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      "body": "<h3>Saudi Arabia</h3>\n<p>The arrival of cinema (after a 35-year ban), comedy shows, woman driving. What the hell is happening? At this rate, within a few months Saudi woman will be tottering around in lululemon and enraging the clerics via Instagram in their yoga pants. I could think of worse things.</p>\n<p>Why all these changes?</p>\n<p>Good question! Let&#8217;s first take a look at what Mohammed Bin Salman (MBS) has done.</p>\n<p>I already wrote about MBS <a href=\"https://capitalistexploits.at/2017/11/bin-rough-week/\" target=\"_blank\" rel=\"noopener\">back in November</a> when he gave all the royals a nice holiday in the Ritz.</p>\n<p>Clearly he&#8217;s charting a new course, and amongst the Saudi population he&#8217;s very popular. And why not? He&#8217;s basically Robin Hood without the green tights, who just donned a white sheet.</p>\n<p>Remember the <a href=\"https://capitalistexploits.at/2012/06/why-some-are-thriving/\" target=\"_blank\" rel=\"noopener\">Arab Spring</a>?</p>\n<p>That was waaaay back in 2012. MBS was just still in his 20&#8217;s but being a sharp guy I&#8217;m pretty sure he was watching.</p>\n<p>It wasn&#8217;t therefore lost on him how mad a population can get when they see lavish extravagance around them&#8230; and they&#8217;re not party to it. And so stripping untold wealth from the royals and redistributing a percentage of this to the people isn&#8217;t the dumbest idea ever. And for that he&#8217;s a modern-day hero.</p>\n<p>As to all those <del>powerful and wealthy</del> angry royals&#8230; Well, they&#8217;re no doubt pretty shocked.</p>\n<p>I mean, what he&#8217;s done is even less appropriate than farting at a Royal Ascot charity dinner. It was certainly more unexpected. I&#8217;m sure if they could, they&#8217;d fill his trousers with some of that oil that&#8217;s made them all so stinking rich and set him alight. But that&#8217;s unlikely to happen, at least for now. Why?</p>\n<p><img class=\"aligncenter wp-image-18921 size-full\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Unknown-1.jpeg\" alt=\"\" width=\"283\" height=\"178\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Unknown-1.jpeg 283w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Unknown-1-125x79.jpeg 125w\" sizes=\"(max-width: 283px) 100vw, 283px\" /></p>\n<p>And Trump can champion all these freedoms MBS is allowing and take credit for them. Now, being such a bashful, humble guy I&#8217;m sure he won&#8217;t, but you know he could if he wanted to.</p>\n<p>As for MBS, he&#8217;s no dolt. I mean, for starters a thuggish dolt of a dictator would simply have chopped off the heads of all the royals and stolen all their money. Not MBS. He&#8217;s cunningly served much the same dish by coating it in a delicious looking mayonnaise called <em>&#8220;cracking down on corruption&#8221; </em>and the world&#8217;s eating it up.</p>\n<p>He realises that OPEC is finished and no matter what they all agree to do it&#8217;s just smoke and mirrors at this point as they&#8217;re all cheating more than a group of married investment bankers in Vegas for the weekend. So what&#8217;s he to do?</p>\n<p>Develop the petrochemical complex, build out refining capacity like they&#8217;re doing at the Jazan refinery and terminal project, which on completion will sport a processing capacity of more than 400,000 barrels of the black stuff per day, providing fuels for domestic and international customers. And diversify Saudi&#8217;s economy from oil.</p>\n<p>Alternative energy? Sure!</p>\n<p>Tourism? Yes, sir!</p>\n<p>Now, you might look at me with cross eyes and say, <em>&#8220;Chris, put down the drugs! Who on earth would go on holiday to Saudi frickin&#8217; Arabia?&#8221;</em> And you&#8217;d be right, which is why MBS is building, amongst other things, NEOM, a $500 billion mega city.</p>\n<p>In his own words:</p>\n<blockquote><p><em>We&#8217;re building a new generation of cities. NEOM will be powered by clean energy, and will have <strong>no room for anything traditional</strong>.</em></p></blockquote>\n<p>Take a look.</p>\n<p>https://www.washingtonpost.com/video/c/embed/54d97738-b961-11e7-9b93-b97043e57a22</p>\n<p>Ha! And you thought I was kidding about lululemon!</p>\n<p>Here&#8217;s what I said in <a href=\"https://capitalistexploits.at/2017/11/bin-rough-week/\" target=\"_blank\" rel=\"noopener\">that article back in November:</a></p>\n<blockquote><p><em>It looks to me like MBS sees this for the expiring option contract that it is. My best guess is that he realises that if they wait too long, by the time the welfare money has run out, they’ll all be overthrown. The old guard probably don’t want to hear that, but it is the truth. And because they don’t want to hear it, you need to get rid of them.