBCC shares to swell almost 400%! (The first meme stock?)
Source: Bloomberg
“The zaniest name change in the crypto craze,” says Bloomberg
Because of the stunt, the Long Blockchain Corp. was investigated by the SEC and, eventually, delisted from the Nasdaq altogether.
But back to the point of the article: “This time, it’s artificial intelligence”… while noting “the public excitement around ChatGPT.”
Even some of the biggest tech competitors, “companies like Microsoft, Meta, IBM and Alphabet, touted their investments in AI on earnings calls,” Yahoo Finance says. “Yesterday” — for instance — “Alphabet rolled out Bard, its ChatGPT competitor.”
“Rumor has it that Microsoft will be making ChatGPT available [via] its Bing search engine within the next month,” says Paradigm’s crypto authority and iconoclast investor James Altucher.
“I expect that Google will introduce its own generative AI tools before midyear,” James adds… who’s looking beyond the hype to something far more substantial.
“ChatGPT will save the economy” is James’ intrepid claim. “CNN and ABC News will have you believe the economy is doomed,” he says. “I’m here to tell you it’s not.
“One of the major requirements for an economic collapse is a complete loss of hope. You see this characteristic across every great economic collapse in history: the global financial crisis, the Great Depression, the fall of Rome.
“In all cases, it seemed that things had totally shifted” for the worse, he says. “There would be no redemption [with] nothing to look forward to.
“To be fair, there were points last year when… I wasn’t quite sure when things would get better,” James says. “However, that all changed in December of last year [when] OpenAI released ChatGPT.
“Within a week, it had a million users,” he notes. “It was clear that we were at the very beginning of a whole new era…
“This sudden source of hope is often the catalyst for every big economic boom,” James says, “the printing press, the light bulb, the internet and the smartphone.” And we’ll add crypto into the mix.
“The development of each of these tools was followed by periods of unprecedented economic growth,” he says. Take, for example, the internet: “I first used the World Wide Web in 1992,” says James, “and people said the internet was a passing fad.”
Which comes with the territory, no? Or “every hype cycle from railroads in the 1800s to the dot-com craze of the 1990s, from cannabis to meme stocks,” says Yahoo Finance.
“Of course, we still use railroads, and we still use the internet. But the initial hype machine turned out not to support the many, many players that sprung up.”
No arguments from James on that score; interestingly enough, in 2017, he said of crypto: “Like any field that is ‘hot,’ the scammers have arrived. Ponzi schemes. Fake currencies. Hacked exchanges, etc.” Umm… mad prescient?
But that’s no reason for wholesale dismissal of an entire technology.
“By the end of the year,” James says, “I expect that every person on Earth with the internet will have interacted with GPT technology. This sort of rapid technological adoption does not exist during an economic collapse,” he says.
“While things may have looked bleak in 2022, 2023 is likely to be defined by optimism and opportunity around generative AI.” James’ advice? “Ignore the naysayers and economic pessimists… the economy will be just fine.
“Our team is watching this space closer than any other before,” James concludes, “to find the best, undiscovered investment opportunities for you.”
To the market today, where the Nasdaq is the single major U.S. stock index that’s not in retreat; the tech-heavy index is barely in the green at 11,890. At the same time, the staid Dow is down 0.50% to 33,720 while the S&P 500 is down 0.20% to 4,100.
Turning to commodities, oil has rallied 3.4% to $76.70 for a barrel of West Texas Intermediate. As for precious metals, gold’s gained $7.10 per ounce to $1,886.70, and silver is hanging out above $22.
Then there’s the market that never sleeps, crypto: Bitcoin is up 0.80% to $22,825, but Ethereum’s down about 1% to $1,630.
Finally, earlier this afternoon, during a Q&A session, Fed chair Jerome Powell telegraphed: “The disinflation process… is going to take quite a bit of time [and] not going to be smooth.” When asked about the boffo jobs number last week, he replied that the employment report “shows you why this will be a process that takes a significant period of time.”
