Category: Fundamental Analysis

The economic value of shitty crypto

On By Chen Yu YanIn Bitcoin, Fundamental Analysis, Trading, UncategorizedLeave a comment

Dear uninformed readers,

We are all delighted/distraught/dismayed/disillusioned/disintegrated/disembowelled/distressed/destroyed by the recent spike in bitcoin. I myself made some bold claims about it hitting $100k this year and will continue to stand by it (unless I’m proven wrong…). Anyways, the topic today isn’t regarding bitcoin, or even the other smaller yet still viable and heavily traded cryptocurrencies, I’m here to talk about ICO’s and the far smaller and less traded cryptos and how they scam investors into their ‘concepts’.

From even the most basic understanding of finance, we know that if something can make money, peole will rush into it. Scams and Ponzi schemes popping up all over the world despite laws and heavy punishments against it is proof enough that as long as it earns enough money, fuck the consequences. It also proves that there are plenty of people, both sophisticated and normal, wealthy and poor, smart and dumb, across the entire spectrum of the species we call homo sapiens, who are willing to invest in something they believe in. This believe can come from a plethora of reasons, can be ignorance, can be trust (in a friend or family member), can be boredom, but all of these reasons are driven by the underlying greed that drives forth the advancement of humanity. I’m not saying that greed is bad. As a student of finance, and somewhat advocate of a free market, I believe that greed is good. It will lead us to waking up earlier, to loving those around us, to making the world a better place. But I also have to concede that it does come with its issues. Losing money and missing out on longer term gains being one of them.

The reason why people lose sight when greed takes over is the basic premise of behavioural finance. Why do we buy lottery tickets? Why do we go gamble at casinos? Why do we do anything with a negative expected value? How do we value infinite expected value games? All these ideas come into play when we look at the deep dark corners of the crypto market.

Let’s face it, as much as we say buying bitcoins is to stick it to man, it is still mainly used by that seedy neighbour whose place always has that stink of weed and bad hygiene. Of course, I’m generalising but take a stroll around the dark web and you’ll see that everything from drugs, to arms, to ‘jobs’ are all transacted via bitcoin nowadays. The decentralised settlement system that cryptos pushes as a forefront feature is why they are the payment system of choice. However, there are issues when using them as currency. The first being, circulation. They simply don’t circulate enough for people to use them on an every day basis. The second is the reason why they don’t circulate. Because they don’t have a stable value! If the currency is pegged to say the US dollar (USDT for example), then it is limited in the amount that they can circulate in the market. This can cause a problem when the growth stage kicks in (see why the US unpegged their currency to precious metals). If it’s unpegged, then all hell breaks lose and we have things like bitcoin which gyrates 20% overnight. Furthermore, for most people who releases ICOs to the public, they want to make money! I know it’s hard to believe that they don’t do it out of charity but it’s true. They’re in it for the money. It’s a lot harder to make money when you have to hedge all the coins according to a peg.

So that brings us to all these ‘concept’ cyrptos. You know, those ‘coins’ that exist because they are used to facilitate paying for electricity, overseas transactions, trading options, ownership of a company, paying for porn, paying for roast chicken (yes this one is real, a friend of mine is making it as I write this) and such and such and such… There are simply too many to mention. Anything that you’ve heard of is probably leagues beyond this (including things like Dogecoin. Yes, Dogecoin is actually quite big…).

We start with the concept. It is usually some bullshit made up to give credibility to the venture and make it sound like it’s much bigger than it is, a scam. It could be based on a per MWh usage of renewable energy generated by some African country that employs thousands of underprivileged children working to clean the solar panels. Wait, no, that’d be child labour. Umm… let’s say it generates thousands of jobs and literally brought light to hundred of smaller villages that would otherwise still be eating casava leaves grinded by stone. Now, buying this crypto not only will make you rich, it will also make you a better person but also very wealthy because African nations need MOAR POWAH!!!

