C2Alpha

Crisis and Change – Alpha Sources

Author: Brian Coker

Sustainability and a Bullfight

I attended a bullfight in Nimes, France.  It was mostly by accident but that is another story.  A beer cost 3 Euro but at the end of the event you could return your cup for 1 Euro.  A great way to reduce waste and a great lesson on sustainability.

 

Trump Likes a Good Stock Market

So it looks like most everyone has something in common with Trump after all!  Most everyone likes a rising stock market.  Yesterday’s 3 percent market drop  plus today’s down 2% has Trump looking to expedite a meeting to discuss China trade agreements and put some heat on the Fed to keep rates low.

Relax investors, Trump has got your back!  But I still like having some cash on the side. Cash will feel pretty good in case China or the Fed chooses not to play ball.  Even if they do, we may be overdue for a big pause in this long bull market.

October 2018 Jitters

I am suffering a small case of the market jitters.  The market has been moving up for a long long time and making money in the stock market has just felt too easy.  Of course, the FANG stocks and pot stocks have been the big leaders in 2018.  I am thankful to them both in the Coker portfolio.  The balance of the US stock market has not been too robust.  Many markets around the globe are actually negative so far this year.

Why the jitters now?  It is a combination of factors: logical, behavioral and Halloween.  Logically, the US market is trading at a significant valuation premium to most of the international markets.  The premium continues to grow and investors may start looking abroad.  Behaviorally, investors may start getting a little defensive (protective of gains thus far).  Halloween – earnings are generally meeting expectations but the outlook messages are being delivered with a bit of caution.

We may be in for a bit of a surprise this fall. One good “Boo” and we could be in for a medium size correction.  Cash feels better than my favorite flannel shirt.

 

Bitcoin vs. Planet Earth

In January 2018, there was a post by Ian Bremmer President at Eurasia Group about the energy cost required to create one Bitcoin. The highest cost being S. Korea $26,170 and the lowest Venezuela $531. Today May 4, 2018, Bitcoin is trading at $9,600 USD. Obviously the cost to create $9,600 USD in traditional paper currency is pretty cheap.

Food for thought: Is this a good use of the world’s natural resources? Or should it be banned on a global basis?

Cost of Mining Bitcoin

Interesting, the cost of bitcoin mining is exceeding the price in some countries. It is exceeding the real value in all countries. See mining cost provided by Ian Bremmer January 2018

Ian Bremmer
President at Eurasia Group
Cost to mine one bitcoin, based on avg electricity rate

S Korea $26,170 (highest)
Germany $14,275
France $7,930
Japan $8,723
UK $8,402
Brazil $6,741
S Africa $5,948
Estonia $5,551
US $4,758
Russia $4,675
India $3,274
Venezuela $531 (lowest)

Bitcoin versus Planet Earth – Millennials Paradox

The global younger generation tends to be interested in minimalism and protecting the environment. All good news for Planet Earth. Unfortunately a subset of this group loves Bitcoin. It is seen as anti establishment and easy money. The Paradox is bitcoin mining and trading requires massive amounts of energy and this related waste is not pro Planet Earth. Save the planet but not with Bitcoin donations.

I have sold my Bitcoin investment.  It does not meet my environmental screen.

Marijuana – Lots of buzz!

Marijuana stocks and ETFs are creating quite the buzz! Increasingly the states are saying yes to medical and recreational use. The U.S. Federal laws still says no. Personally, I bought a marijuana stock earlier in 2017 and still own it. The medical benefits are proven. It has performed. As an investor, the growth opportunity is compelling. However it is important to realize the Federal laws and potential aggressive enforcement are a real risk (or buzz kill) that could crush this investment opportunity.

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