This Hated Commodity Could Make Huge Gains in 2018

The forecast showed an extra 20 million pounds of uranium production for 2018 … with no buyers. As you can imagine, the uranium price plummeted.

It hit its lowest price in October 2016 at $18.75 per pound. That touched a 13-year low price.

The downtrend began back in 2011. The uranium price peaked at $72.50 per pound in January 2011. It fell steadily since then, down a total of 74%.

This is a shocking result for an energy source that many embraced as a “green” rescue from hydrocarbons just a few years ago. Nuclear power creates safe, carbon-free energy.

The problem is, it can cause huge disasters. That’s what we discovered when the Fukushima disaster struck Japan.

The Demise of Nuclear Power

An earthquake and tsunami damaged the Fukushima Daiichi nuclear power plant in March 2011. The earthquake damaged a reactor. Then the tsunami inundated the area, destroying vital backup generators.

Without the backup power, cooling water couldn’t get into the plant. That caused a runaway reaction, a meltdown — the greatest fear for all nuclear power plant operators.

A series of human errors compounded the damage. The operator, Tokyo Electric Power Company, was completely unprepared for the situation.

The result killed the nuclear power industry.

Fukushima turned the world against nuclear power. Germany shut down all its reactors in response. Demand for uranium fell, and the uranium price collapsed.

This finally led major uranium producer Cameco Corp. (NYSE: CCJ) to cut production in early November 2017. The company’s earnings fell and fell. It struggled to maintain profitability. It finally announced that it would suspend operations at its flagship McArthur River mine for 10 months.

Cameco’s decision cut the surplus to just 5 million pounds … and then the unthinkable happened: The world’s largest uranium producer followed suit. Kazakhstan’s state-owned uranium miner Kazatomprom cut production by 20% for the next three years.

The result could be a massive bull market in uranium.

The Uranium Price and A Windfall for Uranium Producers

Shares of Uranium Participation Corp. (Toronto: U), which hold physical uranium for investment, soared in response. As you can see from the chart below, shares are up 30% in just a month and a half.

Kazakhstan’s state-owned uranium miner Kazatomprom cut production by 20% for the next three years.The result could be a massive boom for the uranium price.

Shares of uranium companies surged too. However, this is just the beginning. Analysts that cover the uranium sector believe these cuts could add $30 per pound to the price of uranium. That’s more than double the current spot price.

For uranium producers, this will be a windfall. Companies like Cameco and Ur-Energy Inc. (Toronto: URE) will see revenue and earnings rocket higher.

This appears to be great news for the uranium sector. It’s a story we’ll continue to watch in 2018.

Good investing,

Matt Badiali

Editor, Real Wealth Strategist

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Bitcoin Hits $18,000 – What’s Driving It Higher?

On Thursday, bitcoin hit a new all-time high of $18,197.

While the price has since retreated a bit to around $16,000, the recent moves have been nothing short of spectacular.

The world is wondering, what’s driving prices higher?

If you regularly read Early Investing, you should already have a good idea.

This is cryptocurrency going mainstream. The idea of independent, cryptographically secured currency is catching on.

In today’s chaotic world, it’s an incredibly attractive proposition. Something that’s not attached to tainted governments and banks and that will appreciate in value if the network grows.

It’s a form of money selected by the people, not forced on them.

And for the foreseeable future, bitcoin will continue to be the king of this market. It’s the reserve currency of the cryptocurrency world. It has the biggest network, the most liquidity and, importantly, the best brand.

The limited number of bitcoins available, combined with the incredibly fast rate of adoption, has led to the feeding frenzy we’re seeing today.

Here’s how I described it back in July.

There are only 21 million bitcoins that can exist. Fifteen million already exist today, and the rest will be mined over the coming decades.

It’s not a lot of coins to go around, is it?

Each coin costs around $2,600 today. If bitcoin goes mainstream, the price will go orders of magnitude higher.

So far, this thesis is playing out.

As I’ve described here many times, bitcoin has rapid viral organic growth. That’s the engine.

Viral simply means it spreads naturally among networks of people, like a rebellion, virus or new technology.

Organic means there’s no advertising budget. People desire it and tell their friends about it.

And right now, people want a financial asset that’s not connected to the traditional financial system… one that’s technologically advanced and that offers a real alternative.

