Thursday, November 16, 2017

Poloniex Plans To Delist Three Currencies

Poloniex recently announced plans to delist three cryptocurrencies from its exchange.

Storjcoin X (SJCX), DNotes (NOTE), and NautilusCoin (NAUT) are being delisted Nov. 21, 2017.

Poloniex did not give any explanation for its decision. This is not uncommon. Last May, Poloniex delisted 17 altcoins without any explanation, according to CoinTelegraph. Those coins were BBR, BITS, C2, CURE, HZ, IOC, MYR, NOBL, NSR, QBK, QORA, QTL, RBY, SDC, UNITY, VOX, XMG.

The common thread between delisted coins is their lack of support in the crypto market. For example:

Storjcoin’s 24-hour volume is $261,000.

DNotes has 24-hour volume of $29,605.

NautilusCoin has a 24-hour volume of $69,000.

DNotes came out as a “currency with a purpose,” but after reading its literature, the coin seems like it promises a lot but delivers very little.

When coins like DNotes crash, there is a lot of weeping and gnashing of teeth. The responses to Poloniex’s decision to delist DNotes and the other coins were full of anger and disappointment.

The bottom line. Be careful about investing in crypto currencies. Many currencies are nothing more than an idea without any real users, just speculators. I have not yet participated in a single ICO. That’s because the trading patterns for ICOs are typically unfavorable for early investors. The coin might shoot up during its first official trading day, but often slides down and down and down.

In the end, these losing crypto currencies end up in the proverbial Graveyard of the Dead.

Monday, November 6, 2017

US Government Agency Offers Primer on Bitcoin & Virtual Currencies

CTFC Primer on Virtual Currencies: 10 Investor Takeaways

Bitcoin investment
Bitcoin is a “convertible virtual currency,” serves as a “store of value,” and operates in a virtual currency market that carries “substantial speculation and volatility risk.” Those are among the takeaways from a report by The U.S. Commodity Futures Trading Commission’s LabCFTC , released October 2017.

