A TALE OF TWO CURRENCIES

A TALE OF TWO CURRENCIES

COMING SOON…

Check back for chapters as they are released, linked below.

Table of Contents

Introduction to Money

I. The Separation of Money and State

i. The Call to Capitalist Money

ii. Escaping the “Novus Ordo Seclorum”

iii. Satoshi Nakamoto

iv. A Need for Immutable Money

v. The Internet of Money and Value

II. The Great Flood of Fiat Currency

vi. Bitcoin vs. Gold vs. Fiat

vii. Taking Back Your Sovereignty

viii. The Flight of Magical Internet Money

ix. Coming Straight from the Underground

x. Taking Shelter from the Storm

III. Unification of CeFi and DeFi

xi. The Serum to Monetary Slavery & Time Theft

xii. Becoming A Master of Two Worlds

xiii. Sources & Works Cited

xiv. Glossary

xv. More Insights & Information

Systemic Bliss © MMXX

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DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

FED MADNESS: The Inflation Menace (Episode Five)

“Many find it counterintuitive that the Fed would want to push up inflation… However, inflation that is persistently too low can pose serious risks to the economy.”

Fed Chairman, Jerome Powell on Thursday, August 28th, 2020

SOURCES: Board of Governors of the Federal Reserve System (US), Currency in Circulation [CURRCIR], retrieved from FRED, Federal Reserve Bank of St. Louis; Link, September 20, 2020. Chart date range from August 1, 1920 (Observation: 5.222) to August 1, 2020 (Observation: 2,004.572).

Order & Chaos

2020 has been non-stop chaos, and out of chaos comes order.

To summarize this year briefly, so far there has been a CoViD-19 pandemic, lock downs, protests, riots, shootings, and wildfires plus some not so “wild” fires. The markets took a nose dive as the entire country and world was coming to grips with a liquidity crisis with people feeling comfortable only holding cash and its equivalents foreseeing trouble brewing, yet they have since recovered and hit all-time-highs before fading back with worries rising over the passage of additional and much needed fiscal stimulus, not to mention, a second wave of the coronavirus. Also just a quick reminder, this is all coming before one of the most contentious presidential elections in history. As they almost always do in times of tragedy and trouble, governments saw their opportunity to step in and make an effort to “correct” the situation using “temporary” tools and/or powers.

However, nothing productive has happened since they took it as a good time for themselves to augment their own authority while growing their central bank’s balance sheet by just stuffing it full of assets and securities purchased with freshly printed cash from quantitative easing for an “economic recovery.” This is culminating in another overreach that bifurcating the economy into have’s and have-not’s. By effectively injecting newly minted money into the fractional reserve banking system, capital markets as a result went soaring back to all-time-highs not due to any real pickup in business or productive economic activity, but rather due to more financial engineering that actually devalues the fiat currencies underlying their prices that makes it so in theory, “Stocks only go up.” Fed officials project no interest rate increases through 2023 and signal a commitment to provide more support to the economic recovery, which as a result will see high earners and the wealthy being insulated by these policies while those less fortunate middle-class and low-income families of the nation must struggle to navigate an economy stacked against them from the very top.

Considering this month’s announcement from Jerome Powell, the chairman of the Board of Governors of the Federal Reserve, declaring a major policy shift in the central bank’s core mandate saying that the Fed was willing to allow inflation to run “higher” and “hotter” than the previous target rate of 2% annually so they may normalize long-term inflation in order to “support the labor market and broader economy.” It is incredibly two-faced to promote their decision as such because by definition inflation is a general increase in prices and fall in the purchasing power of money, so for the people living paycheck-to-paycheck and/or off of their hard earned life-savings directly see its corrosive and degrading effects on the value of their money most. The overarching message of chairman Powell’s statements basically came to mean two things: the Fed wants to encourage people into spending money and taking more risk by keeping interest rates near zero as well as increase inflation targets to dis-incentivize savers who will see their money’s purchasing power and value degrade and diminish over the coming months, quarters, and years ahead if they let it sit in cold, hard cash.

Low interest rates paired with rising inflation, not to mention historically high unemployment rates, are shaping the macroeconomic landscape of the coming 2020’s that looks reminiscent to the “roaring” 1920’s where many Americans made and lost fortunes playing the nascent stock market prior to the Great Depression.

SOURCES: Board of Governors of the Federal Reserve System (US), M2 Money Stock [M2NS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/M2NS, September 21, 2020. M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level [WALCL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WALCL, September 21, 2020.

Fed’s Printer Goes “BRRR”

Bitcoin, on the other hand, while also having a bumpy year is managing to trade higher year-to-date and outperform major stock indexes by simply just chugging along doing what it has kept doing over the past decade.

Last summer it was notable when the chairman was firmly assuaging the investment community that the Fed was determined to meet its inflation target of 2% after a long track record of the Fed missing its target set forth by its own mandates. The major tipping point that bitcoiners foresaw coming this year was the third block reward halving in bitcoin’s history where the algorithm of the core protocol saw its inflation rate get cut in half, making it lower than the Fed’s own 2% target rate for the US Dollar. While it may be in the opinion of the current Federal Reserve leadership that keeping inflation high is both good for the citizens and currency’s well-being, bitcoin is flying in the face of Modern Monetary Theory and Quantitative Easing by limiting its issuance over time with each of the 36 total block reward halvings cutting its inflation rate in half every time until the terminal inflation rate is ultimately zero percent annually once all 21,000,000 bitcoins have been mined and put into circulation.

