December 2017


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Block.one, a software startup registered in the Cayman Islands and lacking a central office, has accomplished an astounding feat: So far, it has extracted $700 million in real money from the global public by selling tokens, called EOS, in an initial coin offering. It is by far the largest ICO ever.

An ICO is similar to an IPO, but here buyers got nothing other than the digital tokens – no ownership in the company (unlike what an IPO offers), no promises of any kind, no participation in anything, not even any fake promises of free future products. No matter how awesome and world-changing the blockchain platform or whatever the company might be developing might turn out to be, it won’t be connected to the tokens.

The purchase agreement that buyers in the ICO must sign states this very clearly and explicitly:

The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities and features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities and features on the EOS Platform.

By comparison, with an IPO, investors actually end up with shares in the company. They become part-owners of the company.

The only thing buyers in this ICO got was the hope that the price of the token, given the current cryptocurrency mania, would surge by thousands of percent in the shortest time span – on the principle that the less people get, the more they’re willing to pay for it, and if they got nothing at all, they’d be willing to pay the most. Those hopes have been realized.

The price of the token has skyrocketed, though prices vary around the globe, depending on the exchange where EOS is traded. At the moment I’m writing this, on the top 10 exchanges by EOS volume, prices range from $9.67 at Bithumb to $8.54 at Binance.

In mid-October, the price was still in the 50-cent range. So to people who bought at the time, it doesn’t matter that they own not even one iota of the company or its world-changing technology platform or whatever because since mid-October the price has multiplied by 19. That’s all that matters (via Coinmarketcap.com):

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To pull off the mega-ICO, block.one “made a public relations splash, hosting numerous informational sessions, sponsoring post-conference receptions, giving out free t-shirts and even advertising on a Times Square jumbotron,” Coindesk observed. Its executives “have spoken at myriad conferences and met colleagues and potential clients at “meetups” in cities like London, Amsterdam, Singapore and New York,” the Wall Street Journal observed.

The sale of EOS has started in late June. And it’s not finished yet. Every day, block.com sells two million tokens via an auction process. According to Brock Pierce, a co-founder of block.comcited by the Wall Street Journal, the company plans to keep the ICO going until next June to raise “well north of” $1 billion.

But even at $700 million raised so far, this ICO is leagues ahead of the prior records:

  • The second largest ICO, Filecoin, raised $262 million from August 10 to September 7, which broke the all-time record for ICO funding at the time.
  • The third largest ICO, Tezos, raised $232. It is now embroiled in lawsuits, controversy, and allegations of US securities laws violations and investor fraud.

The most recent class-action lawsuit, filed in the Tezos case a few days ago, stated:

In sum, Defendants capitalized on the recent enthusiasm for blockchain technology and cryptocurrencies to raise funds through the ICO, illegally sold unqualified and unregistered securities, used a Swiss-based entity in an unsuccessful attempt to evade U.S. securities laws, and are now admittedly engaged in the conversion, selling, and possible dissipation of the proceeds that they collected from the Class through their unregistered offering.

Practically anyone can sell tokens in an ICO. So far in 2017, 165 companies have raised more than $4 billion via ICOs, up from $226 million in 2016. Often, companies promise investors something of perceived value for their money, such as something for free down the road, other than ownership. It’s really more like a donation. The main thing is the digital token that can be traded for instant riches if enough buyers can be dragged out of the woods.

Regulators are just now beginning to wake up. A week ago, the SEC ruled Munchee’s $15-million token sale illegal and halted it. SEC Chairman Jay Clayton, still rubbing his eyes from having slept through much of the mania so far, warned “main street investors”:

The world’s social media platforms and financial markets are abuzz about cryptocurrencies and “initial coin offerings” (ICOs). There are tales of fortunes made and dreamed to be made. We are hearing the familiar refrain, “this time is different.”

Since the SEC started issuing warnings about ICOs in June, block.one has closed its ICO to residents in the US. China too cracked down recently on ICOs, and block.one also closed its ICO to residents of China. But cryptocurrencies are transnational, exchanges are everywhere, and people in China and the US who want to buy into the ICO can probably figure out how to do it.

Oh, and over the time that it took me to write this, EOS spiked another 23.8% on Bithumb, to $11.97. So it really doesn’t matter that it doesn’t convey any kind of ownership of the company or anything else, as long as it continues to surge exponentially forever.

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There are not many reliable stock market indicators out there. Some work some of the time. There is one however that has a far more reliable history: the interest rate inversion.

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Part of the reason that an inversion is such a strong signal is that when bank assets (longer-duration loans) generate less income than bank liabilities (short-term deposits), the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion.

So the yield curve has not yet inverted, but it increasingly looks as if it will in the near future.

Are assets, stocks, overvalued? Not the easiest question to answer as there are so many different valuation methods that one can use. My money would be on a drawdown though. Markets don’t move in only one direction forever. They may move far further, for far longer than any rational explanation can explain, but at some point the ride is over.

The good thing about an inversion signal is that it generally gives you advance warning and time to act.

