🚂Hype Train #012: 🇺🇸 US Election & ₿ Bitcoin
+ 🕵️ Kevin Rudd v Newscorp, 🎓 OpenLearning partnership and a 🐒 fancy new way to invest
🚂 All aboard.
Welcome to edition #12 of the hype train. Today we bring you the domestic news, the international news, a funky new way of investing, and my opinion on a controversial asset.
🤔 THOUGHT OF THE WEEK
As a few of you may have heard the US election is currently taking place. Surprisingly (or unsurprisingly), the polls were pretty wrong like in 2016. This begs the question: if polling can be so badly incorrect,
“What else are the ‘experts’ wrong about?” - Anthony Pomp 4th November 2020
🇦🇺 DOMESTIC NEWS
📱 An e-sports micro-cap partners with two hype mobile games: Esports Mogul (ASX: ESH) will deliver fully automated matchmaking and tournaments for two of the industry’s leading mobile titles – Clash Royale and Brawl Stars. Thoughts: The apps they have partnered with are huge. Will be interesting to see if Mogul can generate meaningful revenue from this. I’m generally cautious of micro-cap stocks operating in super hype areas like e-sports with very little revenue and high price/revenue ratios (in this case 252.36) though.
🎓 University going online: OpenLearning (ASX:OLL) have announced a 5-year agreement with the University of New South Wales Global (UNSW). The deal is to design and deliver an online program for international students with OpenLearning set to receive $6-9k in revenue per student enrolled in the program. Thoughts: Pretty hype. I haven’t researched OpenLearning, but being a recent university grad, the industry is ripe for disruption. The legacy university experience is bound to be replaced digitally eventually, and universities will be keen to compete with online education from the likes of coursera, udemy, khan academy, Data Camp, and more.
🕵️ The (potentially) corrupt Australian media empire: Former Prime Minister Kevin Rudd has reached over 500,000 signatures for his call for a royal commision into the Murdoch media empire - News Corp (NWS). Among the signees includes another ex-PM Malcolm Turnball. Thoughts: Clearly a lot of people believe something is amiss with Murdoch’s media empire, however, there's no guarantee a Royal Commission will take place. Bearish on News Corp, bullish on Hype Train media 😉.
🌎INTERNATIONAL NEWS
🇺🇸 Tech stocks rebound as US Election continues: Joe Biden currently has the edge in the US election as counting continues for yet another day… and tech stocks are rebounding as investor’s perceived risk has seemingly been reduced from the election results becoming clearer. Thoughts: We should have the results by the end of the week hopefully. Be wary of investment noise especially concerning US elections. History has shown us that it is actually very difficult to predict the stock market's reaction to any election outcome. This article offers a pretty good breakdown of what could happen.
🇨🇳 China shows Jack Ma who’s actually in charge: Chinese regulators halted the Ant Group (Alipay owner) IPO days before its shares were scheduled to commence trading in Shangai and Hong Kong. The IPO was set to become the world’s largest-ever, valuing the company at over $310 billion USD. Thoughts: Maybe this is just a postponement, but this definitely emphasizes how much control China has over Chinese companies (it practically owns them). Surprisingly not bigger news albeit it occurred on US election day.
🚗 Uber gets a big Lyft: Rideshare companies have secured a huge win in their legal battle over driver status in California. Voters approved Proposition 22, a ballot measure that ensures ridesharing and delivery companies can continue to treat drivers as contractors instead of employees. Thoughts: This is a gigantic win for ridesharing companies, and the market believes this too. Uber is up ~15% and Lyft ~11% on the news.
🐒 THE ASX YOLO WHEEL
Believe it or not, it’s commonly taught in university Finance degrees that historically, the majority of investment managers have done no better than monkeys randomly picking stocks. Now, while we’re pretty sure an excellent stock picker would actually destroy the market, there has to be some merit to all these studies. So maybe random chance isn’t that bad a way to invest…
…unless?
Well, this is why we have built the ASX YOLO Wheel. If you’re unsure of what meme stock to invest in, you can now let the YOLO Wheel decide for you here.
₿ MY OPINION ON BITCOIN
I know this is an Australian finance newsletter, and most of you are just interested in the ASX, but I would be misleading readers if I didn’t disclose how bullish I am on Bitcoin. After all, the asset constitutes a pretty sizeable chunk of my portfolio… and may actually generate better returns than any ASX stock over the next couple of years.
My case for Bitcoin is that it will perform extremely well over the short-term, and eventually become digital gold.
Here’s my thesis:
The upside: Institutional investors may realise that there is a place for Bitcoin in a diversified portfolio and that it’s actually a 10x better inflation hedge than gold (easier to transfer, deterministic, and fixed supply + network effects). If this materializes, Gold’s market cap is 8-10 T, whereas Bitcoin’s is only ~200B so there's room for the Bitcoin price to increase to $400k+ as investors swap from Gold into Bitcoin. Further to this, BTC price increases historically have appeared in a cyclical exponential way (read up on the stock 2 flow model). If this pattern continues the price of Bitcoin will be over 100k by the end of 2021... Now while this might seem insane, the price increase could actually happen due to both:
(1) Known supply shock: Bitcoin recently reduced the amount of Bitcoin entering the system (the latest Bitcoin halving). This effectively reduces the short-term supply available to investors.
(2) Potential demand increase:
Companies allocating cash reserves to bitcoin as an inflation hedge as government print $$$ in response to COVID (square and microstrategy early examples of this)
Retail investors swapping into bitcoin (Google trends is typically indicative of retail investors interest and bitcoin is still way below its 2017 peak..). Plus there is more mainstream technology available for retail investors to buy bitcoin (PayPal just announcing btc buying and selling)
Large institutional investors and funds allocating some of their portfolio to Bitcoin to edge inflation due to covid (Paul Tudor Jones is an early example).
Central bank interest: Iran has reportedly revised the country’s cryptocurrency regulation to require licensed bitcoin miners to sell their coins directly to the central bank for use to fund imports. Will other central banks follow suit? Potentially.
The downside: The stock 2 flow model fails over the next 1-2 years/ halving doesn't have that big of an impact anymore, or big early whales cash out and tank the price. In this case, you could lose around 50% of your initial investment.
Final note: Assessing the downside (lose 50%) against the upside (gain like 10x in the next year), makes this a pretty damn good risk-reward investment. I mean, yoloing money into random asx stocks probably has the same downside risk (if not higher), but not such an obvious upside... a phenomenal risk-return profile.
What you should read/ watch to make an informed decision on Bitcoin:
Anthony Pomp’s newsletter on Bitcoin and youtube video on what Bitcoin is
Fidelity Investments report on Bitcoin
Paul Tudor Jones case for Bitcoin as an inflation hedge
Microstrategy CEO, Michael Saylor’s massive bet on Bitcoin and why he did it
Raoul Paul twitter feed and RealVision youtube videos
A side note on managing securely: I'm failing at this at the moment. Be careful what vender you use to buy Bitcoin, I'm currently holding mine in a Coinbase wallet, but am looking at cold storage options now. I have a lot of faith in Coinbase (its backed by big silicon valley investors) compared to other exchanges but their fees are cooked, and you should get cold storage just in case.
Thank you and have a great week.
Email us at thehypetrainaus@gmail.com if you have any hot tips for an article or just want someone to talk to.