Now with interest rates next to zero and equities as well as other risk-on assets are seeing their valuations soaring, people looking at their savings earning them nothing and are experiencing a fear of missing out on the tasty returns they are hearing about people making on trading platforms like Robinhood or flipping apartments and houses in the real estate market. So, they are eagerly taking on more risk to earn some interest on their principal or protect themselves against inflation, at the very least, by opting for equities as well as options over and above bonds like the US 10-Year offering about 0.67% that’s considered as the risk-free rate of return because it displays “zero default risk.” The Fed chairman this year has emphatically signaled at conferences and interviews on CNBC that, “We [Board of Governors of the Federal Reserve] are not even thinking about thinking about raising interest rates.” Investing in this 21st century is figuratively and literally entering a Brave New World.

Contrasting with the stock market of the early 2000’s where the yield on a US 10-Year bond was about 6%, investors today are forced into seeking out riskier opportunities to earn the same rate of return since the government is not guaranteeing it. Pairing long-term near zero interest rates with the current markets just off record breaking territory as the United States government approaches debt levels that it has not seen since World War II from CoViD-19 stimulus, shrinking GDP, and declining tax revenues; it would be foolish to not recognize the cavalier behavior that the governments have towards printing money and not take it as a warning that they simply may use their power to simply inflate their monetary bases by creating more fiat currency so they can use it to honor their debt obligations rather than simply not making payment because the urge to create money out of nothing in order to “fix” or “solve” their problems is far too great for themselves to resist (as seen historically).

It is a scenario posing a serious risk for the US Dollar’s livelihood and longevity into the foreseeable future as it may risk losing its status as the world’s reserve currency.

Fight Inflation, Not the Fed

The Fed is now the world’s largest investor by owning 22,913 different securities, valued at about $4.8 Trillion, in just a single branch at the Federal Reserve Bank of New York!

Since its inception in 1913, the Federal Reserve bank has been shrouded in mystery and often is the subject of conspiracy theories as well as opinions that are deemed controversial by the general public (mostly for the number of previous POTUS’s speaking out against the centralized banking system) due to its secrecy plus its private elite shareholders. It was meant to serve as an institution to maximize employment and stabilize the value of the currency by managing its issuance and total supply, but money back then was backed by gold or at least pegged to its value in a predetermined amount or rate in the yellow metal whereas fiat currencies today are backed by nothing other than the “full faith and credit” of the government of the United States of America. Some would argue that the dollar is given its value through coercion and violence or backed by oil.

From the time that the central bank of the United States was written into existence by the passage of the Federal Reserve Act by congress to establish economic stability trusting them to oversee monetary policy, it has been the focus of the Federal Reserve to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Although these objectives may sound idealistic, the means of their execution has not been so successful throughout history as there are many exhibits of negligence regarding the adverse effects and negative outcomes stemming from the Federal Reserve’s monetary policies that seem to have benefited the wealthy disproportionately to those in the tax brackets below them. Obstacles such as World War I, the Great Depression, World War II, and the Great Recession has slowly over time distanced people from real assets and honest value through inflation that they forced on the general population with phony fiat paper and certificates of deposit that are unlimited without any sort cap on their issuance and or real-time oversight in the Digital Age. The road back to real money and value is paved with bitcoin and its auditable, censorship-resistant, decentralized, and immutable proof-of-work blockchain.

In the history of the Federal Reserve system, the value of $1 in the United States has lost nearly 99% of its value. Inflation is the “invisible tax” that the Federal Reserve was tasked with fighting against before reversing their stance only just recently embracing it once again while ignoring the lasting effects that have shown that it is detrimental to the value of money and society as a whole. Bitcoin since has appreciated greater than 99% of its value versus the dollar and has the potential to position itself as the 21st century equivalent of “digital gold.”

The problem though is that the Federal Reserve needs stocks now more than it does bitcoin or gold after examining its balance sheet’s assets, but people need bitcoin more than ever as a hedge against against inflation and politics.

So, it is up to you to buy back your freedom and hold your own bitcoin.

SOURCE: Federal Reserve Bank of Minneapolis, Consumer Price Index [CPI-U]

Math & Science (Bitcoin)
vs. Politics & Violence (Dollars)

The true reward for buying bitcoin is seizing the sword of personal liberty by taking back your God given sovereignty, which will free you from the falling dollar and failing fiat that is under the dominion of the Fed as well as other central banks.

Money has been in a descent since its flight from gold-backing to fiat with a floating value tied to its total supply. Bitcoin seemingly as magical internet money rooted in math and science has experienced a rocket-like ascent from increasing adoption and rising demand for assets with fixed supplies, hence one’s that are scarce. Bitcoin compared to gold and real estate is similar for having a limited quantity, but stands apart from those two due to the influence and power that central banks and governments hold over them showing us historically through 6102 orders for their confiscation or coercion using politics and violence to seize control as well as destroy their free market economies.

