Selective Updates

Crypto Update

What a difference a year makes.  Last year I penned My Views on CryptoSince hitting its peak of $19,783 last December (17th) the drop has been breathtaking to say the least.  The -84% haircut (through today) makes even GE (-63% this past year) look like a great investment.  Though enthusiasts maintain the theory that a need exists for an alternative to fiat currency, the reality is that other than some emerging and frontier markets the real world has yet to embrace this concept.  The continuing requirement to classify many ICOs as securities may be a contributing factor to the malaise.  Yes, the wild west is being tamed.

I think it may go a little deeper though.  Consider this:

  • the majority of ICOs require Bitcoin to purchase
  • If the US market is limited until SEC compliance is obtained the supply/demand ratio is impacted
  • As the price drops, mining becomes unprofitable
  • With pricing pressure, the speculation component becomes riskier

In a nutshell, my belief is that the ICO aspect is artificially drawing down the cryptocurrency space but remain doubtful that the glory days will return anytime soon.


Yield On Cost Update

In September, I mused on the YOC metric.  A current, real-time example of a valid potential use is probably worthy of discussion.  The view presented by YOC is generally framed by initial yield and dividend growth compounded by the time held.  Over the past two years I’ve had a stagnant YOC for two primary reasons:

  1. Some of my longer term holdings were lost via mergers for cash, and
  2. My current focus on M&A action – which tends to initially be more of a short-term view – for a third of my portfolio.

My portfolio’s average YOC today sits at 3.54%.  When compared against treasuries (with their increasing yields) my view is the risk premium associated with equities, coupled with the tax benefits with treasuries are beginning to converge.  My cross-over point is about a 1% differential and when attained, I’ll reenter the bond market following a 10-15 year absence.  Catfish Wizard recently wrote on his particular strategy.


‘Tis The Season Update

The annual addition to the trust has been completed with the first foreign issue.  With Friday’s market swoon, Royal Dutch Shell (B shares) was added to this portfolio.  The other change during the year was the loss of WGL via merger for cash in July.  This cash was redeployed in August into Atmos Energy (ATO).  Incidentally the acquirer, AltaGas (ALA.TO,ATGFF) was subsequently forced to cut their dividend by 56%).  Kind of like taking the money and running on that one!


There it is – akin to a Greatest Hits release.  In all seriousness though, I think it’s fair to share some of the thoughts that play a role in the direction my actions take me.

Until next week …

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An Historic Day

marchlifeToday saw worldwide protests to demand that student’s lives and safety become a priority by ending gun violence and mass shootings – starting with schools.  The movement, born of tragedy, has morphed into a cause not dissimilar to the ones I saw during the Vietnam war – sans violence.  These protests seek to place the spotlight on Congressional inaction and President Trump’s failure of leadership to prevent further violence.

In a surprising twist, these students have already succeeded in gathering the support of at least one leading Republican donor, perhaps dampening the hopes that this issue would subside prior to the midterm elections.  Now this issue (among others) could be a front-and-center talking point ranking up there with NRA scorecards and contributions.  Perhaps the conservatives that supported Citizens United v. Federal Election Commission in 2010 will rue that decision as the tables could be turning.

At the very least, the students of Marjory Stoneman Douglas High School are gaining an invaluable civics lesson which crosses all the societal divides currently plaguing America today.  If their efforts gain further traction, we could be witness to a generational change agent over the long term.

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Johnny-come-latelies

Generally I refrain from back-to-back posts with similar topics but decided to make an exception this week as the moving parts have kicked into high gear.  My post last week addressed my uneasiness with cryptocurrency as well as my interest in the underlying blockchain technology.  It appears that my view has some support as two blockchain ETFs debuted on January 17th (BLOK and BLCN) and one January 25th (LEGR).  This should be followed by KOIN next week.  Horizons and Harvest (HBLK) also have ETF applications pending.  Grenadier penned a piece on Seeking Alpha that did some analysis on the first two.  Four of LEGR’s top five holdings are included in either one or both of the originals so it will probably be similar.  David Snowball highlights this sentiment in his piece There’s no idea so dumb that it won’t attract a dozen ETFs stating, “…there are no publicly traded companies that specialize in blockchain; there are mostly companies with a dozen other lines of business that have some sort of efforts going into blockchain.”  This is 100% correct.

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My Views on Crypto

There have been many times where my opinion of cryptocurrency and blockchain have been sought.  My thoughts have always been – and continue to be – that blockchain holds promise while Bitcoin and most of the other cryptocurrency contenders have little merit.  Point of fact being I did add to my blockchain centric investments last month while refusing to play in the pure cryptocurrency sandbox.  With the current euphoria I decided this week to at least frame my position a little while noting I could be either wrong, premature or both.

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