The Investor’s Biggest Problem and His Worst Enemy

 “The investor’s chief problem—and his worst enemy—is likely to be himself. In the end, how your investments behave is much less important than how you behave.”

– Benjamin Graham

I spent the first 10 years of my career learning how to pick stocks.

And even at that, I will continue to make mistakes.

After hundreds of site visits and mistakes and successes on both the technical and financial side, I’ve found a framework that works for me.

Almost as important as my due diligence framework is my framework on how I buy the stock and when and how to sell.

• For one, you should never load up 100% of your desired position into any single buy order.

Perhaps there are other fund managers and newsletter writers who have a mystic ability to buy only once and be set.

But I have found (through direct experience) that the best results have been from buying in tranches.

Two ways to profit from blockchain… without buying cryptocurrency

Last week, I explained the basics of blockchain, the incredible technology behind digital currencies like bitcoin. 

Now that we’ve covered the basics, it’s time to think about how investors can profit from the coming blockchain boom.

As I mentioned last week, blockchain is about to change the way business gets done. Thousands of companies are working to find ways to incorporate the technology to solve problems and improve processes.

In other words, the trend is growing far beyond cryptocurrencies like bitcoin and ethereum. 

That’s great news for investors. It means you can generate big gains without venturing into cryptocurrencies, which could be too volatile for some investors.

Today, I’ll go over two companies poised to benefit from blockchain’s growth. Each has its own strategy for capitalizing on the trend. 

Cannabis Legalization Likely to Expand After Election

In April 2019, crypto market sentiment was still in a pit of despair…

Bitcoin had dropped more than 65% from its all-time high the previous year, while the overall crypto market was down about 70%. It was a bloodbath.

Skeptics were out in droves predicting the death of all things crypto… but here at PBRG, we saw signs of life. After 15 months of lower lows, bitcoin was trying to break out of its downtrend. And what started getting us bullish again was a stream of good news…

Major financial firms like Fidelity were setting up crypto services. And Facebook and JPMorgan Chase had announced plans to launch their own internal digital tokens.

The biggest players on Wall Street and Silicon Valley were coming into crypto, and this meant higher prices. It was simple math. But what really got us bullish was how the entire market was ignoring the good news.

Follow the News, Not the Volatile Market Prices

Whenever the market ignores good news about a beat-up asset class, it’s a sure sign prices are set for takeoff. It’s only a matter of time before investor perception catches up with reality – and sends asset prices higher.

A New Band of Traders Is Flooding Into the Market

Dave Portnoy has become the poster child of the Melt Up investing mindset – as we covered yesterday. But it's not just him.

In fact, one brokerage has come to define this mentality. You probably already know it by name... I'm talking about Robinhood.

The brokerage made its name by starting the trend of zero-fee trading. And this year, it has shepherded in a new band of investors... the kind of folks that can propel the Melt Up in stocks to incredible heights.

Let me explain...

We've seen a rush of new traders in the market lately. The surge in visits to Robinhood's "Learn" page shows it. Daily visits to that section of its site soared 250% between January and June.

U.S. Mint Silver Eagle Sales Forecasted To Triple This Quarter

With the continued uncertainty in the markets and financial system, the U.S. Mint Silver Eagle sales for the last quarter of 2020 are forecasted to triple compared to the same period last year.  Already, sales of Silver Eagles so far in October have surpassed the total during the entire fourth quarter of 2019… three months!

The U.S. Mint just updated its sale figures on Monday to show the total for October was 2,460,000 compared to only 1,110,500 during October 2019.  And, we still have another week and a half remaining in the month.  Total Silver Eagle sales for Oct-Dec 2019 were 1,573,000.

I believe Silver Eagle sales for October may reach 3 million, or double the same month last year.  However, assuming another 3 million being sold in November and December would put the total for the last quarter at approximately 6 million Silver Eagles.  December isn’t such a hot month for Silver Eagle sales as the U.S. Mint curtails production to set up for the new 2021 coins.  But, if we see some crazy things happening in the market if the Presidential Election turns out to be a mess, we could see significant sales in December.

PayPal’s Move Is Good for Crypto Adoption but Not So Much for Profits: Morgan Stanley

PayPal’s pledge to support cryptocurrency as a funding source for 26 million merchants will likely benefit mass cryptocurrency adoption more than it will boost the payments firm’s bottom line, Morgan Stanley researchers said in a Wednesday report obtained by CoinDesk.

• The move "should expand crypto acceptance online, which to date has stalled at 1% of the top 500 internet retailers," wrote the Morgan Stanley analysts.

• It is "unclear" if PayPal's earnings will benefit from that shift. The researchers said bitcoin, bitcoin cash, litecoin and ether funding is "likely immaterial to earnings."

Central Banks: Gold’s Greatest Ally

You’re likely aware of the price action in gold lately. Gold has rallied from $1,591 per ounce on April 1 to $1,907 per ounce as of today. That’s almost a 20% gain in a little over six months, even with selloffs along the way.

Today’s price of $1,907 per ounce is nearly double the low of $1,050 per ounce at the end of the last bear market in December 2015. That’s highly impressive, but it’s only the beginning.

The history of gold bull markets (1971–80 and 1999–2011) shows that the most powerful gains come toward the end of the bull market, not at the beginning.

That means even if you’ve missed out on the gold rally so far, you could still score huge gains as gold trends toward $10,000 per ounce or higher over the next four years.

$14,000 gold is entirely possible by 2026. How?

Tech fund flows on track for a record year

There's nothing like an established market trend to spur demand for MOAR. And when fund companies see that demand from investors, they will do whatever they can to supply it.

We see this all the time. When a sector, or the market as a whole, does well, fund companies will create more ETFs, as we saw in the summer of 2015. Or the opposite - when a sector does poorly, then fund companies will quietly liquidate the funds or split the shares, like what happened with volatility ETFs in 2016.