By not having any centralized power with the ability to amend the historical record or total supply that can distort value and where it’s placed, bitcoin is the highest expression of capitalism to have ever of existed and a purely free form of honest money that is a literal truth machine honoring the sovereignty of the individuals using it in a free market as a tool to prevent undue inflation as well as loss of purchasing power over time from dilution of fiat currencies’ monetary bases. Having no board of governors or committees that have influence over the current mandates or future policies, Bitcoin is a decentralized and electronic payment network written on open-source code that’s auditable as well as available to anyone in the world with a public database keeping track of all transactions going back so far as the very first one ever. It is the most transparent form of governance and money the world has ever seen.

Bitcoin is the cure to the woes of world of fiat currency with its inflation and crony capitalism instilled by the Federal Reserve causing inequality. It is the best shot at a way to actually fix the economy, mitigate the problem of inflation, and possibly solve many problems plaguing the struggling pension plans as well as social security by adding some exposure to bitcoin just by chance it continues to be the best performing asset over the next decade. It is an opportunity for anybody to buy their own freedom and claim their own sovereignty enabling them to protect their wealth from the corrosive power of inflation as well as help build a new macro economy that is more fair, faster, harder, smarter, and stronger with bitcoin.

Owning some bitcoin is not as radical as it may be to NOT own some bitcoin.

“Yes, but we can win a major battle in the arms race and gain new territory of freedom for several years. Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.

Satoshi Nakamoto’s response to being asked “You will not find a solution to political problems in cryptography.”
DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Subscribe for More Insights & Info!

Modern Masterpiece

FEDERAL RESERVE BOARD AND FEDERAL OPEN MARKET COMMITTEE
LEAVES RATES UNCHANGED | FED FUNDS = 0 – 0.25%
FED TO MAINTAIN ACCOMMODATIVE STANCE UNTIL INFLATION TARGET ACHIEVED AND AIMS FOR INFLATION ABOVE 2% “FOR SOME TIME”

FED TO PURCHASE ADDITIONAL ASSETS TO SUPPORT ECONOMY STILL REMAINING COMMITTED TO USING FULL RANGE OF TOOLS

ECONOMIC ACTIVITY AND EMPLOYMENT HAVE PICKED UP, AND WEAK DEMAND PAIRED WITH OIL PRICES DOWN ARE SUPPRESSING INFLATION

HALF OF THE ECONOMY DEPENDS ON THE VIRUS AND THE HEALTH CRISIS WILL CONTINUE TO WEIGH ON THE ECONOMY

FED SEEKS 2% INFLATION OVER LONGER RUN

KAPLAN, KASHKARI DISSENT ON STATEMENT

STOCKS RALLY TO SESSION HIGHS DURING STATEMENTS, BUT FADE TO FLAT BY THE CLOSING BELL FOLLOWING POWELL’S PRESS CONFERENCE

BITCOIN RISES ABOVE AND HOLDS NEAR $11,000
ALTCOINS FADING FROM DEFI-PALOOZA

FOMC FED FUNDS RATE FORECAST
2020 – 0.13% (Unchg.)
2021 – 0.13% (Unchg.)
2022 – 0.13% (Unchg.)
2023 – 0.13% (Unchg.)
Long Run – 2.50%

FOMC INFLATION FORECAST
2020 – 1.20% (0.4% Chg.)
2021 – 1.70% (0.1% Chg.)
2022 – 1.80% (0.1% Chg.)
2023 – 2.00% (0.2% Chg.)
Long Run – 2.00%

POWELL: SIGNS OF IMPROVEMENT IN BUSINESS INVESTMENT AND ECONOMIC ACTIVITY HAS PICKED UP FROM DEPRESSED LEVELS

EXPECT UNEMPLOYMENT TO CONTINUE TO DECLINE, FED HAS TAKEN FORCEFUL ACTIONS TO ENSURE RECOVERY

INFLATION RUNNING WELL BELOW 2% LONG-TERM OBJECTIVE, DESPITE SOME HIGHER PRICES FOR SOME CONSUMER GOODS, INFLATION SUBDUED AND FED WILL CONTINUE TO INCREASE ASSET PURCHASES AT CURRENT PACE

POWELL: basically done all we can think of

FED MADNESS: A New Hope, Barstool & Bitcoin (Episode Four)

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

Warren Buffett

Turning the Tables
Well, well, well… look who took the dive into bitcoin and crypto, if not Dave Portnoy, the prolific founder of Barstool Sports as well as DDTG (Dave Day Trader Global), who just so happened to be a main character in the last episode of FED MADNESS. In the past week, he began making waves across social media talking openly about his intent and interest to buy bitcoin as well as learn more about “blockchain” and “crypto.” This is a very pivotal alliance that will prove to be a formidable move in the rebellion versus the Empire of Blue Checkmarks and Pin-Stripped Suits on Wall Street.

Barstool Brand and Bitcoin
Bitcoin receiving the Barstool Sports brand’s stamp of approval courtesy of the “El Pres” himself, Dave Portnoy, brings a massive audience of day traders, gamblers, and sports fanatics. It is a powerful partnership considering the guests and news that he and his company have hosted as well as generated lately from his interview with President Donald Trump to Miley Cyrus on the Call Her Daddy show plus the hiring an NFL hall-of-famer Deon “Prime Time” Sanders in addition to talking bitcoin and crypto with the Winklevoss brothers. The twins portrayed in the Social Network know the value of them given their experience at the genesis of Facebook as well as understand the value bitcoin and crypto, meaning they also know why having a brand like Barstool and Dave’s brings quite a lot of potential value from the addition of many new eyeballs and users. DDTG being an aggressive trader and wanting to capture the value that opportunity made the investment decision to trade dollars for Bitcoin (BTC), Ethereum (ETH), and ChainLink (LINK).