</em></p></blockquote>\n<p>Now only 3 months on that certainly looks like it was a pretty good guess. Lucky me!</p>\n<h3>IPO?</h3>\n<p>All talk now seems to be around this Saudi Aramco IPO.</p>\n<p>You know what I think?</p>\n<p>I don&#8217;t think it&#8217;s going to happen. At least not as many think.</p>\n<p>Here&#8217;s a question that&#8217;s been bugging me and we should all ask ourselves. We&#8217;re ostensibly leading up to an IPO of what is the worlds largest company. And yet, nobody knows the numbers. Seriously!</p>\n<p>This is not even like <a href=\"https://capitalistexploits.at/2017/05/musk-macron-darned-craziest-things-youve-ever-seen/\" target=\"_blank\" rel=\"noopener\">Tesla</a> whose numbers are just financial spaghetti. These guys have not opened their books so we just don&#8217;t really know. Hands up who wants to invest in a company where we don&#8217;t know what the hell we&#8217;re buying&#8230; in a country renowned for chopping off people&#8217;s heads?</p>\n<p>Yeah, and while you&#8217;re thinking about that, think about this. Everything MBS has done has been pretty methodical and clearly calculated. This is a sharp guy. You may not like him but he&#8217;s clearly not an idiot. Would he risk a failed IPO at a time when he&#8217;s been making some of the most polarising decisions in the history of the Kingdom?</p>\n<p>Yeah, I didn&#8217;t think so either. I may be proven wrong but what I think is more likely is a listing of certain &#8220;assets&#8221; — maybe some port facilities, a refinery or two. JVs such as the Aramco-Sinopec Yanbu refinery JV. We&#8217;ll see that sort of stuff but not a wholesale listing of Aramco because let&#8217;s face it: That&#8217;d be like lifting you kilt and what the whole world will be looking to see is how big is it really? I don&#8217;t see any signs MBS is willing to reveal this.</p>\n<h3>Implications</h3>\n<p>Markets are funny creatures. Everything everywhere feeds in and out of the animal revealing which way it may be headed. So in that light I present to you high yield energy:</p>\n<p><img class=\"aligncenter wp-image-18918\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/DTVzP8CWkAEXRp4.jpg\" alt=\"\" width=\"700\" height=\"393\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/DTVzP8CWkAEXRp4.jpg 1000w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/DTVzP8CWkAEXRp4-125x70.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/DTVzP8CWkAEXRp4-300x169.jpg 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/DTVzP8CWkAEXRp4-768x432.jpg 768w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>Back to 2014 highs. Remember 2014? Probably not. Well, let me remind you. Here it is:</p>\n<p><img class=\"aligncenter wp-image-18919\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Screenshot-2018-01-16-20.31.15-1024x520.png\" alt=\"\" width=\"700\" height=\"355\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Screenshot-2018-01-16-20.31.15-1024x520.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Screenshot-2018-01-16-20.31.15-125x63.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Screenshot-2018-01-16-20.31.15-300x152.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Screenshot-2018-01-16-20.31.15-768x390.png 768w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>That&#8217;s quite some divergence. Certainly the high yield market shows us that speculators are betting aggressively right now. That&#8217;s a worry in itself because the thing with speculators is they&#8217;re like husbands arguing with their wives — let&#8217;s face it, we&#8217;re very rarely right.</p>\n<p>Long or short?</p>\n<p>Well, I can&#8217;t give away how we&#8217;re positioned as that&#8217;d be pretty unfair to <a href=\"https://capitalistexploits.at/become-an-insider/\" target=\"_blank\" rel=\"noopener\">subscribers</a>, but there&#8217;s just no asymmetry in oil itself and as for the high yield energy market. Put a gun to my head and I&#8217;d be short and since there&#8217;s no gun at my head, I&#8217;ll just not play in that sandpit.</p>\n<p>What do you think?</p>\n<p>What&#8217;s the best way to invest in oil (long or short) for the next 5 years?</p>\n<p>Let me know in the comments section.</p>\n<p>&#8211; <a href=\"https://twitter.com/capitalistexp/\" target=\"_blank\" rel=\"noopener\">Chris</a></p>\n<p><em>&#8220;Cycles of shortage and surplus characterize the entire history of oil.&#8221;</em> — Daniel Yergin</p>",