Viral organic growth is one of the most powerful forces on the planet. And that’s what’s fueling the growth of cryptocurrency.

This force needs to be powerful in order for bitcoin to succeed, because the establishment doesn’t like cryptocurrency.

We’ll need to fight for it and demand fair treatment for cryptocurrencies from government. I hope newcomers realize this is not just a speculative asset.

Cryptocurrencies are critical to the movement to build a decentralized new financial system.

It’s the biggest market in the world. The stakes are high, and there will be pushback.

Altcoin Growth Cycles

As more people get involved in bitcoin and make money off it, a portion of them will start dabbling in alternative cryptocurrencies, often called “altcoins.”

The largest U.S. exchange, Coinbase, now offers three cryptocurrencies. (Until last year, it only offered bitcoin.) Those three are…

  1. Bitcoin
  2. Litecoin
  3. And Ethereum.

And while bitcoin is grabbing all the headlines, the altcoin market is doing even better.

There are now 15 coins with market caps of more than $1 billion. A year ago, there was just a single coin valued in the billions, and that was bitcoin – it was valued at $768 per coin with a market cap of $12 billion.

The price of Litecoin has risen from $3.92 to more than $96.

In the last year, Ethereum has soared from around $7 to more than $428. It’s now the second-largest coin by market capitalization (total value of all coins).

A year ago, the total value of all cryptocurrencies was around $14 billion, with bitcoin making up $12 billion of that. Today the overall cryptocurrency market is worth $426 billion, with bitcoin accounting for $302 billion of that.

Do the math… Altcoins are rising much faster than bitcoin alone.

As I often say, there’s room for dozens, if not hundreds, of long-term winners in this space. Remember, we’re talking about building an entirely new financial ecosystem here.

Now hundreds of teams are racing to build the next big coin. Competition can do wonders in a market this large and fast-growing.

Many of the best coders on the planet have been attracted to the cryptocurrency space by the world-changing mission (and the money).

It’s all happening. Right now.

And no, it’s not too late to get involved. We are still so, so early. If you’re worried about buying at an all-time high, I recommend “averaging in.” By that I mean buy the same amount of cryptocurrencies at regular intervals over time. Just keep in mind that bitcoin has always had sharp corrections.

Good investing,

Adam Sharp
Co-Founder, Early Investing

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Source: Early Investing 

The No. 1 Stock to Own for 2018

My windshield was smashed. Everything of value in my car was gone. They had rifled through every single thing in my car, leaving a mess.

That’s what happened to me the first time I took my car to New York City.

This was in 1989. My entire summer job’s earnings were in this car that I had paid $800 for.

It was a nine-year-old, unpleasantly yellow two-door Toyota Tercel. Still, it worked, and best of all, I had a car for the first time since I’d come to the United States.

So, of course, one of the first things I did when I got back to college … was drive it to New York City.

Back then, New York City was crime-ridden. Bryant Park, which is now a fancy place, had so much drug activity that you’d see needles scattered through the park.

So, why am bringing this up to you today? You see, the stock market is a bit like New York City in the 1980s. There is incredible risk if you’re buying the wrong stocks, and you’ll end up losing more than you bargained for…

Learning the Hard Way

People had warned me: Don’t take your car to New York City. Just take the bus.

Or if you take your car, park it in a paid parking lot. They told me my car would be safe because someone was watching the lot.

Of course, I didn’t follow any of this advice. I was a poor college student, and the idea that I was going to stand around waiting for a bus, then pay $12 for round-trip tickets seemed silly when I had a car.

Paying $15 for parking also sounded ludicrous, especially when parking on the streets of New York City was free.

You can say I learned my lesson the hard way.

To repair my windshield cost $100. The value of the things in my car was another $40. Then, to add insult to injury, I was ticketed because I stayed over the time limit for the spot I parked in. That was another $50.

Following the guidance of people who had experience would have saved me valuable money.

Right now, if you make the wrong moves in the market, I believe you’re going to find yourself in a similar position. Not, however, if you look to mega trends.

The Lens of Mega Trends

You see, many people think that the market is too expensive. They use backward-looking statistical measures like cyclically adjusted price to earnings, or CAPE, to justify their view.

However, the problem with CAPE is that it’s incredibly backward-looking. It looks backward, when stock markets look forward.