Full Disclosure: I have held positions in these assets for several years and still believe in their future.

DDTG meeting the Bitcoin Billionaires
Dave, as the leader of the DDTG gang of day traders and loyal stoolies, met with the Winklevoss twins popularly known as the first bitcoin billionaries in his Montauk home office to discuss bitcoin including blockchain and crypto too. Long story in short of how they came to find bitcoin and their claim to fame, Cameron and Tyler originally went on to buy bitcoin using much of their Facebook settlement money after their spat with Mark Zuckerberg discovering it over a random discussion that was accompanied by some tequila shots with an entrepreneur in Ibiza before going on to buy about 1 percent of all bitcoin and founding an exchange that would help other people gain access to buying and selling bitcoin and crypto naming their platform “Gemini.” Seeing those two paired with Dave Portnoy’s DDTG to help market their assets, exchange, and ideas about open-source software as well as transparent payment networks is monumental because in principle it is helping onboard new users to bitcoin and crypto assets while correlating to them appreciating in value accordingly with classic network effects as demand for alternative forms of money and scarce digital assets are increasing with inflation on the future horizon.

Teaming up with the Winklevii
At the start of the DDTG live stream last week after introducing himself and his familiarity with bitcoin and crypto to the twins, Portnoy mentioned his Twitter rant video from three years ago detailing him not knowing next to nothing about it then and admittedly shared that he still does not fully comprehend the way it works today. Tyler and Cameron put his worries at ease explaining that bitcoin is “gold for the Internet” and even though its creator, Satoshi Nakamoto, is unknown and seemingly mythical the open-source code speaks for itself. Quickly he learned and saw firsthand how simple it is to create an account with a bitcoin and crypto exchange like Gemini as well as linking his bank account “seamlessly” to it, and then it was off to the races for DDTG to start trading bitcoin and crypto even noting how much easier and faster it was than a traditional brokerage account like he has been using to trade stocks.

Learning the Force Inherent to Bitcoin and Crypto
After quelling his initial concerns, the brothers explained the mining process that confused Dave by putting it into terms he and his audience understand in saying that it is a process of ensuring transactions on the bitcoin network are valid ensuring nobody is counterfeiting or double-spending any funds by active nodes dedicating their computing power to essentially act as the referee (if they do a good job, they get paid with a block reward). Getting around to the notion that investing in bitcoin and crypto could bring a fortune like it did the Winklevosses, DDTG is aiming to become the next bitcoin billionaire while also helping more people striving to be like him make more money and protect their wealth. The talks really took a turn when the two brothers jokingly floated the idea of asteroid mining being the downfall to gold’s value due to its supply not being fixed like bitcoin’s with the Jeff Bezos, David Cameron, and Elon Musk-types heading to space seeking to monetize it from not only travel but also resource mining posing a risk that would “make it rain gold from the sky.”

Learning the Way of the Jedi
It hopefully is going to be a long and rewarding foray into bitcoin and crypto for DDTG and the gang against the cohorts of “Suits.” Dave when asking both Cameron and Tyler if he should pour all of his money into bitcoin, they both answered in unison responding before bursting into laughter, “Yeah, pretty much!” Putting his money where his mouth is after rationalizing with them about not knowing how email entirely works albeit it does whether they do or do not understand the technology’s mechanics, Portnoy made an initial investment of $150,000 into bitcoin, $50,000 into ether, and another $50,000 into ChainLink’s token for a total of $250,000 in both bitcoin and crypto aspiring to “make a million” in his first month.

Bottom of the First Innning for Bitcoin, Top for Crytpo and DeFi
Seeing that an increasing amount of smart people are becoming invested as well as more involved in bitcoin and crypto, the impression is that they know something that others do not, but the reality is simply that bitcoin is more scarce than US dollars or gold that gives it value and crypto creates use cases that can build additional with applications value on top of the core protocols. There is no reason for any fear missing of out because it is a long way still for bitcoin to disrupt the markets for gold and money, and crypto and its decentralized finance (“DeFi”) counterparts are only getting started with digital “stablecoins” vying to replace fiat paper money in the open-source finance movement towards more fair and transparent marketplaces.

A New Breed of Money
Barstool Sports and DDTG are making serious moves into bitcoin and crypto making a lot of sense for them in particular seeing the potential network effects in addition to a plethora of synergies because of their relationship to gaming, gambling, and sports. Together, bitcoin and crypto, are a new breed of money and value offering greater accessibility, higher security, and faster payments to millions of people, not just day traders and stoolies but major companies as well as institutions also, embodying freedom from corrupt and maligned powers. In the war against the Suits, they are backing the best horse by buying bitcoin that surpasses normal intelligence, speed, and security of traditional assets being a censorship-resistant, decentralized, digital, divisible, durable, electronic, immutable, open-source, peer-to-peer, permission-less, portable, programmable, psuedonymous, scarce, state-less, trust-less, unseizable, verifiable, and worthwhile store of value.

You need strong hands to HODL, to the moon!

JH

“I want all the bitcoins.”

Dave “El Presidente” portnoy
DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Subscribe for More Insights & Info!