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      "body": "<p>We&#8217;ve closed the door on 2017 and clutching those New Year&#8217;s resolutions hatched under the &#8220;alfuence of incahol&#8221; we strive boldly into 2018.</p>\n<p>Being a boring old fart I&#8217;ve nothing new for the year but rather sticking to old principles. One of those is to steer clear of bad ideas and stupid people.</p>\n<p>So, with that in mind here&#8217;s one of my favourite replies to <a href=\"https://capitalistexploits.at/2017/12/looking-seed-capital-can-help/\" target=\"_blank\" rel=\"noopener\">one of my recent posts.</a> If you&#8217;re looking to raise capital for an endeavour, take notes and thank me later.</p>\n<p><img class=\"aligncenter wp-image-18842\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-29-at-8.52.49-AM.png\" alt=\"\" width=\"650\" height=\"207\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-29-at-8.52.49-AM.png 986w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-29-at-8.52.49-AM-125x40.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-29-at-8.52.49-AM-300x96.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-29-at-8.52.49-AM-768x245.png 768w\" sizes=\"(max-width: 650px) 100vw, 650px\" /></p>\n<p>Way to go champ! As sharp as a blunt stick.</p>\n<p><img class=\"size-full wp-image-18851 aligncenter\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/images.png\" alt=\"\" width=\"221\" height=\"228\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/images.png 221w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/images-121x125.png 121w\" sizes=\"(max-width: 221px) 100vw, 221px\" /></p>\n<p>Here&#8217;s the bullet point version for you:</p>\n<ul>\n<li>Get your target to like you. Tick! Man, I&#8217;m in love. I mean, who doesn&#8217;t like being called a moron?</li>\n<li>Ask to raise money for something that can be done for free online. Tick! Clearly, there&#8217;s something so amazing about this product it can&#8217;t possibly be launched for close to free via any of the current methods. I&#8217;m intrigued already. In fact, I&#8217;m as good as sold. Unleash the genius already.</li>\n<li>Respond to an email that has NOTHING to do with your proposal. It shows you&#8217;re the man. You&#8217;re focussed, driven, and don&#8217;t give an isht about anything but your gig. Killer!</li>\n</ul>\n<p>This had me reminiscing on some of my first ventures where I was as broke as Western Governments (though without the debt) and wanted to get something going.</p>\n<p>One thing I learned was that you really don&#8217;t need capital to start your own business, certainly not self publishing.</p>\n<p>With only your stubby little fingers and Google you&#8217;ll find there are literally hundreds of avenues to self publish while greedily keeping the vast majority of the profits with only a smidgen going to Amazon.</p>\n<p>And if you really are surviving on a can a day of Purina cat chow, then go get a job packing shelves, mowing lawns, or pumping gas.</p>\n<p>But Lordy Lordy, why would you ever borrow money to self publish? And because it makes as much sense to borrow money for this sort of business as it does <a href=\"https://capitalistexploits.at/2017/11/elon-musk-pulls-ico/\" target=\"_blank\" rel=\"noopener\">buying Tesla,</a> no sane investor is likely to lend you money.</p>\n<h3>Lessons</h3>\n<p>So, here are some lessons learnt after being involved in financial markets for longer than I&#8217;d really like to admit, including running a VC firm:</p>\n<ol>\n<li>The first answer to making money as an investors is to not&#8230; well, lose it. Ok, ok. If you want to be picky that doesn&#8217;t actually make you money but if you lose it, then you can&#8217;t use it to make more so it&#8217;s pretty much foundational. If you haven&#8217;t got the NOT LOSING part down pat, then it really doesn&#8217;t matter what you do to make money because those old habits will just drag you back down to your starting point, wherever that may be. Think I&#8217;m joking? About 70% of people winning the lottery are broke within 3 to 4 years and about the same percentage of entrepreneurs raising capital go tits up in about the same timeframe. Coincidence?</li>\n<li>Be wary of entrepreneurs whose first answer to the problem of not having what they want (a big profitable business) is to raise money. It&#8217;s the same problem we find with Joe Sixpack who wants that new SUV but hasn&#8217;t got the cash for it and so finances the thing. More often than not Joe Sixpack is in love with the idea of a flashy SUV and not the utility of the thing, and as such there&#8217;s no productivity there. Good solid businesses provide something useful and for that as an entrepreneur you can start small, build a prototype, and go from there. Could be a widget or a service — doesn&#8217;t matter. There are two really really cheap forms of financing. One is raising money in a mania (like ICOs now) and the other is self financing through cashflows. First step then is to provide something useful. My friend Derek Sivers made this awesome rundown on exactly this.