To read more, click here

Sunday, November 5, 2017

CFP Board Suspends Topeka Financial Adviser Mark Schneider

By Michael Hooper
The Certified Financial Planner Board of Standards recently imposed an interim suspension of Mark A. Schneider's CFP certification, effective Oct. 19, 2017.
                                 Mark A. Schneider
For many years, Mark Schneider has operated Plan Professionals in the Columbian Building, at 6th and Kansas, Topeka.
The CFP Board's action, announced on Oct. 31, 2017, came as a result of finding out about the Kansas Securities Commissioner's order in 2015 requiring Schneider to pay $94,720.60 to a client for losses incurred by using nontraditional Exchange Traded Funds. Schneider also had to pay a fine for $25,000 for violating Kansas securities law.
The CFP Board said it imposed an automatic interim suspension after discovering that Schneider entered into a consent order with the Kansas Securities Commissioner without admitting or denying the following findings by KSC: 
1) Schneider’s firm charged clients an assets under management fee on accounts that held funds solely in a money market account; 
2) Schneider failed to manage clients’ accounts in accordance with the clients’ investment objectives and utilized investment strategies that could not offer returns sufficient to cover the fees charged by Schneider’s firm;
3) Schneider’s firm failed to maintain a positive net worth and failed to notify the Kansas Securities Commissioner of its negative net worth in a timely fashion;
4) Schneider failed to update his Form U4 to disclose two customer complaints, two civil judgments, a Notice of Intent filed by the Kansas Securities Commissioner and the final order arising out of the Notice of Intent. 
Under the terms of the consent order, The Kansas Securities Commissioner revoked Schneider’s firm’s registration as an investment adviser; and permanently barred Schneider and his firm’s registration as, or any association with, a broker-dealer or investment adviser in Kansas.
Under the CFP's automatic interim suspension order, Schneider’s right to use the CFP certification is suspended pending CFP Board’s completed investigation and possible further disciplinary proceedings.
This morning, Schneider's LinkedIn account still listed his CFP certification under "Certifications."
There is a lot of detail about Schneider's problems in the Kansas Securities Commissioner's order
The order says that a couple in Topeka were longtime clients of Schneider. For many years, their investments were largely conservative, with cash and large cap mutual funds.
The husband was dying from a disease he had been coping with for a long time. Schneider advised the couple to take out substantial life insurance policies. When the husband died in 2010, the wife collected $1.2 million in insurance proceeds.
In May 2010, Schneider developed a plan for her. She wasn't working and still had kids in school, so she needed income. He determined that she had insufficient assets for her long term income needs and needed to grow her assets. Shortly thereafter, Schneider liquidated her positions and invested her portfolio in leverage and inverse Exchange Traded Funds, also known as non-traditional ETFs. He put stop losses on the ETFs, added more stop losses and then lifted the stop losses altogether. In some cases, he held these nontraditional ETFs for over 100 days, but the ETFs were typically for sophisticated investors trading and holding only one day.
FINRA said in 2009 nontraditional ETFs may be useful in some sophisticated trading strategies, they are highly complex financial instruments and are unsuitable for retail clients who plan to hold them more than one trading session, particularly in volatile markets.
Schneider said there was no difference in the level of care needed for nontraditional ETFs than other products. He believes the risk from the product came from the market, not the product. Nonetheless, Schneider placed all of his 160 retail clients in nontraditional ETFs.
Jack Duval, an expert witness, testified at his hearing that nontraditional ETFs are not suitable for investors who need income and growth. Holding non traditional ETFs for more than a day would constitute a breach in the fiduciary duty of the investment adviser, Duval said. Schneider was asked if he knew what was a "constant leverage trap." At first he wouldn't answer, then he said, "no." During the hearing, Schneider appeared arrogant and made no recognition that he might have been wrong in using nontraditional ETFs, the state's order said.
Leveraged ETFs are exchange traded funds that borrow money, with the hope of enhancing returns for clients. Leverage will increase the risk of the fund because the fund has to pay interest on the borrowed money and has to pay it back. 
An inverse ETF works in the opposite direction of a traditional ETF. For example, QQQ is a popular ETF that tracks the Nasdaq. PSQ is an inverse ETF that bets on QQQ declining. PSQ suffered a 65% loss over the past five years.
Bears have gotten slaughtered in recent years as the S&P 500 has tripled in value since 2009. The Nasdaq is up 400% since 2009.

Saturday, November 4, 2017

Kansas City Bitcoin Group Hosts Meeting On How To Gain Wealth Through Digital Currencies

By Michael Hooper

KANSAS CITY, Mo -- A Kansas City Bitcoin group recently hosted a meeting where participants learned about opportunities to gain wealth through digital currencies.  

A record turnout of 70 people showed up for the Kansas City Bitcoin & Cryptocurrency Meet Up Nov. 3, 2017, at Office Port K.

Tim Lawrence, organizer, led the discussion on Smart Contracts, ICOs and Segwit 2X.

"Some day we're going to look back at this time and say, 'we were there at the beginning,'" Lawrence said.

The group included a variety of people, businessmen, real estate specialists, code developers, lawyers, programmers, gamers and bloggers. Many were young, under 30, but most were middle aged people, they all shared a curiosity and interest in Bitcoin and Crypto Currencies.

I met one investor who had gotten into the Initial Coin Offering for Ethereum, July 2014, when you could buy 2000 ETH for one Bitcoin, which at the time was around $500. In other words, this investor was able to buy one ETH for $0.25. Today one ETH sells for $300. So you know this investor I met had done quite well.

I also met another man who has been mining Bitcoin for over a year. He said he has a couple of miners that cost more in electricity than the BTC revenue, but he is banking on Bitcoin going to $10,000, even $20,000 some day.

The smart contract discussion was excellent. A smart contract is a digital contract on the Ether blockchain, where services such as the transfer of a given amount in a cryptocurrency are made dependent on the occurrence of previously programmed conditions.

Tim Lawrence showed us a great web site called Ether Party where users can build smart contracts without having to be a coder of Solidity, the language for Smart Contracts.