The Great Flood of Fiat

“THE FAILURE OF MONEY to serve as a stable and sensible unit of measurement for financial transactions has caused innumerable financial dislocations. The dislocations caused by inflation or deflation are so well known that the public in virtually every country of the world has become fixated on the uncertainties of the value of money.”

Robert J. Shiller, Author or Irrational Exuberance

A Rising Tide Lifts All Boats?

The creation of money digitally through simply marking up a private central database as well as by physically printing it the old fashioned way onto banknotes are the primary methods of managing the flow and supply of the total stock of currency in a modern economy. If people value their time in money meanwhile the total supply of that same currency they accept hypothetically increases double in size of what it was previously, it equates to a theft of the value in their pay relative to the actual wage they earn requiring them to work twice as much to make up the difference. The reason for the widening dislocations mentioned by Shiller in the quote above can be attributed to the fact that anyone not able to achieve an income exceeding their costs of living including any debts and taxes cannot realize the level of savings necessary in which they could use it to invest and make their money “work for them.” The slim percentage of the population that has or have earned enough money for themselves to invest in diverse portfolios full of alternative assets, conventional fixed income instruments, traditional mixes of stocks, real estate holdings, and risky vehicles that exclusively offer cheap shares of startup companies not available to the public or retail markets sees the greatest benefit in the manufacturing of more money because they are well protected and positioned to even profit from it happening.

Cantillon Effects

The Cantillon Effect is a reference to the change in prices resulting in a change in the money supply. It refers specifically to the change in the relative prices occurring because the change in the money supply has a specific injection point and flow path through the economy, think of it as an examination of “trickle down economics.” In the financial system today, the first recipients of the new supply of money are the players in the convenient position of being able to spend and invest extra dollars before prices have increased leaving whoever is dead last in the line receiving their new dollars after prices have increased. In essence, it boils down to depict the government seizing purchasing power from its citizens (through what is considered a non-legislated tax) rather than collecting their money with congressional approval in attempt to close the federal spending deficit, for an example.

Evolution of Money

There is a movement rising as a silent protest against the centralized financial system that’s pushing to decentralize and democratize it. “Everything dies, baby, that’s a fact but maybe everything that dies some day comes back.” Similar to the prophetical lyric from the The Band’s song “Atlantic City,” just because the centralized financial system may be appearing to slowly be showing signs of its fall doesn’t mean that it is not going to come back in some new form. There are serious talks beginning to focus on the launch of unexciting forms of blockchain technology to use its decentralized architecture to issue, monitor, and track government-backed assets as well as central bank digital currencies (“CBDC’s”) although they will still be governed by same few people from the same centralized institutions in control today by giving themselves backdoor access to use the minting power as they wish which completely defeats their purpose and value proposition.

The Great Flood of Fiat

Money is raining down from the central banks around the world. The flows they are facilitating with the increased creation of currency is culminating in what would be seen as a tsunami of currency in proportion to what is considered an already saturated market that many regard as overvalued. The everlasting expansion of the money supply will eventually crunch its value in a devastating manner that wipes out much of the remaining trust that the macro economy has for assets denominated in fiat reserve currencies. Hence, the reason why bitcoin and crypto assets were created with their transparent and verifiable units of account plus are being seen as potential stores of value and forms of insurance for having finite as opposed to infinite supplies and presenting a new-fashioned solution to our growing problem with fiat currency.

Flight to Bitcoin and Crypto Assets

Fiat currencies whether people like it or not are not automatically better for being on some distributed ledger technology if the same forces causing their downfall now remain in power with the rise of CBDC’s, and they will provide less in terms of innovation from what already exists today in financial technology as well as compared to bitcoin and crypto assets that are censorship-resistant, fixed to hard supply caps, and programmable. Considering the costs, lack of speed, and vulnerabilities to counterfeiting associated with fiat currencies makes an attractive investment case for bitcoin as an alternative asset and payment network to the legacy financial system. As a non-sovereign asset that is neutral to any country’s government or political regime that could use its influence to create any excuse necessary to debase their national currency despite its reasons for doing so being justified by the citizens, bitcoin is looking to give shelter from the coming storm. The bottom line is bitcoin looks like it might actually be able to withstand the flood of global currencies and act as a flight to safety if its price were to sail into the six or seven digit range or even hold its value relative to the rising tide and tumult in fiat.

DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

FED MADNESS: The Rise of the Day Traders (Episode Three)

“In 2010, the Securities and Exchange Commission (SEC) began looking at the practice of quote stuffing in relation to the Flash Crash. The agency started assessing whether the practice violated ‘existing rules against fraudulent or other improper behavior’ or caused a disadvantage through distorted stock prices. SEC chairman Mary Schapiro said the agency would assess whether traders must hold orders open for minimum periods of time and other changes to financial trading. No such regulations have been enacted (except in Italy).”

— Wikipedia page for Quote Stuffing under “regulatory changes and enforcement.”

Technology, Order-Preferencing Arrangements, and Robinhood

Technology can be exciting for how it can enhance and simplify our lives as well as horrifying for what can be done with it when it falls into the hands of bad actors seeking to exploit its power.

Much of the financial industry has been trending towards a digital future for decades with the disappearance of runners on the floors of stock and options exchanges with traders now on their mobile devices, tablets, and laptop terminals. Recent trends influenced by this years events have accelerated the need for execution, privacy, security, and quick payments for both individuals and institutions alike. Large retail brokerage firms offering discounted or even free trades are being exposed for negotiating and selling their order books to large securities dealers through order-preferencing arrangements, which were supposedly pioneered by Bernie Madoff.