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A definition of money is that it provides the function of [universal] indirect exchange. Currently, Bitcoin fails that test. The use or acceptance of Bitcoin in indirect exchange is still restricted to [mostly] early adopters.

The current surge of interest in Bitcoin, myself included is as a vehicle of speculation. I have no interest [currently] in using Bitcoin as ‘money’. It is an asset class that to date has increased in value and could further increase in value.

One major issue [for me] is that in the event of war, possible invasion, could I store any wealth in Bitcoin and could I, if necessary, access it? Currently you need a computer and access to the internet, assuming an internet still exists. Sure this is an end-game argument, but it is an argument put forward by advocates of Bitcoin. This however is a scenario where fast access to a gold coin, to offer a bribe, comes out streets ahead of, I’ll just login and transfer to you a Bitcoin.

As to transferring money around the world, it can already be done. True it’s not invisible to the authorities, but most people have no real need of the anonymity provided. For the few that do, then this is a major advantage.

The jury is still out on whether Bitcoin will go mainstream as a money. This is however an argument that drives the valuation of Bitcoin, that Bitcoin will replace fiat money and to do so, Bitcoin will be valued at the current value of all available money in the world. I have no idea whether that will happen. I personally just couldn’t be bothered to use it as a medium of exchange, in its current form it’s just too much effort. To date, your average person does not understand Bitcoin, although due to the phenomenal rise in money prices, they have heard of it.

 

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Bought HK $10 strike @ July 2018 @ $0.55

This was on the back of some pretty heavy buying by a couple of Hedge Funds.

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There is a [recently filed] class action lawsuit. Essentially stating that GE management knew that earnings were going to fall below estimates and that this was ‘misleading’.

 

NEW YORK, NY / ACCESSWIRE / December 13, 2017 / The Klein Law Firm announces that a class action complaint has been filed on behalf of shareholders of General Electric Company (GE) who purchased shares between July 21, 2017 and October 20, 2017. The action, which was filed in the United States District Court for the Southern District of New York, alleges that the Company violated federal securities laws.

In particular, the complaint alleges that throughout the Class Period, defendants made materially false and/or misleading statements and/or failed to disclose that (i) the Company’s various operating segments, including its Power segment, were underperforming Company projections, with order drops, excess inventories and increased costs; (ii) in turn, the Company overstated GE’s full year 2017 guidance; and (iii) as a result of the foregoing, General Electric’s public statements were materially false and misleading at all relevant times.

On October 20, 2017, the Company disclosed quarterly results for the third quarter 2017, disclosing earnings per share (“EPS”) of $0.29, falling below estimates of $0.49 per share. The Company also lowered 2017 earnings expectations, lowering EPS to $1.05- $1.10 from $1.60-$1.70. On a conference call to discuss its financial results, CEO John Flannery stated that the Company had been completing a review of its operations and that, “While the company has many areas of strength, it’s also clear from our current results that we need to make some major changes with urgency and a depth of purpose. Our results are unacceptable, to say the least.”

Shareholders have until January 2, 2018 to petition the court for lead plaintiff status. Your ability to share in any recovery does not require that you serve as lead plaintiff. You may choose to be an absent class member.

If you suffered a loss during the class period and wish to obtain additional information, please contact Joseph Klein, Esq. by telephone at 212-616-4899 or visit http://www.kleinstocklaw.com/pslra-sb/general-electric-company?wire=1.

Joseph Klein, Esq. represents investors and participates in securities litigations involving financial fraud throughout the nation. Attorney advertising. Prior results do not guarantee similar outcomes.

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Just bought GE.

There are some big buyers of the stock, individuals and Hedge Funds over the past couple of weeks. The price is now [pretty much] bottomed and seems to be stabilising [see daily chart] at these levels.

To get some leverage, I bought Jan 18 2019 Calls at $0.43 at strike $23.

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I have posted many articles on bitcoin and read a hundred more. Bitcoin traded towards, or has possibly already exceeded $18,000/coin. There are predictions of $1,000,000/coin out there. Who knows.

Of all the arguments for bitcoin, its uses, the only one that really resonates with me is the one that argues that where you live in a country with no [honest] banking, no legal system, high inflation, countries like Zimbabwe or Venezuela or any other of twenty crazy countries, then Bitcoin or something like it makes it easier to hide/transport your wealth out of the country.

The real benefit however is not Bitcoin per se, it is the blockchain. It is the non-centralised computer code that provides the benefit.

If I could hold some other form of wealth on the blockchain, then the value of Bitcoin would arguably fall. So I could hold my shares of Berkshire Hathaway, my Treasury Bonds, my deeds to real property and my gold futures on the blockchain.

The value therefore does not reside in the cryptocurrencies, it resides in the blockchain technology. Someone [a programmer] will at some point realise this is make it possible to hold these assets on the blockchain.

Already ‘smart contracts’ are being discussed in relation to the blockchain, it is just another step to any contract. If [when] it happens, what then is the value of a Bitcoin?

 

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