Monday, December 4, 2017

Hints of a Cryptocurrency bubble

Excerpt below from Marc Faber's December 2017 Market Commentary


My friend Laeeth Isharc always sends me fascinating articles on just about any subject I can think of. The other day he sent me a piece which appeared in the New York Times by OP-ED writer Adam Grant entitled, "Kids, Would You Please Start Fighting?" 

Grant believes that if kids never get exposed to disagreement, we’ll end up limiting their creativity. 

He adds that, "We’ve known groupthink is a problem for a long time: We’ve watched ill-fated wars unfold after dissenting voices were silenced.….Teaching kids to argue is more important than ever. Now we live in a time when voices that might offend are silenced on college campuses, when politics has become an untouchable topic in many circles, even more fraught than religion or race. We should know better: Our legal system is based on the idea that arguments are necessary for justice. For our society to remain free and open, kids need to learn the value of open disagreement. 

If no one ever argues, you’re not likely to give up on old ways of doing things, let alone try new ones. Disagreement is the antidote to groupthink. We’re at our most imaginative when we’re out of sync. There’s no better time than childhood to learn how to dish it out - and to take it."

I fully agree with the views of Adam Grant. In my dealings with financial institutions I observed that fund management companies performed better if they had eclectic employees with completely different views about economic and financial trends than fund management companies whose senior staff members had homogeneous views and identical investment styles.

There are currently some interesting developments in financial markets. Momentum stocks such as Facebook, Amazon, Alibaba, Google, Microsoft, etc. seem to be under liquidation as investors shift their funds to other momentum markets. On both November 28 and November 29, when the Dow soared by 255 and 103 points respectively, most tech stocks were down.

It is entirely possible that the stock market continues to move up, but that the momentum stocks of 2017 fall by the wayside and underperform the overall stock market. It is not unusual that once a momentum sector goes out of fashion, the speculation moves to a completely different asset class.

In this context 2017 is a very special year. Not only has the speculation shifted to another asset class but to an entirely new asset class: cryptocurrencies.

With the advent of cryptocurrencies an important missing link in the final phase of the great asset bubble of 1981 to 2018 has been fulfilled: Heavy public participation towards the end of a major asset bubble.