An entrepreneur in real estate said she is considering using smart contracts in her rental business. All that she has in her normal rental agreement can be put into a smart contract, including her wallet address, where a renter could send Bitcoin to pay for rent.

Another site for helping build smart contracts is Ether Scripter. The advantage with a smart contract is that a person could build in consequences for damaging property. Smart contracts make it easy to lock in these types of conditions.

During the discussion of the ICOs, a member of the group showed a portfolio of crypto currencies that he had purchased, often in the pre-ICO process. What he found was that the price of the coin typically jumped when it first began trading but would decline after many of the early investors had sold out. So in many cases, it was better to wait until several days of trading had occurred before buying the new coin.

A participant told investors to do their due diligence before investing in an ICO. Some of these ICOs are just an idea under development. Make sure you understand what you are getting into. Some ICOs are shaped like multi level marketing or Ponzi schemes, so be careful.

I shared my experience trading PotCoin. I bought the coin last spring, then a week later, the coin jumped in value 83%. The reason was PotCoin's announcement that it was sending Dennis Rodman to North Korea to promote sports and peace. Because I thought Dennis Rodman would be unable to bring peace between North and South Korea, I quickly sold PotCoin for an 80% return. The price fell after I sold.

Then someone in the back of the room, a man who looked straight out ZZ Top, said he had traded in HempCoin, PotCoin and several other currencies multiple times for a profit. Wow, that gets my interest for coming to the next meetup event. Friday, Dec. 1, when there will be discussions on Mining and Trading.

A miner asked me what was driving the price of Bitcoin. Hysteria, I said. He said he thought talk show host Glenn Beck was helping to drive the price of Bitcoin by promoting Bitcoin on his talk show. "Digital currency is coming because it is the way we live," Beck said on this show. "It makes sense."

When discussing Segwit 2x that occurs on Nov. 15, Tim said Bitcoin owners will have a duplicate currency on Segwit 2x blockchain along with their original Bitcoin. This will be similar to what happened when Bitcoin Cash was started in August. Those who owned Bitcoin before that event got a duplicate amount of coin in Bitcoin Cash.

Some traders sold their Bitcoin Cash immediately after it was given to them. I sold most of my Bitcoin cash for around $300, but perhaps I should have held on, Bitcoin Cash is currently trading for about $600.

The meeting lasted about two hours and was filled with lots of valuable information.

One presenter made a profound observation about Bitcoin. This is one investment where you can get in before Wall Street jumps in. That is true. I mentioned Bill Miller, a legend on Wall Street, who put 30% of his fund into Bitcoin in 2016, a move that helped him earn a 70% return this year. Miller is highly respected on Wall Street. I expect big institutional investors to follow in his path.

During a small group discussion, I mentioned to one investor that CoinBase was adding 35,000 accounts daily, and one day this week added 100,000 accounts. With limited supply and growing demand, the price of Bitcoin is likely to rise.

"I'm going to buy more Bitcoin right now," said the young investor.

Disclosure: The author owns and mines Bitcoin and also owns Ethereum and Ripple. This article is not a recommendation to buy anything. Do your own research.

Thursday, November 2, 2017

Bitcoin's Vertical Run To $7000

By Michael Hooper

When I got up this morning and looked at the price of Bitcoin at 5 a.m., it was $6,999. Suddenly the price crossed $7,000, then onto $7,315 pretty quickly.

Wow, amazing, this is so huge. On Feb. 19, 2017, upon the advice of my son, Reid Hooper, I bought 0.67787675 BTC for $750.00 on CoinBase. Today that is worth $4,958.66, up 6.6 times in less than a year. I've been an investor for 24 years, and never have I owned an investment that went up this much in under a year. My original shares in Berkshire Hathaway purchased in 1996 were up 5 times after 10 years. I thought that was pretty good. Yet Bitcoin did in one year what took Warren Buffett 10 years. I'm not selling my Berkshire Hathaway. But I am glad I listened to my son about Bitcoin. 

Reid had been studying crypto currency for a couple of years and had already invested some of his money into Bitcoin and Ethereum. So when we sat down on the couch to discuss it, he was already quite knowledgeable. 

