31 August 2017: A classic bubble

Last weekend, Tim went to a barbecue at his wife’s company. He had an interesting conversation with the spouse of one of his wife’s colleagues on purchasing cryptocurrencies. This guy was lyrical about the returns he had achieved recently by purchasing and selling cryptocurrencies such as Bitcoin, Ethereum and Gulden. To Tim, his story had all the characteristics of a classic bubble. According to his conversation partner, this technological innovation is very different from the rise of computer and internet technologies, because of the decentralized nature of cryptocurrencies (“This time it is different.”). The trading price of cryptocurrencies experienced a dip some months ago after years of stormy climbs, but has risen since then even more vigorously. (A recovery from a dip confirms euphoric traders in their belief in cryptocurrencies.) His conversation partner also mentioned that some of his colleagues bought cryptocurrencies some weeks ago, although they have a total lack of understanding of cryptocurrencies and their markets. They were triggered by a story of another colleague who had bought two new cars from the benefits of his investments in cryptocurrencies over the last two years. (“You are a fool if you do not invest in something that makes such a good profits.”)
Data of late show that some investors are moving away from stocks. This might be due to the fact that stock prices are expensive from a historical viewpoint. But we should not be surprised if a substantial group of investors is lured by the seemingly unlimited earnings that have been made with cryptocurrencies during the last few years.
The following scenario is not at all unrealistic: if the cryptocurrencies bubble bursts in the upcoming period, it might also hit stock prices very hard, because of the great number of investors who have switched partly or fully to investments in cryptocurrencies and who suffer big losses. A black swan called Crypto C.?

white-chapel-logo-small

All three major US indices gained yesterday after better-than-expected data and tax-reform talk. The Dow was up 0.12%, the S&P 500 gained 0.46% and the NASDAQ a whopping 1.05%. Wednesday was clearly a day at which investors were in a good mood. Volatility eased steadily during the day. The VIX closed almost 7% lower. The effect on UVXY ETFs could have been worse, but the damage was limited to a decline of 1.22%. XIV ETNs were up 0.44% for the day.
Danny Daredevil is still waiting for more volatility to show up. His RSS dropped to just below 82%. Adventurous Anny is holding cash. Her RSS remains unchanged at just below 4%. Solid Suzy and Lazy Larry profited again. Their RSS now stands at just over 22%.
None of our models gave a trading signal at the end of yesterday’s session.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

81.77%

-54.91%

-58.24%

43%

Adventurous Anny Cash 6 March 2017

3.84%

3.84%

-25.11%

8%

Solid Suzy XIV 6 March 2017

22.45%

22.45%

-2.17%

51%

Lazy Larry
XIV 6 March 2017

22.45%

22.45%

-2.17%

51%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

Well, well, well. Who do we have here?
Is this Bengt Ekerot in his role of Death in Ingmar Bergman’s The Seventh Seal?
Or is it Cornholio in his Sunday outfit?
None of the above.
It is Nick J. Swarth, this year’s presenter of the BUT film festival.
“With his sweet spot for underground and bad taste, Nick J. Swarth is the ideal presenter”, according to edition #1 of this year’s BUT Daily News.
Shortly after his opening speech, script writer and guest of honor Richard Stanley was invited on the stage, and his movie Replace (2017) — the opening film of the festival — was shown on three screens.