Next we come to marketing. This concept must be backed by some white guy who won multiple philanthropy awards and is extremely rich but also low key (which is why you won’t ever find him on say, the Forbes list). He’s doing this and coming out into the limelight for the world! He’s doing it and sacrificing his privacy that he values for the future! Now, he’s generally backed by a board of diversified people both men and women, with a few LGBTQ and/or disabled. It’s a big family! It’s a RICH family, who even though could totally just invest in the renewable energy project themselves and profit greatly while doing the world a favour decides that they want to share the profit with all the investors who believes in them. Theyw ill team up with some ‘executive’ at a major bank (generally speaking a fraud who may or may not have even worked in any bank). They’re too poor to do proper roadshows so of course they will simply be sending out mass emails from some seeds list they bought filled with information of people who were too cheap to pay for porn, or expected that some naughty but not too good looking middle aged women were out and about in their neighbourhood looking for a good time. Of course, they will also hit people up on social media and join Discord channels or reddit communities and lure them into their own chat group.

Now that they have a bunch of lonely, vulnerable guys who probably joined the chat because the person inviting them really ‘connected’ and has ‘huge boobs’, they will be lured into a very ‘prestigious’ chat group that they only managed to get in because their ‘friend/relatively/anybody who is close but definitely not a partner because godamnit they are still single because they’re the soulmate of every guy they lured in there’ is a professional investor who has connections in all the right places and can get access to this crypto before it’s released to the public. Now, all the marketing in the previous step will be pushed down the throats of these people like… ok, no more similes. But my point should be crystal clear now.

Payment. Of course you’ll need to pay them, but they only accept bitcoin/USDT/some kind of crypto that is well known and liquid and NOT any kind of bank transactions that can be traced. The money will be transferred via a ‘third party platform’. Their coin can ONLY be found there. And the pricing and supply and demand are more opaque than the lead linings outside a nuclear reactor. So now that you invested, the money starts to grow because all the prices are manipulated on the back end of their platform. Other people in chat sees you flaunting your enormous e-Penis from your recent gains (that you definitely cannot withdraw because withdraws are only possible once the ICO is completed) and all the ‘pretty girls’ in the group stroking your… ego, and will soon follow. Of course, the group gets bigger as people start to call more friends and family to join in on this once in a lifetime opportunity.

Scammers who are brave may even have offline meetings to booster confidence in their project. A quick lunch event with some people in the group will go a long way to validate their venture. Finally, they delete the group and run for it leaving everyone there distressed and unable to get back any of their investments.

The precise method they use will obviously differ. I am only going through what I have seen personally and what people around me have gone through. So to sum up, the economic value of shitty cryptos is for scammers to rob you of your money. that definitely doesn’t cover all of them, but those that remains are statistically insignificant at 0.1% level using the t-test

Best regards,

The uninformed trader

Bold Calls: Jan 2021

On By Chen Yu YanIn Bitcoin, Equity, Fundamental Analysis, Technology, Trading1 Comment

Dear Uninformed Readers,

I’m back! After a long hiatus that’s caused by study and being lazy in general, I am back to being able to focus on what I enjoy best, Netflix and chill. And also studying the random, dark, untouched areas of the market. Anyways, this new bold call update will signify my return and hopefully (New Year Resolution time) I will be able to update regularly this year (aiming for weekly but will be happy if my update frequencies can average fortnightly).

So before I start, I’ll have a quick summary of the results. My previous bold calls pretty much all came true. Property prices peaked in 2017 in Australia and equities did great (11.46% returns for the ASX 200). China smashed my expectations and increased 21.78% and closed 4030.85. Basically, I’m a lot less rich than what I should be considering how good I am and how right I was… *sigh*

So on a new note, let’s talk 2021. I start by focusing on a few fields this year. China will certainly cause geopolitical chaos with the US this year as RCEP kicks in. The deals they’re making with the EU won’t help either. As geopolitical tension rises, so does Gold and Bitcoin. The relentless QE programs and record low interest rates (that doesn’t look like it’s going anywhere higher anytime soon) will essentially devalue any currency. The thing with trade is that if you lower your currency and gain a competitive edge, it really fucks up the balance. So the current trend is, everybody print money, and we all deflate together, and we all die slowly… together.

