Is This the End of the Mania?
The bitcoin rally continues... Up 100% and counting since December... Bad news is good news on trade... Uber falls flat... Is this the end of the mania?...
Two months ago, our colleagues Ben Morris and Drew McConnell made an incredibly bold call...
As we mentioned in the March 25 Digest, they told their DailyWealth Trader subscribers it was "time to buy bitcoin."
In short, Ben and Drew noted that after an 80%-plus decline from its December 2017 peak, speculators had finally begun to "throw in the towel" with bitcoin.
Meanwhile, the cryptocurrency had put in a series of "higher lows," and was close to making a "higher high" above $4,064. A breakout above this level would confirm a new uptrend, and – in their opinion – suggest a new bull market had started.
When we checked in on bitcoin last month, we noted that the uptrend was well underway...
Bitcoin had rocketed through this key level, and it was trading for more than $5,000. From the April 8 Digest...
Clearing this level is an undeniably bullish sign. We now have a clear uptrend for the first time in more than a year. And as Ben and Drew noted last month, after such a large decline – and with sentiment still relatively bearish – there is plenty of room for bitcoin to move much higher from here.
Bitcoin has continued to move higher since then, just as Ben and Drew predicted...
Yesterday, it broke through another strong area of "resistance" near $6,000. And today, it made a fresh six-month high of more than $6,400.
Bitcoin is now up more than 100% since its December bottom... including more than 60% since Ben and Drew made their bullish call in March.
But once again, there are reasons to believe this trend could continue...
In the past few weeks, Bloomberg has reported that two of the country's biggest brokerage firms are preparing to offer cryptocurrency trading to their customers.
Late last month, the news service reported that E-Trade (ETFC) will soon allow customers to trade both bitcoin and ethereum – the second-largest cryptocurrency by market value – on its platform. And then on Monday, another Bloomberg report said Fidelity will roll out "crypto" services to its institutional customers before the end of this month.
Of course, these developments don't guarantee bitcoin will go higher immediately...
But they're incredibly bullish for the long term.
They're a sign that Wall Street is slowly but surely beginning to recognize cryptocurrencies as a legitimate asset class. And as more and more mainstream firms join this trend, tens of millions of individual investors will be able to easily buy these assets for the first time.
Imagine if even a fraction of these folks decide to diversify a portion of their portfolios into bitcoin. Prices could rise higher than you can imagine.
Again, despite the potential upside, we'll remind you that bitcoin and other cryptocurrencies are not for your rent money. If you're going to speculate, be sure to keep your position sizes small, and don't risk a penny you can't afford to lose.
Elsewhere in the markets, the recent volatility continues...
U.S. stocks plunged to fresh lows this morning, following more negative trade news overnight.
As we suspected in Wednesday's Digest, the White House followed through on its threat to raise tariffs on Chinese imports last night. At midnight Eastern time, it more than doubled the tariffs on $200 billion worth of goods from 10% – which had been in effect since last year – to 25%.
However, stocks didn't stay down for long...
Despite Chinese negotiators leaving the Office of the U.S. Trade Representative without reaching an agreement... and despite comments from White House officials that no further talks are planned... the market rallied sharply and closed in the green.
Why? More positive – yet unsubstantiated – rhetoric from the White House, of course. As financial network CNBC reported...
Stocks rebounded from steep losses on Friday after President Donald Trump said conversations with China over trade will continue and the relationship with President Xi remains strong...
Stocks hit session highs after Trump's late Friday tweet. He also noted that the trade talks with China were "candid and constructive." Trump said the new tariffs on $200 billion worth of Chinese goods "may or may not be removed" in the future.
Major averages began paring some of their losses after Treasury Secretary Steven Mnuchin said China trade talks were "constructive"... Mnuchin later told CNBC no official talks are planned as of now.
Not every stock benefited from the latest 'Trump pump,' however...
Shares of popular ride-hailing firm Uber Technologies (UBER) began trading this morning after its initial public offering ("IPO") last night.
And even after pricing shares well below what the company had originally anticipated, its first day of trading did not go well. As the Wall Street Journal reported...
Uber Technologies lurched into the public markets Friday, notching a rare first-day decline for a high-profile IPO as the ride-hailing giant begins its next chapter as a public company.
The company's stock traded in the afternoon around $44 a share on the New York Stock Exchange, below its initial-public-offering price of $45. That gives Uber a valuation of roughly $80.5 billion.
The decline is a blemish for the San Francisco-based company, which staged one of the most anticipated IPOs ever. It took a conservative approach to pricing the IPO to entice buyers: After dialing back valuation expectations in recent weeks, Uber priced near the low end of its target range. But Friday's trading signaled the strategy wasn't conservative enough.
Uber shares closed the day at just $41.57, nearly 8% below the stock's offering price.
That's certainly a disappointment for those who just bought Uber shares in the IPO...
But as our colleague Alan Gula noted on Tuesday, it could also be an important indicator for the broad market as well...
We're seeing an IPO frenzy right now. Equity allocations are high. Investors and traders are buying stock market dips with impunity.
This is all behavior you would expect to see in the late stages of a bull market – like we did just before the tech bubble burst. And that's why we should be on high alert that another sharp sell-off may be right around the corner.
Seeing one of the most widely anticipated IPOs in years fall flat could be the first sign that investors' appetite for risk is waning.
Now, this is no reason to panic... But it is one more reason we believe it's time to start preparing for the end of this long bull market.
If you're not sure where to begin, we urge to join us for our first-ever Bear Market Survival Event next week. On Wednesday, May 15 at 8 p.m. Eastern time, Porter and legendary investor Jim Rogers will lay out a simple "blueprint" to protect yourself – and profit – from whatever comes next. Click here to reserve your FREE spot now.
New 52-week highs (as of 5/9/19): Hershey (HSY), NVR (NVR), and New York Times (NYT).
If the response to yesterday's Digest is any indication, many of our readers are skeptical about the mobile-payments revolution. What do you think? As always, send your notes to feedback@stansberryresearch.com.
"I started going to China in 1973 to learn Chinese, have worked there for over 25 years, and can honestly say your China advice is spot on. Keep up the good work. I bought Tencent in 2016 so consider myself lucky..." – Paid-up subscriber Steve C.
"Regarding mobile payments. My greatest fear about them is that the companies are not politically agnostic. For example, I wouldn't be surprised if progressive leaning companies like Apple and Google ban the use of their mobile payment platforms for buying firearms. Later, it could include gasoline in lieu of electric charging for vehicles.
"I'm sure you can see where this can go. Cash is king and until monopolistic companies like Apple, Google, Amazon, Facebook and Twitter, who largely control their business space, can treat their customers agnostically there will be pressures placed on the transactions to favor or deny access to money flows based on their political viewpoints." – Paid-up subscriber David W.
"Chris Igou's writing on the coming 'cashless society' may be spot on but it strikes astounding fear in this old man's inner being! No one seems to carry this concept to what it may/will ultimately lead to... complete control of EVERYTHING by whomever controls the 'one' payer system! Wise up folks and smell the daisies... THINK about it and stop sheepishly following the 'wave'..." – Paid-up Stansberry Alliance member Barry J.
Regards,
Justin Brill
Baltimore, Maryland
May 10, 2019