Perhaps his most convincing piece of evidence to buy Bitcoin was the security of its ledger. Satoshi Nakamoto had solved the double spending problem. You can't cheat the system. Miners around the world conduct a proof of work, to verify each transaction and make sure it is legitimate. This eliminates the need for a bank.

Japan, Korea, Europe, South America and the United States are embracing Bitcoin. CoinBase is adding 35,000 customers per day. Trading in Bitcoin continues 24 hours per day.

One of the reasons BTC spikes so quickly is that demand is outstripping supply. People who own Bitcoin aren't selling. And only about 1,800 new Bitcoins are created each day by the miners. I expect a lot of the miners like me are holding onto every single Satoshi (which is 1/100 millionth of a Bitcoin).

While writing this piece, I see Bitcoin price has retreated somewhat to $6,900. Well that's expected. Bitcoin tends to run up and retreat, it is quite volatile.

A friend of mine, Travis Warren, an experienced trader, saw this coming with Bitcoin. He told me once it passed $5,000, the price is headed to $10,000. He had a conviction buy for BTC because during retreats in price, volume dropped off substantially, as if sellers weren't there, they disappeared and were holding onto their Bitcoin. With demand piling up every day and not enough sellers, the price just shoots up!  Can you say Parabolic? Well Travis, I'm glad you got into the game. Now we will be talking Bitcoin in addition to our stock picks.

Wednesday, November 1, 2017

Legendary Investor Bill Miller Puts 30% of Fund In Bitcoin

Bill Miller, a value investor who previously worked 35 years at Legg Mason, saw value in Bitcoin and invested a bunch of money in his fund in Bitcoin in 2016. I'm sure he is happy now: Bitcoin is over $6,500 per coin, up 10 times in the past 12 months.

In an investor letter obtained by WSJ investing columnist Jason Zweig, Miller revealed that he had allocated 30% of his MVP1 hedge fund to bitcoin back in early 2016, when one coin was trading at $350. This year alone, his fund has soared 72.5%.

Here are Bill Miller's view of Bitcoin:

“My view on bitcoin is that it is a technological experiment that may or may not prove to have any long lasting value,” Mr. Miller wrote in his letter. 
“Bitcoin has a market capitalization greater than 90% of the companies in the S&P 500, but it still might fail. I don’t know and neither does anyone else, no matter how certain they are of their opinion.”
“I believe there is still a nontrivial chance bitcoin goes to zero, but each day it does not, that chance declines as more venture capital flows into the bitcoin ecosystem and more people become familiar with bitcoin and buy it.”

As a value investor, he was open to owning high P/E stocks and low P/E stocks. "We own low PE and we own high PE, but we own them for the same reason: we think they are mispriced. We differ from many value investors in being willing to analyze stocks that look expensive to see if they really are. Most, in fact, are, but some are not. To the extent we get that right, we will benefit shareholders and clients," he said.

In 2016, Bill Miller obviously felt Bitcoin was "mispriced" even though it was trading between $382 and $782 per coin. Good call Bill Miller. Bitcoin is up 10 times from $600!

I think skeptics of Bitcoin in the old institutional investment world will take notice. When you see 35,000 new customers per day at CoinBase, you have to take notice. Something is happening. As Bill Miller says, an increasing number of investors will buy Bitcoin as venture capital flows into the Bitcoin ecosystem and more people will become familiar with Bitcoin and buy it.

I think investors who are strong on mathematics are impressed with the math behind Bitcoin. In his design, Satoshi Nakamoto was careful to drip out only so much Bitcoin at a time, so as not to raise supply too quickly.

There is 16.6 million circulating supply, and maximum supply of 21 million of Bitcoin. Miners are creating new coins each day, but only a little amount. I recently reviewed this chart at Blockchain and this shows me an average of 1,672 Bitcoins were produced daily from Oct. 24 to Oct. 30, 2017.