And when you look forward using the lens of mega trends like the Internet of Things (IoT), CAPE looks wrong. Completely wrong. The reason for this is productivity growth.

Productivity leaped by 3% in the last quarter. That’s the fastest level the U.S. economy has experienced in three years.

Most economists think this is a fluke. However, the stock market is a better forecaster than any economist. The S&P 500 is up 3.2% since this was announced.

I believe this is the beginning of a huge rise in productivity growth that’s going to go on for years, thanks to these mega trends.

 More Money in Your Pocket

The causes of productivity growth are hard to see in the data today. However, I believe it’s the early dividend due to the rising use of IoT technology like Big Data, artificial intelligence and robotics. These technologies are being used in more countries and in a rising number of industries.

This is why I am optimistic about where the prices of stocks can go in the U.S. and many parts of the world. In fact, the No. 1 stock for subscribers of my Profits Unlimited service is up over 200%, and it’s an international sensor/chip company that’s involved in every facet of the IoT.

As productivity rises, we’re going to see this stock and others continue to rise.

The bottom line is, doing the right thing now means more money in your pocket later. And based on what I’m seeing today, I believe that the right thing to do is own stocks in general, and then to focus on those that are exposed to rising growth and productivity.

Regards,

Paul Mampilly

Editor, Profits Unlimited

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Source: Banyan Hill

An Interesting Way To Hedge Portfolio Risk

One of the great things about options is how flexible they can be for custom-designing strategies to meet your needs.  With options, even something as mundane as hedging can be done in an interesting and creative manner.

This is especially true since volatility ETPs (exchange traded products) have become widely popular among traders and investors.  Being able to buy or sell volatility (related to the level of the VIX) is something which used to be restricted to the realm of the professional options trader.

Now, a fund like iPath S&P 500 VIX Short-term Futures ETF (NYSE: VXX) is as commonly traded as just about any individual stock or ETF on the market.  In fact, VXX is one of the top 10 most actively traded equities, period.  It’s a useful instrument for betting for (or against) a short-term spike in volatility.  In particular, it makes for a great hedging tool for long stock portfolios.

Speaking of hedging, here’s a very interesting trade that hit the wire just recently in VXX…

With the VXX price at $31.50, someone sold a January 29 put while simultaneously buying a January 35 call.  This kind of trade is called a risk reversal and it’s clearly bullish on VXX.  The short put is used to help finance the long call.

In this case, selling the put brought down the price of the call to $0.57 (it would have cost $1.88 without the premium collected from the put sale).  The risk reversal traded 7,000 times, so the trade cost the buyer $342,000 in premium – a substantial amount lower than what the call would cost straight up.

Still, that’s a lot of premium to spend on a product known for mostly going down (as you can see in the chart).  As such, this trade is likely a creative way to hedge against volatility risk through mid-January.  If VXX stays where it is, all that’s lost is the premium amount (not bad for a hedge on what is likely a big portfolio).  However, if VXX climbs above roughly $35.50, the position makes $700,000 per $1 higher.

On the other hand, the position could lose $700,000 per $1 below $29 (along with the premium spent) due to the short put.  However, VXX isn’t likely to plummet that quickly due to macro event risk.  Rather, it is more likely to move down slowly – giving the trader time to adjust the risk reversal as necessary.

I think it’s an interesting way to hedge risk, as long as you are able to make adjustments as VXX moves lower.  It wouldn’t be too difficult (or overly expensive) to buy back the short puts as VXX approaches $29.

Keep in mind, this isn’t the sort of method most of us should use for trading VXX.  If you want to use VXX to hedge (or speculate due to event risk), buying straight up calls or a call spread has defined risk.  For keeping costs low, a call spread is the better choice.

For instance, the January 32-37 call spread (with VXX around $31.50) only costs about $1.  That’s a breakeven point of $33, and a max gain of $4.  You can only lose the $1 you spent in premium, so your payout ratio is 4:1.  That’s a reasonably cheap way to hedge, and balances your payoff with reasonable costs.

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Delta Air Lines, Inc. (DAL) Confirms $25 Billion Airbus Jets Purchase

The airline announced that it would be buying these A321neo jets for $25 billion to go along with an optional 100 more of the aircraft. Delta Air Lines announced the move through a filing with the U.S. Securities and Exchange Commission.