There has certainly been demand for anything tech-related. On a yearly basis, flows into ETFs with a technology focus have already surpassed 2000. 

On a long-term basis, there has to be at least modest concern about the attention these stocks are getting. When any single sector becomes such a focus, there is usually something, at some point, that comes along to knock it down a peg.

Stimulus & Debt-Deferral Economy: Americans Splurged. Huge Price Increases Boosted Auto Sales. Liquidation Sales Pumped up Department Stores

Depicted by my 13 whiplash-charts.

By Wolf Richter for WOLF STREET.

Total retail sales – sales of goods in stores and online, but not including services such as doctor’s visits, insurance, airline tickets, hotel bookings, rent, etc. – in September jumped by 1.9% from August, to a record of $549 billion (seasonally adjusted), according to the Census Bureau. Compared to September 2019, retail sales were up 5.4%.

But as we’ll see in a moment, there were huge differences between categories, from sales at clothing stores and restaurants which, though they bounced a lot, were still below where they’d been years ago; to sales at stores for building materials and garden supplies, which jumped from record to record during the crisis:

Are Oil Wells Going Dry – And Is This the End of the Supermajor?

On August 27th, 1859, George Bissel and Edwin Drake changed the American petroleum industry forever.

The two men were responsible for the first successful use of a drilling rig for a commercial well. Drilled especially for oil.

Named the Drake well, and drilled to a whopping depth of 69 feet, it took Titusville, Pennsylvania by storm.

And set the course for investment and speculation in the oil industry.

You might not know this, but the history of drilling for oil predates Bissel and Drake by at least 1,500 years.

• The earliest known wells, discovered in China, date to AD 350 and were drilled out to depths of up to 800 feet by using drill bits attached to bamboo poles.

But Drake’s well stands out from its predecessors for several reasons:

Before this point in the U.S., oil was only collected where it seeped to the surface, such as in northwestern Pennsylvania where it was skimmed from the tops of ponds.

How to Get Around the Market’s Election Waves

By Teeka Tiwari, editor, Palm Beach Daily

It was 1992…

My guts were turning inside out. My clients were losing millions as the market carnage rained down on me.

I hadn’t taken big risks. In fact, I owned some of the safest, most reliable stocks in the world. And we’d been having a great run…

But then, the country elected Bill Clinton as president. And his run for the White House created a political firestorm over drug stocks.

You see, one of his major campaign promises was to introduce nationalized health care. That meant price caps for all the major drug companies.

Before he even took his first oath of office, the entire pharmaceutical sector started collapsing.

Blue chips like Johnson & Johnson, GlaxoSmithKline, Bristol-Myers Squibb, Pfizer, and Merck were in a freefall leading up to the election. My clients’ portfolios were stuffed with these names.

I spent my days fielding angry calls, begging people not to sell.

The rise and fall of the ICO

Editor’s note: The public launch of our security token, Curzio Equity Owners (CEO) is just around the corner… So, in the coming weeks, we’ll be featuring guest articles by experts in this new asset class.

Today, we welcome first-time contributor Herwig Konings, a founding partner of Security Token Group. He unpacks why security token offerings (STOs) are rapidly taking the place of traditional coin offerings (ICOs)… and why there’s no going back to traditional methods of finance. 

Some will look back and say all of this was obvious. Others may have shock from the wake up call they receive. Many will continue to deny and believe.

Below, I am going to dissect the rise and fall of initial coin offerings (ICOs)… and give you the institutional investor’s answer to the ICO.

A new technology

Blockchain has been a new VC investment sector since 2013. The concept was pitched with its first native use case, Bitcoin. Up until the end of 2016, blockchain companies would receive almost $1.5 billion in investments.

Square Puts 1% of Total Assets in Bitcoin in Surprise $50M Investment

Square, the payments company helmed by Twitter CEO Jack Dorsey, announced Thursday it has purchased 4,709 bitcoins, a $50 million investment representing 1% of the firm’s total assets.

• "Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company's purpose," the company said in a statement.

• "We believe that bitcoin has the potential to be a more ubiquitous currency in the future," said Square CFO Amrita Ahuja. "For a company that is building products based on a more inclusive future, this investment is a step on that journey."

• Bitcoin's price jumped 2.5% following the announcement, while shares in Square popped around 1%.

What Wall Street Gets Wrong About Investing

I didn’t always have a Porsche 911 GT3 RS.

I didn’t always have a multimillion-dollar real estate portfolio.

And I certainly didn’t always have the freedom to travel the world, first-class, with my family and loved ones.

Had you met me as a child in Britain’s foster system, you never would’ve thought I’d be writing to you today.

You see, I grew up dirt poor. Food stamps, clothing vouchers, free school lunch – the whole nine yards. My early years were spent ping-ponging between group homes, foster homes, and hospital wards (I was very ill as a child).

Looking back, I was an outcast in many ways.

I was ashamed of being in foster care and would lie about it. As far as anyone else knew, I lived with my mother. That meant I was socially isolated. I couldn’t take the risk of people finding out, so I kept everyone at arm’s length.

Why China Is the Secret to the Next Leg of the Gold Boom

I suffer from Big Family Syndrome.

No, that's not an actual scientific term. It might even be the first time you've heard these three words spoken together.

But I assure you, it's something that most Asian Baby Boomers and Gen Xers (like myself) can relate to.

I grew up with a huge extended family. And by huge, I'm talking about enough aunts, uncles, cousins, nephews, and nieces to fill a town hall.

My father had 14 siblings while my mom had nine. All but four married and went on to have kids of their own. Just remembering the names of each of my aunts and uncles was a challenge when I was growing up. It made every family gathering feel like a midterm exam.