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Why Investors Can't Afford to Not Have Exposure to Blockchain

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Why Investors Can't Afford to Not Have Exposure to Blockchain Source(s): 123rf.com, Investing.com #GetOffZero: Why Investors Can’t Afford To Not Have Exposure To Blockchain Technology & Digital Assets September 2020 Words of Wisdom “Any plan conceived in moderation, must fail when circumstances are set in extremes” Prince Metternich “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction.” Bill Gates “The four most dangerous words in investing are: This Time It’s Different...” Sir John Templeton 2 The Dilemma Of Highly Priced Assets 3 In 2000, Warren Buffett Said US Equity Valuations Were Stupid (His Words) 20% Today Source(s): InvestorFieldGuide.com 4 2000 GMO Forecasts Reflected US Valuation Stupidity, Negative Returns… Source(s): GMO 5 Most Investors (including my Chairman) Believed Long-Term History Would Rule Components of Long-Term Portfolio Returns 1926-2000 2000-2010 Component Avg. Return Proj. Return “Risk Free” Rate 4% 2% Credit Risk 2% 2% Equity Risk 5% (4%) Illiquidity Risk 5% 10% Structuring Risk Variable Variable Source(s): NYU Stern, GMO, MCCM 6 When Circumstances Were Set In Extremes Ended Up With New Abnormal ’80-’99 ’00-’19 Avg. Return 13.8% 4.6% Avg. Drawdown -10.5% -16.5% Source(s): JPMAM 7 Turns Out Buying Assets At Extreme Valuations Yields Poor Future Returns Cumulative Total Return By Strategy Traditional Portfolios Failed To Deliver Necessary Returns Source(s): Bloomberg 8 Endowment Model (Disciplined Approach) Delivered Far Superior Results Private Equity Top Tier More Exposure to VC Endowments Hedge Average Funds Better Asset Allocation Endowment Traditional Traditional Portfolios Institutional Failed To Deliver Portfolio Necessary Returns Average Individual Return Source(s): 20 years ended 6/30/2016 TIAA CREF, HFRI, CA Private Equity Index, Public Pension Data, NACUBO, Top Tier Endowments (HYPS) (Period Ended 6/30/2017) 9 Back To The Future #2000Redux 10 GMO Forecasts Negative Returns for US Assets Again Over Coming Decade Alpha Source(s): GMO 11 Other Pundits Pointing To Decade Of Very Poor U.S. Equity Returns As Well Source(s): @HussmanFunds, ResearchAffiliates.com 12 Real Returns On Traditional U.S. Portfolio Very Unappealing For Next Decade Enhanced Security Market Line Security Market Line Source(s): ResearchAffiliates.com 13 Has The Inflection Point Arrived? 14 Gann Financial Time Table & Benner Cycle Both Point To 2020 Panic Period Watch for significant days in lunar year: March 21, June 22, Sep 22, Dec 22 2018 89108 Source(s): Time-Price-Resaerch.com 15 U.S. Equities Wildly Overvalued On Every Measure, Need 57% Drop To FV! Source(s): AdvisorPerspectives.com 16 U.S. Equity Valuations In Rarefied Air, Now Worst Of All Time, Ends Badly... Source(s): AdvisorPerspectives.com 17 Forward P/E Shows No Room For Margin Expansion, ATH Margin Adjusted Source(s): Yardeni.com 18 At Some Point Investors Finally Realize Corporate Profits Not Growing... Source(s): @LanceRoberts, @sentimenttrader 19 How Can Rational Investor Buy Business Selling For >10X Revenue? Can’t Scott McNeely at Sun Microsystems summed up Tech bubble madness best in 2000... To pay 10X revenues for a stock is ludicrous (higher is insane), you will lose money. In Sun’s case, you lost 98% of your money over next 8 years... Source(s): @jessefelder, @NuitSeraCalme 20 Wait, What? Bonds > Stocks In U.S. Since Jan 2018? Huge Win Q418 To Now January 2018 to Current October 2018 to Current Source(s): Bigcharts.com 21 How Did We Get Here? 22 Words of Wisdom My friend summarizes the situation best, “I recall a time when I did not know the names of the global Central Bankers, I long for those days to return....” Anonymous “There is no answer in the available literature to the question why a government monopoly of the provision of money is universally regarded as indispensable as it has the defects of all monopolies...” Friedrich Hayek “With a gun a man can rob a bank, with a bank a man can rob the world...” Carter Glass “I was reading in the paper today that Congress wants to replace the dollar bill with a coin. They’ve already done it. It’s called a nickel...” Jay Leno 23 Central Bank Definition: Oversight, Monetary Control, Lender Of Last Resort A central bank, reserve bank, or monetary authority is an institution that manages the currency, money supply, and interest rates of a state or formal monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and also generally controls the printing/coining of the national currency, which serves as the state's legal tender. A central bank also acts as a lender of last resort to the banking sector during times of financial crisis. Most central banks also have supervisory and regulatory powers to ensure the solvency of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks. Central banks in most developed nations are institutionally