The company added that it expects deliveries of the aircraft to begin in the first quarter of 2020 and continuing to arrive through 2023. Delta added through the SEC filing that it now expects its operating margin of its fourth quarter to be 11%.

The company previously said that it expected this figure to be between 11% and 13% in its previous forecast. Airbus beat out Boeing Co (NYSE:BA) for the move as Boeing and Delta have had a fraught relationship in recent quarters.

The disagreements between the two companies began in October following Boeing’s success in lobbying the U.S. Commerce Department to pass trade duties of roughly 300% of Delta’s decision to order CSeries jets from Bombardier Inc (OTCMKTS:BDRBF).

Delta has made no mention regarding whether or not the disagreement between the two companies affected the airline’s decision to go with Airbus for the deal.

“This is the right transaction at the right time for our customers, our employees and our shareholders,” CEO Ed Bastian said in a statement today.

DAL stock gained 2.8% on Thursday.

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Top 3 Electric Vehicle Stocks to Buy Instead of Tesla

almost feel sorry for the hype machine known as Elon Musk and Tesla. First, the electric car field is becoming crowded with more and more players, making it tougher to stay ahead in the race to an electric future.

Then, Musk boasted about the 75-megawatt lithium-ion battery Tesla built within 100 days in Australia to help with their power shortage. That glory will fade quickly as Korea’s Hyundai’s Electric & Energy Systems Co. is building one twice as big – 150-megawatts, that will go live in about three months on the country’s southeast coast.

Finally, he rolled out Tesla’s e-Truck with much fanfare. However, more established players in the field have already beaten Musk to the punch with their version of an electric battery-powered truck. But before I delve into those companies, let me tell you about Tesla’s electric truck.

Tesla’s e-Truck

Elon Musk unveiled Tesla’s electric truck last month that has been in development for over a year. It is supposed to have a range of about 500 miles and, according to Musk, will be “impossible” to jackknife. He said that it would go into production in late 2019.

While the range is too short for long-haul drivers, the truck will still have a ready market. That’s because 80% of routes driven by truckers are less than 250 miles. Already, a number of large companies have placed orders for Tesla’s electric truck. These firms include: Walmart (15 trucks), Anheuser-Busch (40 trucks), Sysco (50 trucks) and JB Hunt (40 trucks) along with a host of other companies that placed smaller orders.

Tesla’s truck does have some nice features. It will use the same sensors as its smaller vehicles for its autopilot system. At the moment that means safety features such as automatic lane control and braking, but it eventually will allow full autonomy. The truck uses cameras instead of wing mirrors, helping its aerodynamic look.

Related: 3 Electric Car Stocks to Crush Elon Musk and Tesla

However, Musk claimed that the charge for these trucks would only take 30 minutes using a solar-powered “megacharger” that Tesla hasn’t invented yet. It is supposed to be 10 times more powerful than the current supercharger for Tesla’s electric cars.

Doubts and No Doubts

Some scientists have questioned Musk’s claims about the megacharger, saying it’s science that hasn’t happened yet. The fastest chargers today can support 450 kilowatts of charging compared to the roughly 1,500+ for Musk’s megacharger.

A U.K. consultancy called Aurora Energy Research, set up by scientists from Oxford University, estimated that the power required to charge a battery in that short a time frame would be 1,600 kilowatts. Questions arise then about the electric grid’s ability to handle that load since the scientists’ claim that’s the equivalent of providing power for several thousand homes.

While there doubts on the science side, if that is solved I have no doubt that production can be ramped up quickly.

Just look at China and e-buses.  Just a few years ago, China only produced about 10,000 electric buses. But in 2016, output exceeded 100,000 buses. Market leader BYD (OTC: BYDDY) has also begun to churn out a good number of electric garbage trucks. The company, 8.5% owned by Warren Buffett, has been assembling them for two years at a California plant and is opening another facility in Ontario, Canada next year.

The question with electric trucks is whether Tesla will be the winner or will more established players in trucking and engines triumph. Here’s look at three of them.

Electric Truck Company #1 – Cummins

The first company is Cummins (NYSE: CMI), which will not build electric trucks. But it will supply a fully-integrated battery electronics system (with the batteries coming from an unnamed supplier. It is a leading maker of diesel and natural gas engines for commercial trucks.