Robinhood Markets Inc., the maker of the free trading app, has grown in popularity with an increasing customer base over the past year for a plethora of reasons. The app, “a pioneer of commission-free investing,” moved into crypto asset trading quickly in 2018 helping it grow its user base when major platforms were skeptical of buying and selling bitcoin, ether, and other digital assets on behalf of their customers. Aside from its crypto product, Robinhood has cash management, fractional shares, stocks of individual companies, bundles of investments (ETFs), and options offered through Robinhood Financial as well as a “Gold” package that starts at $5 per month that allows access to research reports, trading on margin, and the ability to make larger deposits with faster account funding. A 30-day trial is available for the latter product, but that is not where the company generates most of its revenue.

The retail investment platform has come under careful examination by the Financial Twitter community, “FinTwit,” after its practices known as payment-for-order-flow in financial arrangements with third-party market venues went viral following a series of tweets from a popular account called Zero Hedge (@zerohedge) months after being banned from the social media website. The tweets included details of such arrangements as well as the amounts received by Robinhood Financial and Robinhood Securities for routing trades to a handful of venues that happen to be the most dominant high-frequency trading firms notorious for “front-running” retail investors to make large sums of money off of the smallest fluctuations in prices from their algorithms by buying the shares before the Robinhood traders can get them and turning around to sell those shares that they wanted back them at a negligibly different price. These firms use the excuse that they are “providing liquidity” to the market to get away with selling the shares at marginally lower or higher prices that in turn accentuates the momentum behind the market for those shares while those firms make money either way it goes by being directed the equity order flows of retail trading clients telling them which way they want it to go.

Stealing from the Poor, and Giving to the Rich

These revelations are ironic.

They show the direct opposition Robinhood’s business model has with their namesake, the heroic outlaw who steals from the rich and gives to poor on top of being beloved for his deeds by the townspeople. Instead, the app steals from the poor to give their orders to the rich seeking to become richer at the disgust of FinTwit as well as niche trading communities on Reddit. It is showing there is a hidden cost to discounted trades or free brokerage firms while highlighting the need for greater transparency in our financial marketplaces because as billionaire investor and NBA Warriors team owner Chamath Palihapitiya (@chamath) who shared the Zero Hedge tweet also responding sharply to it stated, “And this will eventually fuck over the same retail traders on @RobinghoodApp who started it in the first place. This is shady AF…”

Retail traders in the traditional commission model use their trading applications and platforms to place orders that are taken by the broker and then routed to a market maker who executes the trade, but in the no-commission model without any fees on trades market makers pay a pre-set fee to the broker in the pay-for-order-flow model (Robinhood, for example, receives payments averaging less than a penny per share for order flows and/or each trade executed). This is the key business driver that enables the zero-commission stock brokerage industry thanks to those unsavory order-preferencing arrangements that are cropping up elsewhere too. Crypto asset exchanges such as Coinbase Pro have their order books practically front-and-center on their user interfaces to enhance the experience from having a visualization of changing prices and with varying increments of volume. Giving the trader a view into the market while also effectively democratizing it for everyone’s benefit by allowing anyone to see the order book, thus using it to their full advantage seeing the spread in buyers and sellers to find their own sweet spot among all of the open bids and asks.

According to SEC Rule 606 disclosures, the selling of order books and order routing practices also happens at the big retail brokers such as Charles Schwab, e*Trade, Fidelity, and TD Ameritrade among others. It seems that the retail brokers have put in place limits that cap how many trades are sent to specific market makers, typically seen in percentages, to mitigate risk and concentration concerns though it is not an enforced standard or even used by everyone in the industry. For not considering all execution quality factors, Robinhood was fined as well as paid $1.25 million in December 2019 without admitting or denying wrongdoing according to the FINRA announcement of “best execution violations related to its customers’ equity orders and related supervisory failures.” Not considering price improvement, for instance, is a major concern for financial authorities that want to prevent market makers from taking retail traders for a ride and creating undue momentum and volatility.

The Rise of Davey Day Trader Global

No suit is safe with the rise of Davey Day Trader Global, or DDTG for short.

Dave Portnoy, founder and president of Barstool Sports as well as owner of DDTG, who made his bones from his popular blog that has grown an avid almost cult-like following focusing on gambling, sports, and hot takes in this golden age of content successfully pivoted away from his usual shtick towards day trading and finance during the quarantine with the lockdown preventing much of the professional sporting events from taking place. Many of the loyal Barstool followers known as “stoolies” that would have been otherwise betting on sports are now transitioning towards investing in stocks and joining the trading platforms mentioned above, which are basically just another sort of casino with their own variety of games of chance that people can wager on (arguably, they are just as dangerous). While his exploits are gaining traction in the financial news making for an entertaining underdog story, odds are more likely than not that his story will end up being one that winds up being a cautionary tale of investing in this century.