independent from political interference. Still, limited control by the executive and legislative bodies exists. Source(s): Wikipedia.com 24 United States Dabbled w/ National Bank Model, Jackson Busted Monopoly First National Bank – 1791‐1811 The Jackson Veto ‐ 1832 Andrew Jackson vetoed the bill re‐chartering the Second Bank in July 1832 by arguing that in the form presented to him it was incompatible with “justice,” “sound policy” and the Constitution. The bank’s charter was unfair, Jackson argued in his veto message, because it gave the bank considerable, almost monopolistic, market power, specifically in the markets that moved financial resources around the Second National Bank – 1816‐1836 country and into and out of other nations. That market power increased the bank’s profits and thus its stock price, “which operated as a gratuity of many millions of dollars to the stockholders,” who, Jackson claimed, were mostly “foreigners” and “our own opulent citizens.” He then suggested that it would be fairer to most Americans to create a wholly government‐owned bank instead, or at least to auction the Second Bank of the US’s monopoly privileges to the highest bidder. Source(s): Wikipedia, U.S. Money vs. Corporation Currency – Crozier, 1910, BusinessInsider.com 25 Morgan Got Rid Of Competition, Father-in-Law Helped Steer New Course Source(s): Wikipedia.com 26 Aldrich Plan Created Creature From Jekyll Island (Fed), Concentrated Power Source(s): U.S. Money vs. Corporation Currency – Crozier, 1910, Creature From Jekyll Island 27 T.J. Was Right, Banks Controlling Issuance Of Currency Leads To Theft... "I believe that banking institutions are more dangerous to our liberties than standing armies, if the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around these banks will deprive the people of all property until their children wake up homeless on the continent their fathers conquered...” Thomas Jefferson Source(s): U.S. Money vs. Corporation Currency – Crozier, 1910 28 What Goes On Inside Mariner Eccles Building Resembles Stranger Things... Federal Reserve Inflation Monster – 1910 Mindflayer ‐ 2018 Board Building ‐ 1937 Hawkins National Labs ‐ 2016 Source(s): Wikipedia.com, Creature From Jekyll Island, elle.com 29 Central Bank Bubble Blowers Have Been Working Overtime Since Inception Source(s): U.S. Money vs. Corporation Currency – Crozier, 1910, measuringworth.com 30 Jefferson & Keynes Warned Us About Danger Of Fiat Currency To Capitalism Source(s): QuoteHD.com, Karatbars.com 31 Free Money Era (QE) Has Inflated Global Real Estate Bubble, Unaffordable... Source(s): IMF.org, Fortune.com 32 Where Paper Wealth Exploded, Real Estate Prices Soared, Rich Get Richer Source(s): Compass.com 33 Century Of Central Bank Profligacy Led To Greatest Inequality In History Source(s): chartbookofewconomicinequality.com, DB Research 34 Central Banksters Have Done Amazing Job Concentration Wealth In Top 1% Source(s): @trevornoren 35 Equity Returns Seem Too Good To Be True? Your Currency Being Destroyed Source(s): SeekingAlpha.com 36 How Did You Go Bankrupt? Two Ways, Slowly At First, Then All At Once… Source(s): Reportfocusnews.com, 37 Equity Returns Seem Too Good To Be True? Inflation Stealing Your Wealth Source(s): TradingEconomics.com, @SteveHanke 38 Once Government Loses Control #RiskHappensFast, “Priceless” Goods… Source(s): Wikipedia, KFGO.com 39 When Dictator Playbook Emerges, Citizens Seek Security Of Sound Money Source(s): Statista.com, MCCM Research 40 In Challenging Investment Environment, Need an ALPHA Driven Model 41 Four Ways to Make Returns, Must Take “Risk” in All Four, Be Compensated Components of Long-Term Portfolio Returns Outlook Component Average Return DM EM “Risk Free” Rate 4% 1% to 2% Credit Risk 2% 1% to 2% Equity Risk 5% (4%) to 2% Illiquidity Risk 5% 7% Structuring Risk Variable Low Note(s): Projected returns are not a guarantee of future results. Historical Averages Ibbotson Style Data for Stocks, Bonds, Cash for 1926-2011, Cambridge PE Data for Illiquidity Premium. Outlook estimates are current risk free rates, current bond yields and forecast equity returns in developed and emerging markets from Bloomberg and GMO. Illiquidity forecast is MCCM estimate. Source(s): Bloomberg, GMO, MCCM estimates 42 Everybody Loves #FANGMAN, Investors Inflating Tech Bubble 2.0 w/ Fed $ GDP of Japan + India... Source(s): @Schuledensuehner, @LanceRoberts 43 Cyclically Adjusted P/E Ratio; U.S. Above Average, EU Average, EM Below CAPE Ratios Are Long‐Term Indicators, Favor EM > DM Source(s): @SoberLook, @CAPE_Invest 44 Long/Short Equity Strategies Have A Long History of Beating The Markets 240% 220% Ann. Return Volatility 200% HFN Long/Short Equity Index 6.6% 6.8% MSCI World Net 4.1% 15.0% 180% S&P 500 5.3% 14.4% 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% -60% HFN Long/Short Equity Index MSCI World Net S&P 500 eVestment., Note(s): Data shown from 04/01/00 to 12/31/17.
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