First bold call, Bitcoin is going to $100,000 baby!!!! HODL!!!

Second bold call, Gold will hit $2,500.

Last bold call, the S&P500 will hit the 4200 mark.

Now to explain myself. Once again, I’ve pretty much put all my eggs in one basket (the QE basket). The amazing, fabulous, miraculous effect of printing money based on credit is that you can keep doing it. As long as you have more credit. And right now, the US has CREDIT! With Trump out (and I’ll explain what happens should he refuse to leave power later) and Biden in, we can expect more money pouring into the market to make sure the economy doesn’t shit itself (see image below).

This is exactly how the Feds work. True story.

What happens is that this money will end up in the hands of corporations. Even if it’s handed out straight to the public, they will need to spend it somewhere, let’s say paying for their mortgage or buying consumer staples, the corporations are where the money will end up at. The remaining money, will push themselves into whatever looks half decent to invest and drive up their prices as investors, both uninformed and informed rush in because let’s face it, it’s free money! As long as credit holds up, this is inevitable. As money rush in, the corporations make money, the stock markets go up. And because there’s so much money in the markets, given the ratio between the inflow and the size of the economy, money is suddenly worth a lot less (not necessarily inflation, because everyday items may not increase that much in price, just the investment products including real estate).

Oh, that reminds me. Fourth call, real estate is back! I’m thinking 10% in the Australian markets.

Anyways, continuing on with my rambles, as money is worth less relative to these investment products, people rush in natural to attempt to beat the basic devaluing of the currency. Bitcoin prediction is because everyone is crazy! And crazy means it will shoot to the moon. And that’s pretty much it… 2021 will be fairly uneventful (when viewed in this angle).

Ooh, almost forgot, if Trump doesn’t want to leave power, scrap the S&P prediction. Gold and Bitcoin should still go up because duh!

Anyways, after a shitty 2020, I hope you all can have a good 2021. My best regards to you and may you be happy everyday.

Yours Sincerely,

The Uninformed Trader

Bold Calls: Jan 2017

On By Chen Yu YanIn Equity, Fundamental Analysis, Futures, Policy, Retail, Sector, Technical Analysis, TradingLeave a comment

Dear Uninformed Readers,

Wow… what a year. I made two calls last year and both were pretty good. I admit that gold came a bit short but come on, what’s $20 between friends (I don’t actually have friends, that’s why I blog). So to sum up, gold was slightly underwhelming stopping just pass $1380/oz whereas bitcoin did exactly what I anticipated and flew right through the big $1000 mark (I know it collapsed based on selling pressure from mainland China but hey, I never said it wouldn’t come back down).

I am once again aiming to do some decent analysis this year as well so here we go.

For 2016, I called on currencies. This year I’m calling on equity. Actually, equity markets to be precise. Because I live in Australia, I am going to start with the ASX S&P200 index. It is currently trading around 5650 as I write (it’s a Friday and markets closed around 4 hours ago so yeah… it’s 5654.80 to be precise). I am looking out for the big 6000 mark. That’s where it all went wrong early 2015 and I think we’re gonna go tempt fate again by trying to smash that ceiling. My reason is fairly simple. With tightened controls around foreign investment (property in particular), property prices are going to stall. Those seeking returns will be driven to the equity market (I know there are those seeking yield but come on, who seeks yield phft…). The money will flow into the equity space which hopefully drives the market past that 6000 mark.

And because I like the Shanghai market, I’m gonna go with the Shanghai composite on the next prediction. Shanghai stalled at 3123.14 and I honestly don’t see it moving much this year. However, I just have a good feeling about the technical patterns. On the fundamental side, we have a similar situation as in Australia. P2P lending has gone way too big in China to yield anything generous these days. Real estate is a big joke in all the major cities as things are simply getting too expensive for people to invest. Hence I anticipate a near 20% increase to the 3500-3600 level. This also happens to be a resistance level (technically) from 2015 so my eggs are certainly all in one basket this year.