Without any of the fanfare of the Tesla unveiling, this summer saw a big e-trucking announcement from Cummins. It revealed a Class 7 heavy-duty truck cab (the cab was built by Rousch Enterprises) that featured an advanced 140 kilowatt battery pack, which is capable of hauling a 22-ton trailer. Cummins said it would begin selling the 18,000 pound cab (named AEOS) to bus operators and commercial trucking fleets beginning in 2019.

The battery has about a 100-mile range, so Cummins is targeting urban delivery vehicles (like a beer truck or food delivery truck) as well as other short haul trips. It can be recharged in about an hour at a 140 kWh charging station, and the company’s goal is to get that down to 20 minutes by 2020. Cummins added that current battery technology doesn’t yet make sense for a Class 8 semi tractor-trailer (an 18-wheeler).

Cummins is also offering an extended range version (available in 2020) of the AEOS. It uses an efficient diesel engine as an on-board generator, which allows for up to possibly 500 miles between charges and 50% fuel savings compared to today’s diesel hybrids with zero emissions.

You may wonder if this is the right move for Cummins and if it can remain competitive when the trend is clearly toward electric vehicles.

The history of this 98-year old company suggests the answer is yes. It was at the forefront of environmental shifts, embracing stricter clean air standards while other manufacturers dragged their heels. It also led the shift from 2-stroke to 4-stroke diesel engines and was a leader in developing after-treatment systems for nitrous oxide particulates.

With its work on electric powertrains and fuel cells for about a decade, I think it will succeed again. That means more gains for its stock on top of the 25% gain year-to-date.

The next two companies offer more direct competition to Tesla.

Electric Truck Company #2 – Daimler

Daimler AG (OTC: DDAIY) is the world’s largest manufacturer of commercial vehicles and a former Tesla shareholder. So as you can imagine, it is taking the challenge from Tesla quite seriously. To that end, it has already started initial production of its Fuso eCanter urban delivery trucks. And it expects such vehicles to be competitive with traditional diesel vehicles cost-wise within two years.

Daimler introduced the light-duty eCanter haulers in New York in September, supplying a fleet to several New York City non-profits as well as signing United Parcel Service (NYSE: UPS) as its first commercial customer in the U.S. The truck has a range of 60 to 80 miles between charges and is coming to market as customers insist on cleaner vehicles better-suited to rising delivery demand (e-commerce) in cities.

The company will start mass production of these vehicles at its Tramagal plant in Portugal either late in 2018 or early in 2019. About 10,000 of the light-duty eCanter were produced at this plant in 2017.

Daimler is also taking Tesla’s challenge in heavy-duty trucks trucks seriously. It beat Tesla to the punch when it unveiled the E-Fuso Vision One in late October. This truck can carry 11 tons of cargo up to 220 miles before recharging. Its load is two tons less than a comparable diesel model in order to accommodate the weight of the 300-kilowatt battery packs.

It will be interesting whether these moves will boost Daimler’s ADR in 2018. It is almost unchanged so far in 2017.

Electric Truck Company #3 – Volvo

Another European company that Tesla should worry about is Volvo AB (OTC: VLVLY).

You may not be familiar with Volvo – it is one of the world’s leading manufacturers of trucks, buses, construction equipment, industrial and marine engines. The car division was first bought by Ford, which in turn sold it to the parent of Geely Automotive in China.

Volvo is one of the biggest providers of electric buses and hybrid-electric buses in the world. And it is a major producer of electric construction equipment and autonomous mining equipment. This being at the forefront of electric and autonomous vehicle design is a reason why I believe the stock is up 57% year-to-date.

Related: 2 Stocks for the Death of the Combustion Engine

It is testing in Sweden an autonomous garbage truck that uses sensor to continuously monitor its path and stops immediately if an obstacle appears in front of it. It drives itself from stop to stop with the driver walking in front of it to pick up the trash.

Volvo is also working other futuristic technology including charging pads and electrified highways that will themselves charge electric vehicles. And with 600,000 connected vehicles (200,000 in the U.S.), Volvo is collecting lots of data to further improve its vehicles.