Attention began with public announcements via social media that the Barstool Sports founder was skeptical of Dr. Anthony Fauci when the NIAID Director urged Americans to take health and social distancing guidelines seriously suggesting the precautions would help curtail the spread of coronavirus as well as recommended holding off on sporting events until further notice. Dave Portnoy, a specialist in being a contrarian and stirring controversy on the Internet, then doubled down on his stance that the shutdown from the pandemic should not be taken as seriously as the health experts and mainstream media suggest. The self-proclaimed “King of Content” soon began taking swipes at one of the greatest investors of all time, Warren Buffett, who credits traditional value investing and his long-term approach to his success.

“I’m sure Warren Buffett is a great guy but when it comes to stocks he’s washed up. I’m the captain now.”

— Dave Portnoy, Founder of Barstool Sports

Portnoy who believes in his and DDTG’s ability to outperform the entire market being weary of the “blue checkmarks” and “pin-stripped suits from Wall Street,” referencing the badges on Twitter of verified accounts and hedge fund managers that are often featured with talking heads on financial news networks proclaimed, “Warren Buffett is 90 and washed up!” From that point forward, he has started making the headlines after buying the airline and cruise stocks following the announcements that Berkshire Hathaway and the “Oracle of Omaha” dumped their shares. Live streaming his forays into day trading all along the way, the rise of Davey Day Trader Global began and quickly saw many of the loyal stoolies and gambling wannabe’s jumping on the day trading bandwagon becoming “retail bro’s” creating accounts on discounted and free brokerage firm’s platforms to trade side-by-side with Dave and DDTG.

A Level Playing Field? Not So Much…

Unbeknownst to many retail traders, the market is a not so level playing field.

Market makers have the power and resources to employ complex strategies and advanced tactics that skew the arena in their favor by manipulating and moving markets. Anyone suggesting that Dave Portnoy also known as “El Presidente,” a self-admitted novice that does not know what he doing and flying blind in his own trading cockpit, is trying the bend stocks towards his own will and good fortune is obviously ignoring that glaring truth above or just severely uninformed about of the magnitudes of difference that DDTG wields compared to the “Flash Boys“-like high-frequency trading firms on Wall Street. For the most part, Dave Portnoy and his retail supporters in the stock market are trying to compete against forces that are by far greater than they are that is making them out to be some of the biggest victims or martyrs at the hands of these questionable practices from the brokers and market making firms mentioned above. On its face, it appears to be an easy comparison and pun to say its another story resembling David and Goliath.

“The U.S. stock market now trades inside black boxes, in heavily guarded buildings in New Jersey and Chicago.”

― Michael Lewis, Flash Boys

Amplifying egos and deflating dreams in milliseconds or less, the high-frequency trading algorithms and firms using the stocks that Dave Portnoy shouts out of the comment section or pulls from scrabble pieces on his streams can wreak chaos on him and his unwavering DDTG gang of day traders trying to buy and sell those shares that these firms front-run while printing their own profits either way the market decides to go. It is actually making the case for index as well as value investing too as opposed to day trading and momentum investing because if Dave along with his faithful stoolies realized the significance of the saying that they love to repeat, “Stocks only go up.” If only they accepted that there are bigger and better equipped firms with their own inside stairwells leading to the black boxes dictating the direction of the stock market, they could see that simply buying the index fund for the entire market or exchange traded funds for specific sectors and calling it day, more often than not, is the best as well as most cost-effective game plan for capturing gains rather than just picking and trading random stocks without any sort of methodology or strategy.

It’s “big brain time” for El Pres and the gang of DDTG day traders as well as financial professionals supporting their brick-by-brick movement, and that means they need to devise a scheme that cuts back to Barstool’s core of being, “By the common man for the common man.” Returning to gambling on something that has a more fair and transparent market structure, bitcoin and crypto assets as alternatives that he and his followers can buy and speculate on as well as educate others about would greatly help limit the obstacles that newcomers encounter while exploring this new asset class and market as well as aid in pushing the them into the mainstream, not to mention, so they can directly benefit too from becoming early adopters with handsome gains from owning them ahead of the “suits” following his daily streams that are too about worried their client’s stock portfolios and reputations on Wall Street to make such a move. Portnoy wants a fight against the suits, and the best way to do so is by not playing into their games that they rigged for themselves and instead opting for new ones that they don’t hold authority over or cannot influence easily with their money printing machines.

A New Hope

A rebellion is underway against the same Empire of Blue Check Marks and Pin-Stripped Suits on Wall Street, bitcoin wants to restore freedom and transparency in global marketplaces while creating a new alliance of mathematics and money.

Think about the possibilities if Portnoy of Barstool Sports with the backing of the Penn Nation Gaming company and his DDTG gang of day traders fully embraced bitcoin. Their relationship should be especially symbiotic to one another since gambling and prediction market’s websites commonly are known to accept and deal in bitcoin for its ability to make quick, secure payments online. It also levels the playing field for everybody involved from the ease of access and transparency inherent to Bitcoin compared to trading in the stock market these days.

Wouldn’t it be a commendable gamble if buying into bitcoin in protest against “the suits” paid off generously for DDTG? Barstool and Penn should combine efforts to increase its acceptance and educate people about it as well as teach them about responsible investing plus all of the risks associated with it. Although it is not a day trade and more of an insurance play for the long-term with the outlook that bitcoin becomes the next world reserve currency, there is an opportunity that owning even the smallest percentages (such as 1% of total assets) will have a positive impact on the performance of one’s portfolio and overall net worth as a hedge against debasing fiat currencies.

“You can’t win, Darth.”