To sum up for 2017, equity UP! Property not so much (in Australia and China at least).

Yours sincerely,

The Uninformed Trader

Tasteless but necessary – Part 1

On By Chen Yu YanIn Environment, Fundamental Analysis, Futures, TradingLeave a comment

If there’s one thing in this world that is both tasteless and necessary, it would be water. Actually, scratch that, air would be equally important but that’s not my point. I’m focusing on water. The human population of the third planet in a solar system that is on the outer reaches of the milky way galaxy (as it is known by by the indigenous inhabitants of the planet) has grown to over 7 billion people last year. All 7 billion people needs to drink water to survive [citation needed]. I am going to split this research into a few parts due to the large amount of research papers, websites, and information in general that I have to go through.Now that’s out of the way, it’s time to ask the important question.

How much water do we have?

From studied so far, the volume of the world’s oceans is 1.332 billion cubic kilometers [1]. That’s a lot of water [citation needed]. I don’t think I need to exaggerate exactly how much that is. But I will. That amount of liquid is roughly half the water based lubricant you go through in one night when… well you get the idea. I don’t think a racist homophobic necrophilia incest joke is acceptable anywhere other than 4chan (and if you don’t know what 4chan is, go check it out. It’s a nice place [citation needed]).

In terms of freshwater (all in cubic kilometers), we have 24 million in ice caps, glaciers, and permafrost, 23 million in groundwater, and around 10.5 million in fresh water that is available to drink as is (if you don’t mind the occasional deadly bacteria or virus). 3.8 trillion cubic meters of water is withdrawn every year (excluding evaporation), which when converted into a similar metric as what we were using before would yield… 3800 cubic kilometers of freshwater. Oh well, that’s a lot less than I thought. You know what, we’re in the clear! But wait, that’s just the withdrawn from the reserves. A research done shows that the average American uses around 420 litres of water per day. So some simple maths yields around 50 trillion litres of water in a year. Which once again… isn’t that much. If it weren’t for the fact that only 1 percent of our freshwater is readily accessible due to stupid things like, being trapped in other less convenient forms, such as ice. 1% of 23 + 10.5 + 24, gives us around 570 thousand cubic kilometers. Suddenly, 3800 out of 570,000 seems like a lot (~0.66%). It would mean that if there wasn’t any replenishment via the water cycle, we would run out of water in 150 years.

When nature kicks you in the balls, it usually doesn’t end with just one kick. So of course things are going to get worse from here. Fresh water isn’t spread evenly in the world. Some areas are affected by droughts (South Africa is brought up a lot when we talk droughts) while others are constantly flooded (Atlantis is a good example). So we’re stuck with technically enough water for the world population right now, but just with really, really bad distribution. So we need to move water around. Except that it is a lot harder than it seems. Moving water by trucks is extremely inefficient. Moving it by any form of transport that we have is extremely inefficient. So we need to build some canals that funnels water into areas that needs water.

But geography puts the ‘anal’ in ‘canal’.

Water tends to flow in a downward direction [citation needed]. Unfortunately, mountains tends to go upwards. It’s kind of axiomatic that way so there’s not much that we can do about it. Water doesn’t seem to like it when you tell them to go upwards. This is actually good, otherwise there’d be no land. Distance is also a major factor. There is nothing that distance can’t break down. From relationships to water, distance tends to ruin things and is up there right after ‘time’. However, we all know that distance and time is related so in reality, that whole family is bullshit. I’ll end this here for now. There will be more coming soon, though a temporary lack of internet might delay it a bit.

 

Bold Calls: Jan 2016

On By Chen Yu YanIn Bitcoin, Equity, Fundamental Analysis, Futures, Policy, Technical Analysis, TradingLeave a comment

In private, I’ve made some bold calls. This affects my trading and I see it as a way for me to exercise my ability to predict long term movements based on an unique style of analysis. I won’t bore you with specifics as that isn’t the point of this entry.