Specifically with trucks. Volvo is testing a hybrid powertrain for long-haul heavy-duty trucks that is all part of its Super Truck project working in conjunction with the U.S. Department of Energy. Here are some of its features:

  • It recovers energy when driving downhill on slopes steeper than 1%, or when braking. The recovered energy is stored in the vehicle’s batteries and used to power the truck in electric mode on flat roads or low gradients.It has an enhanced version of Volvo Trucks’ driver support system I-See, which has been developed specially for the hybrid powertrain, which analyses the upcoming topography using information from GPS and the electronic map.

For long hauls, it is estimated that the hybrid powertrain will allow the combustion engine to be shut off for up to 30% of driving time.

Bottom line for you — a new age in trucking is right around the next bend in the road and there are a lot of other purer-play companies besides Tesla for you to profit from in this sector.

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Investors Look for Other Cryptocurrency Opportunities

Litecoin prices skyrocketed 30% as investors look for new opportunities in the cryptocurrency market.

The crypto community is still debating how the trading of Bitcoin futures will affect prices, and newer crypto investors don’t like the idea of paying more than $16,000 to own one coin. The Litecoin Foundation is also making a marketing push to bring more awareness to the “silver” to Bitcoin’s “gold.”

Litecoin pricesSpeaking of Bitcoin futures, the Chicago Board of Exchange (CBOE) introduced Bitcoin futures last night (Dec. 10, 2017) under the ticker XBT.

At around 8 p.m. EST on Sunday, a two-minute halt occurred after Bitcoin futures prices rallied more than 10%. Another five-minute halt came after prices added another 20% around 10 p.m. EST.

The price topped $16,750 around the same time that noted economist and hedge fund manager Nassim Taleb suggested that Bitcoin could hit $100,000.

He also said that it will be nearly impossible for investors to time their shorts of the cryptocurrency. Taleb is perhaps best known for his research on “black swan” events and for predicting the 2008 financial crisis.

“No, there is NO way to properly short the Bitcoin ‘bubble,'” he said on Twitter Inc. (NYSE: TWTR) before CBOE launched Bitcoin futures trading.

“Any strategy that doesn’t entail options is non-ergodic (subjected to blowup). Just as one couldn’t rule out 5K, then 10K, one can’t rule out 100K,” he said.

Below is a recap of the top cryptocurrency prices at 10:00 a.m. EST.

  • Bitcoin: $16,573.40, +8.73%
  • Ethereum: $475.57, +5.67%
  • Bitcoin Cash: $1,380.28, +2.78%
  • IOTA: $4.18, -3.71%
  • Ripple: $0.248, +3.95%
  • Litecoin: $186.87, +30.43%

Now that we know all of today’s price movements, here’s what has been moving these cryptocurrencies…

Cryptocurrency Markets Today

On Monday, the market capitalization of the global cryptocurrency sector hit $443.48 billion. Bitcoin now comprises 63.2% of the global cryptocurrency market. Just nine of the top 100 cryptocurrencies were in the red this morning thanks to the huge surge of investments flowing into the sector.

Top performers from the largest 50 cryptocurrencies by market capitalization included Santiment Network (up 43.03%), Waves (up 31.65%), TRON (up 28.90%), Nxt (up 26.94%), Ardor (up 23.62%), MonaCoin (up 22.26%), and Basic Attention (up 21.41%).

Some of the worst performers from the top 50 largest cryptocurrencies by market capitalization included Einsteinium (down -5.78%), QASH (down -2.97%), and Tether (down -0.34%).

Bloomberg Questions the Authenticity of Bitcoin

Over the weekend, Bloomberg released a controversial report that raises questions about the safety, security, and authenticity of the Bitcoin market.

According to the report, 1,000 people own roughly 40% of the entire Bitcoin market. This means that just 1,000 people are controlling $112.74 billion of the Bitcoin space, and each person’s average Bitcoin net worth is $112.74 million.

Must Read: 3 Bold Bitcoin Price Predictions for 2018 and Beyond

This has raised concerns that these so-called “Bitcoin whales” have more power to float or sink the market and potentially manipulate it through collusion in the future.

Will Bitcoin Futures Revive ETF Talk?

In early 2017, the U.S. Securities & Exchange Commission (SEC) denied two attempts to create an exchange-traded fund (ETF) around Bitcoin.