― Obi-Wan Kenobi, Star Wars Episode IV: A New Hope

Let the suits take their swipe at you, Dave. It’s time to become one with the force and help make the next episode in my series of FED MADNESS be named A New Hope: Barstool & Bitcoin. You can’t beat the suits at their own game or fight the Fed without the resources they have at their disposal, but if you let them try to strike down DDTG then it could be your way of delivering a much more devastating blow to them in the future by forwarding an important message to the next generation of day traders about the dark side of finance.

Bitcoin Bends to No One’s Will, Not Even Wall Street

If bitcoin hit its all-time-highs from speculators, just imagine what DDTG and the stoolies would do for its price!

While possibly being instrumental in taking the orange coin and its entire asset class with it to new heights, the increasing value in annual lows for bitcoin is really driven by its “HODLers” or owners that refuse to sell despite where the price is going holding steady in the belief their “stack” will be worth much much more in the future. A number of applications and services are available today that allows people to buy and send as little as one one-millionth of a bitcoin, the smallest unit of account named a “satoshi” or “sat” for short, which allows them to accumulate small increments that they stack on top each other through the ebbs and flows of the market without taking on too much risk at one time. This translates to bitcoin being a better savings mechanism should its price continue to rise in value versus the dollar-cost-average basis of their initial investment allowing those people to create more wealth for themselves or give themselves more money to bet with if they so choose to take profits.

“When the state finds itself unable to meet its committed expenditure by raising tax revenues, it will resort to other, more desperate measures. Among them is printing money.”

― James Dale Davidson & Lord Rees-Mogg, The Sovereign Individual

“Taking profits is for losers,” Portnoy has gone on the record saying when speaking to financial pundits recently. From the sounds of it, he already likes the idea of “HODLing” and would fit right into the bitcoin and crypto asset communities. As a proponent for freedom and prosperity, Dave Portnoy with DDTG and Penn National have a tremendous opportunity with incredible upside if they chose to adopt and embrace bitcoin and crypto fully themselves as well as within their own respective companies to help them become more mainstream, understood, and widespread.

Not expecting that it will come easy to DDTG or that they will suddenly decide to jump head first into crypto, but it wouldn’t be that hard to change the “brick-by-brick” mentality to just apply it to bitcoin easily changing it to a “sat-by-sat” movement that he and all the stoolies can do together. They can still get in on the ground floor of a new currency and asset class with fabulous potential into the foreseeable future with demand for digital payments increasing in these modern times. As the Rise of the Day Trader takes place, they should know the facts before embarking on their investment journeys and equip themselves with the knowledge as well as tools necessary to level the playing field before defeating the suits once and for all.

The Smart Money vs. Schrute Bucks

Smart money has enter the chat, and they are putting their money where their mouth is by buying and holding bitcoin for a long-term payout.

Bitcoin, being a non-sovereign asset with a hard-capped supply backed by mathematics and secured from its strong encryption, will never be bent or broken by it ever being massively inflated similar to the “Schrute Buck“-like dollars that are being created at the behest of the Suit Empire. Having been born out of the financial crisis of 2008 that has recently been trumped by the level of stimulus of the 2020 crisis, bitcoin’s edge is its programmatic scarcity and verifiable transparency that Wall Street filled with its cheap tricks of financial engineering and imitation games offering shares in the next so-and-so company could never can truly offer. As the show goes on and the stakes becomes higher, I believe betting on bitcoin will turn out to be an incredible gamble with huge growth potential compared to bonds, stocks, or any other asset if economic trends continue to head in the direction and on the trajectories that they are heading at the moment.

The new breed of day traders without a fair fight unless they adapt to have more sophisticated trading setups can barely compete if they can even stand a chance against the much larger, faster participants that easily exploit them whether they know it or not. Not to discourage them from trying, but rather give them the edge and information needed to help level the playing field as well as protect some of their wealth while trillions of dollars are being added in bond buying programs for corporations additionally with mortgage-backed securities, repurchase agreements, swap lines, and temporary credit facilities from our Federal Reserve bank may end up culminating into a giant tidal wave of money that wipes out the entire economy as we know it after seeing a total loss in value of the underlying currency. As socialist policies and politicians are slowly normalizing themselves and play their infinity games with our dollar as our stock market rages back towards all-time-highs, it needs to be understood that they represent the descent of money and its value figuratively and literally by issuing more of it for innumerable causes they deem worthy, which will end up diluting the accumulated wealth of the nation as well as the savings of hardworking men and women earning enough to make it in the top tax brackets while they simultaneously try to increase their taxes on them.

Investing in the infrastructure layer of a newer, more transparent macro economy by buying bitcoin and ether as well as the application layers being built on top of their technology gathering users from around the world will be how the younger generations in this decade create wealth that lasts them centuries. Crypto assets have greater property rights and protections that were not possible previously with traditional assets coming before them since they are bearer instruments that are digital as well as attached to distributed ledgers available to anyone around the globe possessing an internet connection for real-time auditing and verification. Bitcoin, emerging as the most sound electronic cash system in the world, preserves the highest ideals of Capitalism and addresses the problems that are plaguing fiat currencies around the world that are vulnerable to being debased by irresponsible bureaucrats and politicians.

All the best and to the moon,

JH

Drop the stocks and start stacking sat’s in bitcoin!

Bitcoin is money for smart people, you probably wouldn’t be interested.