In 2015, over a ramen lunch with close friends, I made a bold call to say that the US equity market will fall 30% from the peak, the Aussie will fall 40%, and China 50%. This was around June 2015. So far, China is looking to have almost hit my target as it is almost touching that magical 2600 mark. Honestly, being a massive Chinese hedge fund, the Australian markets is gonna tank a little as well. I guess we’ll see some results by mid year. The US markets are probably the most difficult to predict. I believe it will be heavily affected by who gets elected for presidency this year.

My new bold call for 2016 is Gold (gold vs US to be precise). I am fairly bullish on gold and I expect an initial target of $1200/oz followed by a rally to $1400/oz (it is currently $1100 as I am writing this). This is based on increasing volatility, the distrust in the growing Chinese/other emerging economies, a beautiful technical bottom plus reversal patterns emerging.

My second call would be for bitcoins. As mentioned in my very first post here, the block chain technology is worth a lot of money. The ability to decentralize the settlement system alone is enough to save enough money to make Scrooge McDuck drool. This along with the fact that we’re half way to mining everything out means that suddenly there is a supply squeeze that can raise the prices faster than twitch chat raising dongers (a very specific reference so kudos if you got this one). My personal target is $1000/coin but I believe we have to wait for around the end of the year for that to come about.

To sum up, bitcoin and gold will be the best performing currencies in 2016 (I’m counting gold as a currency because it pretty much is) and your phone is ringing because I’m calling it!

The unfortunate tale of shopping for Christmas Presents on Christmas Eve

On By Chen Yu YanIn Equity, Fundamental Analysis, Retail, Sector, TradingLeave a comment

Santa Claus doesn’t even count for small talk nowadays… is how I’d like to begin this segment. Unfortunately, I am almost sure that there will be copyright issues on the horizon if I did that so I’ll stop it there. I don’t plan on doing anything too heavy for this particular entry. Nor do I intend for this entry to have a point. I am just lamenting the fact that I have yet to buy Christmas gifts as life has been slightly busy lately. Somehow, the Christmas holiday atmosphere has made my days all the more hectic. As the title can possibly allow one to gather, I plan on ranting a bit about the retail sector today.

The fall of Lehman Brothers was so magnificent that it made me question whether I shall ever open a business with a sibling. What I want to say is, there are many factors and risks that are out of your control. One moment, the market is good, the next, your balance blows up in a fashion reminiscent of the 4th of July. It has always been my thoughts that the Australian retail sector is undergoing something similar. People are so desperate for profits that I feel that they are pushing sales for the sake of sales. It reminds of me an old retail joke that I heard while I was selling mattresses.

Sales A: “We’re making a loss on each unit we sell, what do we do?”

Sales Manager: “Don’t worry, we’ll make up for it with volume.”

The only thing I see saving this year’s Christmas figures is Star Wars. Hopefully, the ticket sales will be enough to create a positive effect and get people not only going out to watch the movies but also out shopping while they’re at it (and if you consider the drinks and popcorn sold, that’s just a bonus!).

Looking at the department stores, Westfields and Chases has never been so quiet so close to Christmas. I recall a few summers ago (I live in Australia) when I could barely move about while shopping. The perfume section at David Jones and Myers are full of eager sales people who are more than willing to spray and puff the latest scents and sell things while giving up gift bags, vouchers, future discounts, free samples, a foot massage, a tractor, a flamethrower etc. Along with the traditional Boxing Day sale where everybody everywhere simultaneously teleports to their nearest shopping center credit card in hand, it makes the pre Christmas season anything but festive.

I personally believe that there is a move away from giving Christmas presents on Christmas Day. As mentioned earlier, a fat man dressed in red who works very specific hours is too hard to believe even before you see your kindergarten teacher kissing him. So we intuitively understand that the presents are store bought and not made by elves captured and put to slave labor (unless by elves are what you call the Chinese). Delaying the purchases a bit can yield serious savings. If it’s possible to short the market value of goods, shorting between the 24th and the 27th would definitely yield profits higher than students at a college party. And they get pretty high.

This is it for now. I’ll probably have something for new years so look forward to that.

Merry Christmas,

The Uninformed Trader