Following the introduction of Bitcoin futures trading, CBOE’s CEO, Edward Tilly, said that his organization’s leap into cryptocurrency contracts will likely fuel reconsideration for ETFs.

“All of that information goes into building the next steps,” Tilly said in an interview with CoinDesk.com.

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Source: Money Morning

Gun Manufacturers Love Democrats

Gun stocks like Smith & Wesson and Sturm Ruger & Co. saw huge gains as they turned unexpectedly high profits quarter after quarter with a Democrat in power.

As we all know, gun control has been a hot topic in politics, particularly during the last two to three years. And the fear of restrictions on guns has been very profitable for gun manufacturers – and great for gun stocks.

For a lot of gun buyers, it was a means of stashing something so nobody could prevent them from buying it. As a result, gun stocks like Smith & Wesson (now American Outdoor Brands Corp. [Nasdaq: AOBC]) and Sturm Ruger & Co. Inc. (NYSE: RGR) saw huge gains as they turned unexpectedly high profits quarter after quarter.

But now, with a Republican in office, those worries of having guns taken away seem to be fading. Not completely, as there are still relatively high numbers of background checks coming though, but the number has fallen short each month of the peak that it reached in 2016.

As a result, gun stocks that led the market last year have, for the most part, collapsed.

Gun stocks like Smith & Wesson and Sturm Ruger & Co. saw huge gains as they turned unexpectedly high profits quarter after quarter with a Democrat in power.

All of the stocks in the chart above move with the gun sales market. With the numbers on the right side representing the percent return for the past year, you can see that the returns have been awful, especially when you compare them to the S&P 500, which is up 18%over that same time period.

In short, the recent trend is that gun sales, and therefore the prices of gun stocks, tend to increase when a Democrat is in office. This was pronounced with Presidents Bill Clinton and Barack Obama. And now, there are investments you can make that are based on typical policies for each political party.

That’s right, political investments!

As of October, EventShares has come out with exchange-traded funds (ETFs) for “Republican” and “Democrat” stocks based on policies typically carried out by either party. The ticker symbols are GOP for Republican policies and DEMS for Democrat policies.

These are easy ways to invest in the policies carried out by each party. For example, GOP holds a lot of stocks that benefit from tax reform, deregulation and national defense investment. DEMS focuses more on health care expansion and stocks that benefit from environmental efforts.

Regards,

Ian Dyer

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Source: Banyan Hill

Here’s How to Short Amazon

Amazon.com Inc. (Nasdaq: AMZN), the online retail giant, has seen its stock price skyrocket more than 50% over the last 12 months.

It has surged past the $1,000 price level, which was tricky to break through, and has continued to climb since then.

Many investors are looking at the euphoric Amazon stock price movement and wondering if now is a good time to short the stock.

The answer is no.

There’s never a good time to short a cult-like stock such as Amazon. It doesn’t trade on normal parameters, and it operates a business model that doesn’t have to generate a profitfor its stock to go up. These types of companies are almost impossible to short because of that.

But there is another way to profit, one I have shared with you in the past: not buying into the hype of the Amazon stock price.

Here’s what I mean…

 Grocery Stocks Got Slammed

Back in June, Amazon announced it would acquire Whole Foods to disrupt the grocery sector. Many investors bought the hype and immediately downgraded all sorts of grocery-related stocks expecting Amazon’s competition to weigh on the industry.

Then, in late August, Amazon completed the acquisition ahead of schedule.

Once again, grocery stocks got slammed.

I wrote an article on September 4 saying this bloodbath was your buying opportunity, and it paid off with an average gain of 15% since then on the five stocks I listed.

And out of the five stocks mentioned, The Kroger Co. (NYSE: KR)Sprouts Farmers Market Inc. (Nasdaq: SFM)Wal-Mart Stores Inc. (NYSE: WMT)Costco Wholesale Corp. (Nasdaq: COST) and SuperValu Inc. (NYSE: SVU), all but one has rallied basically 20% since then.

The one stock that is down is SuperValu, and even that stock popped 10% early on. Take a look:

The Amazon stock price has skyrocketed over 50% the last 12 months. But don't short the stock. Use this trading strategy instead.

Not a bad return considering Amazon was expected to crush the competition in the sector.

For reference, the S&P 500 is up about half of that amount over the same time period.