A block on the Bitcoin blockchain takes about 9 to 10 minutes to create. The reward per block is 12.5 Bitcoins. That is going to drop in half around June 12, 2020 when the amount of Bitcoin reward will fall to 6.26 Bitcoins. New Bitcoins enter circulation in an orderly, predicable way. Outside forces cannot arbitrarily flood the currency with new money. An incentive is provided for people to mine the coin and make the currency more secure and make transactions happen quickly and efficiently. 

With current demand outstripping supply, Bitcoin is likely to rise for awhile.

Because you can buy only fractions of Bitcoin, the investment allows anyone to get into it, even at $6.61 US can buy a Milibit of Bitcoin, which is 0.001 BTC.

I see $9,000 Bitcoin price by May, with lots of volatility between now and then.

Tuesday, October 31, 2017

General Electric: A Case For Another 36% Haircut


GE shares are trading at 2.36 times book value, an unjustified premium above its peers.
GE has too much debt and is paying out more in dividends than it earns.
GE's 28 P/E ratio is too high compared to peers' 21 P/E ratio.
GE stock may fall to $13 per share but probably will bounce back fairly quickly
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By Michael Hooper

General Electric (GE) shares have fallen 33% so far this year, but the stock is likely to get cheaper. GE stock could fall another 36% to $13.21 per share because it has too much debt and is trading at an unjustified premium above its book value.
GE at $20.79 per share is trading at 2.36 times book value, versus Berkshire Hathaway (BRK.B) (BRK.A) trading at 1.54 times book value. GE has a lot of energy assets. One the largest utilities, Consolidated Edison (ED), is trading at 1.8 times book value.
GE has traditionally traded at a premium over BRKA, partly because GE pays a dividend and BRKA does not. But at a Nov. 13 analyst meeting, we will find out the future of GE’s dividend. I believe the dividend may be cut because the company is not making enough profit to cover both the dividend and its debt obligations. GE’s dividend payout ratio is 109%, which is unsustainable.
GE's long-term debt of $136 billion equates to $15.71 per share, according to an SA article by Travis Brown. Debt is 75% of GE’s capital structure, only 25% is equity.
Berkshire Hathaway has $102 billion in debt, which is about 25% of its capital structure and the other 75% is equity, according to Morningstar.
Book value of GE is somewhere around $8.80 per share. At 1.5 times book value -- the same multiple that the market has applied to BRKA -- GE stock would be valued at $13.21.
With a peer level P/E ratio around 21, GE’s stock would be around $17 per share, but currently its P/E is 28. Honeywell's P/E is 22, Berkshire Hathaway's P/E is 21.32
GE has some valuable assets but its margins have declined due to high expenses. The new CEO John L. Flannery has vowed to turn around the company.
The Wall Street Journal reported that GE used a two-jet flight system for flying its former CEO Jeff Immelt. That is a complete waste of money. The new CEO has grounded the two plane system. GE executives did not notify the board about the practice of trailing the former CEO with a spare jet anytime he traveled. Management for years also withheld from directors an internal complaint it received about the empty plane.
Morgan Stanley and UBS reduced their ratings for General Electric shares due to concerns about dividend cuts at its Nov. 13 analyst meeting, CNBC reported. Morgan Stanley believes the dividend cut is not priced in. “We believe investors need to take action to protect against the possibility of near term under performance in the event of a dividend cut in November and this is clearly an additional factor in our rating change," Morgan Stanley's analyst writes.
During the financial crisis in 2008-09, GE stock fell from $25 per share to $7 per share. Warren Buffett agreed to lend GE some money. I bought the stock around $22, but later sold it at $9 per share for a big loss. I know some vulture-like investors who bought GE at $7 and $9 per share and held on until the stock got back into the 20s again.
GE has some great assets but will need a massive restructuring in order to pay down debt and improve its capital structure. Asset sales are likely.
Investors looking to buy GE shares may want to wait for the price to fall below $20 per share. I think the company is worth about $13 per share. Because GE is such a well loved company with over a 100-year history, it is likely GE shares won’t remain down for long. We may see a massive downswing and a massive upswing, perhaps back up to $20 within a short time period.

Disclosure: I do not own GE shares but may consider buying GE if the stock falls below $17 per share.