As you know, I’m presently hyperbullish on cryptocurrencies.
Especially a few that are trading for pennies on the dollar.
As such, I truly hope your portfolio has a 10% allocation to cryptocurrencies.
If you don’t own any alt-coins yet, you’re costing yourself thousands. Perhaps even more!
For those ready to dive in, you’re probably wondering…
“Should I buy bitcoin or bitcoin cash?”
Great question!
Here’s the quick backstory…
After three years of cutthroat infighting, on Aug. 1, a consortium of bitcoin miners voted to split the blockchain into two.
The “hard fork” immediately spawned bitcoin cash, which processes transactions faster than bitcoin.
With a market capitalization of $5.3 billion, bitcoin cash is suddenly the fourth-largest crypto in existence. (Behind bitcoin, ethereum and ripple.)
I believe bitcoin cash’s speed advantage holds intrinsic value. CNBC had this to say:
bitcoin transactions, grouped into “blocks,” have always taken on average 10 minutes each to process. But as the virtual currency’s popularity has grown, used for everything from buying pizza to anonymously buying illegal drugs on online black markets, the transaction network has started to get bogged down.
With a 1 MB block size limit, bitcoin can only process seven transactions per second.
Meanwhile, Visa’s network can handle 56,000 transactions per second.
bitcoin cash aims to close that gap.
In every other respect, bitcoin cash is the same as bitcoin.
Since money loves speed, I’m declaring bitcoin cash a “smash hit.”
It’s worth noting that traditional fiat currencies are also disruptors.
For example, the euro rebound is wildly moving certain stocks.
I asked my senior analyst, Martin Hutchinson, to unpack the sneaky effects that fiat currencies can have on shares of multinationals.
Hutch’s full analysis is below.
Ahead of the tape,
P.S. Speaking of “smash hits,” a brand-new cryptocurrency is quietly about to launch. The prospects here are wildly bullish. For my full report on this upcoming ICO,
Good morning, this is Martin Hutchinson, senior analyst.
I’m building a library of all the concepts that you might need when investing. The central concepts that help you become a better investor.
Today, I’m going to talk about currency effects.
Currency movements have increased in recent years, and 2015 and 2016 were both big years.
And they can have a big effect on corporate earnings, especially for multinationals but not just for them.
Consider first the effects on U.S. companies.
If the dollar is strong, that’s bad for exporters. Their foreign currency revenues are worth less in dollars and their U.S. costs increase relatively. Ordinary multinationals will then do badly.
But on the other hand, a strong dollar is good for U.S.-based international banks, because their dollar capital supports more foreign activities.
And it’s good for retailers such as Walmart (NYSE:WMT), because they import a lot of their goods from overseas, such as from China, and their import costs are reduced and that may increase their sales as well.
Conversely, a weak dollar is good for ordinary multinationals, but it’s bad for international banks and retailers.
When currencies move a lot, as in 2015, you can trade on their movements, which show up in earnings a few months later.
This works better for current companies in smaller countries than the U.S., because the currency effect is relatively larger.
The U.S. does so much domestic trade that exports and imports are less important.
For example, in 2015, the weak Chilean peso and strong lithium prices helped SQM Chile by reducing their costs and increasing their income because lithium prices were based in dollars.
And in this case, you see, all their production was in one country and their revenues were worldwide and priced in dollars.
On the other hand, in 2015, the Norwegian krone was weak because oil prices were down. You could then go and look at what other Norwegian exporters there were and find a company called Marine Harvest, a Norwegian fish company that exports to the EU. And that did particularly well in 2015.
So the conclusion is in years like 2015 and 2016, when currencies move a lot, this is a smart way to invest.
It’s less so in 2017, when currency markets have been fairly quiet.