If you have seen gains like this in these stocks, and your sole purpose of owning them was to benefit from the rebound, then you can take profits off the table now.

Opportunities that come from buying into industries that Amazon attempts to disrupt occur often.

Just this year it has happened with delivery companies, pharmacy companies, grocery stocks and, last week, a new industry — dental stocks.

Overreactions to the Amazon Stock Price

Last Wednesday, dental supply stocks Henry Schein Inc. (Nasdaq: HSIC) and Patterson Cos. Inc. (Nasdaq: PDCO) closed down more than 4%.

The reason? Amazon.

Amazon is reported to now be buying dental products from a different direct manufacturer, Dentsply Sirona Inc. (Nasdaq: XRAY) — its shares were unchanged on the news.

A Henry Schein spokesperson said the company is “unaware of any market-leading dental manufacturer” having a direct relationship with Amazon, adding: “We believe that at this time Amazon is a minor player in the dental consumables market, with an insignificant market penetration.”

This doesn’t sound like a major threat to the way things are done, and it’s why buying these dental stocks on this weakness is an opportunity.

I wrote back in October about Amazon’s many failed attempts to disrupt industries. It’s what makes Amazon Amazon. But it’s also why these overreactions are buying opportunities.

Regards,

Chad Shoop, CMT

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Source: Banyan Hill 

A Big Volatility Trade To End The Year

2017 isn’t exactly going out with a bang – but it’s also not ending with a whimper either.  We’re actually seeing higher levels of volatility than what we’ve experienced most of the year.  Granted, volatility (as measured by the VIX) has been historically low in recent months.  However, the end of the year so far is proving to be a bit more interesting.

First off, we’re seeing a fairly substantial rotation out of tech stocks and into financials and other sectors.  Tech stocks have been driving the market this year and valuations have definitely gotten a bit frothy.  Moreover, financials should see benefits from higher interest rates coming in 2018 and beyond.

Tech has been hit pretty hard – especially the chip stocks – and this may have caught some investors off guard.  Surprising investors is certainly one way to get volatility to go higher.  The Semiconductor Index chart below makes this pretty clear.

Of course, there are several other factors contributing to relatively higher VIX levels, most of them political in nature.  The tax reform bill has been front and center in terms of financial news.  Who knows what the final version of the bill will end up looking like, but it seems pretty certain it will be a boon for corporations.  Any serious issues with the bill (eventually) passing could certainly add to market volatility.

There’s also the threat of government shutdown, although by the time you read this, I predict a short-term deal will already be in place.

Finally, there’s the Mueller investigation regarding the current administration and Russian interference with the election.  This case seems to have some legs to it, although the impact on the stock market remains nebulous at best.  Even if high ranking members of the administration are forced to resign, it really shouldn’t change much in terms of economics.  Once again, I expect a business-favorable tax plan to pass regardless.

SEE ALSO: This “21st Century Pension Plan” Pays You Income for LIFE

Keep in mind, political news tends to create short-term volatility.  Long-term changes in volatility are mostly the result of economics.  A political scandal is generally a short-term situation.  A tax bill is long-term.

That being said, plenty of big VIX trades are hitting the wire – and the majority of them are focused on the VIX moving higher.  Of course the VIX is the main instrument used for hedging, so it stands to reason that most big trades in VIX options would be on the long side.  Nevertheless, you can tell a lot of what hedgers are thinking about risk levels by what strikes they use.

For instance, a sizeable trader recently purchased 50,000 January VIX 20 calls for $0.50. That’s a $2.5 million bet that the VIX breaks above $20.50 by mid-January.  Of course for that kind of money, this is clearly a hedge.  The VIX hasn’t been above 20 in over a year – and hasn’t even been particularly close this year.

As someone who is generally a seller of volatility, I don’t like spending a lot of money going long VIX whether it’s a hedge or a speculative bet.  As such, I’d prefer to do a long call spread rather than buying calls straight up.  As an example, if you think the VIX is going to move higher or want to hedge, you could buy the January 13-18 call spread (buying the 13, selling the 18) for about $0.80.

It’s a good way to keep your costs low while also providing decent upside potential.  A max loss of $0.80 with a max gain of $4.20 (if VIX is at $18 or above by January expiration) is certainly a good ratio to have on a call spread.

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Source: Investors Alley