Which bears repeating what Jim Rickards said last month: “Inflation’s job one [for the Fed.] ‘We’re going to crush it. We’re going to keep raising interest rates until we’re confident we’re there… There is going to be higher unemployment. Too bad.’”
“The outlook for gold’s price is extremely favorable,” says Paradigm’s macro authority Jim Rickards.
“The first reason is [when] the dollar is weak, gold prices tend to rally,” he says. “After a long period of extremely high dollar valuations (and sideways gold prices), the dollar is now losing strength.”
Second, Jim says, “because Russia has been largely driven out of the dollar-based payments and reserve systems, Russia will buy gold instead. This increased demand from Russia will tend to put a floor under the price of gold.
“The third reason involves the return of stagflation — a combination of persistent inflation with weak economic growth,” he explains. “When real interest rates are low or negative and inflation is persistent, gold is extremely attractive as a safe harbor and inflation hedge.”
[To calculate the real interest rate, subtract the rate of inflation from the nominal rate of U.S. dollar investments, traditionally bonds. “If the nominal rate on a 10-year U.S. Treasury note is 3% and inflation is 2%,” says Jim, “then the real rate on 10-year Treasury notes is 1%.” Those numbers don’t jibe with 2023… but you get the idea.]
“The final reason for higher gold prices involves the likely poor performance of other asset classes [during] a recession,” Jim believes. (Which, by the way, contradicts James Altucher’s optimism up top, but Paradigm editors aren’t bound to a party line… And we like it that way.)
“Stocks may fall as much as 50% from already depressed levels,” says Jim. “Real estate prices have already started to decline sharply. And cash will produce negative real returns while inflation persists.”
Jim’s takeaway: “All of this constitutes a material tailwind for the dollar price of gold,” he says. “In such a challenging environment, gold shines as a safe haven and reliable store of value.”
“Cash is freedom,” says the Free Switzerland Movement (FBS), which garnered enough petition signatures to force a vote on the fate of Swiss banknotes.
“Getting rid of cash not only touches on issues of transparency, simplicity or security… but also carries a huge danger of totalitarian surveillance,” says FBS president Richard Koller on the group’s website.
Accordingly, the petition, signed by more than 100,000 citizens, “seeks to prevent the abolition of cash by means of a constitutional guarantee so that Switzerland always has enough money and banknotes,” says news platform SWI. “They also propose that any move to abolish the Swiss franc would have to be approved by the people and the cantons.”
“Under Switzerland’s system of direct democracy, the proposal would become law if approved by voters,” Reuters says, “though government and parliament would decide how that law was implemented.”
Reuters does a little editorializing, too: “There is no evidence of moves toward a cashless society by Swiss authorities… As far back as 2017, [an] Ipsos study found more than a third of Europeans and Americans would happily go without cash.”
Reading between the lines, it sounds as if the mainstream-est of mainstream outlets is a little peeved that us serfs aren’t happily complying… No word yet on when the Swiss vote will take place, but we’ll keep you informed.
If you get engaged at Cracker Barrel, you could win free meals for a year… Because nothing says “Will you marry me?” like a 45-minute wait in a kitschy gift shop and some Southern-fried carb loading.
According to Cracker Barrel’s Instagram account: “To enter the contest, guests must upload an original in-feed, publicly viewable video to Instagram between Feb. 10–16, depicting the wedding proposal at a Cracker Barrel Old Country Store.” Plus, include the hashtags #contest and #ISaidYesAtCrackerBarrel.
Look, I’m not a snob. (Personally, my favorite menu item is Cracker Barrel’s Chicken & Dumplings; they’re a close enough approximation to my Kentucky-born great-granny’s recipe.) But fellas, just don’t.
Y’all (heh) take care… We’ll be back with another episode tomorrow.
Best regards,
Emily Clancy
The 5 Min. Forecast