</li>\n</ol>\n<p><iframe src=\"https://www.youtube.com/embed/7KLnXjqKL5g\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"></iframe></p>\n<p>What else?</p>\n<p>There are dozens of perfectly valid reasons for entrepreneurs to raise capital.</p>\n<p>Prototype finished, proven, company profitable? Perfect for growth capital.</p>\n<p>Or you have a proven track record and are raising capital for businesses with large asset bases and infrastructure requirements.</p>\n<p>Or like one I&#8217;m looking at right now: financing a gold mine in Brazil with two successful mining pros. Large gold mines after all are quite unlike the business of self publishing books.</p>\n<p>And though I don&#8217;t need to tell you, I will: we&#8217;re at the bottom of the cycle where we buy assets for cents on the dollar.</p>\n<p><img class=\"aligncenter wp-image-18024\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/09/170920-9.jpg\" alt=\"\" width=\"550\" height=\"433\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/09/170920-9.jpg 731w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/09/170920-9-125x98.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/09/170920-9-300x236.jpg 300w\" sizes=\"(max-width: 550px) 100vw, 550px\" /></p>\n<p>So here&#8217;s to 2018. I for one am really looking forward to it. You know why?</p>\n<p><img class=\"aligncenter wp-image-18881\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Wrestling.jpg\" alt=\"\" width=\"500\" height=\"309\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Wrestling.jpg 855w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Wrestling-125x77.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Wrestling-300x185.jpg 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2018/01/Wrestling-768x474.jpg 768w\" sizes=\"(max-width: 500px) 100vw, 500px\" /></p>\n<p>&#8211; <a href=\"https://twitter.com/capitalistexp/\" target=\"_blank\" rel=\"noopener\">Chris</a></p>\n<p><em>“It is better to be roughly right than precisely wrong.”</em> ― John Maynard Keynes</p>",
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      "body": "<p>Today you&#8217;re in for a treat.</p>\n<p>Jamie Keech, who joined our merry band of men here some months back, is uniquely positioned to bring much, much more to the table than I ever could when it comes to the commodity spectrum. It&#8217;s why, quite frankly, we wanted him.</p>\n<p></p>\n<p>But aside from his dashing good looks, he&#8217;s also a mineral engineer who spent the early part of his career working in exploration in Mexico, Nevada, the Yukon, and Albania.</p>\n<p>He went back to school, completing a Masters in Mining Engineering focused on Environmental Development and Corporate Social Responsibility at the Camborne School of Mines in the UK. Jamie then moved to Hong Kong and Mongolia working for the world’s largest mining contractor, Leighton Holdings, on three open-pit coal mines. He then returned to Toronto and spent two years working with Hatch Consulting, a leading global engineering firm, where he was focused on ArcelorMittal’s $6-billion Mary River iron ore project in Nunavut.</p>\n<p>When he joined our merry team he was, and still does conduct due diligence on behalf of mining investors, and consults to various junior companies on technical due diligence, project management and regulatory affairs. As if this wasn&#8217;t enough he has taught an introduction to mining at Nanjing University in Nanjing, China and seminars for P.W.C. on the technical aspects of mining.</p>\n<p>All in all, he&#8217;s very switched on and a great resource for all of us as well as you, our readers.</p>\n<p>This article is Jamie&#8217;s first pubic appearance if you will. I think you&#8217;ll like it.</p>\n<p>&#8211; Chris</p>\n<p>&#8212;&#8212;&#8212;&#8212;</p>\n<h3 class=\"c7\">Nickel</h3>\n<p class=\"c7\">Henry Ford once said: <em>“If I had asked people what they wanted, they would have said faster horses.”</em></p>\n<p class=\"c7\">Steve Job’s mused people don’t know what they want until you show them.</p>\n<p class=\"c7\">It’s become a common ethos in Silicon Valley and the tech world that innovation comes from individual creativity as opposed to the group demand, and it is the rare visionary that can tap into this societal zeitgeist and create something before we know we want it. It’s even more rare to find someone that can take a common substance and make us need it.</p>\n<p class=\"c7\">You don’t know who Robert Crooks Stanley is.</p>\n<p class=\"c7\">His product is common to the point of mundane. But in addition to being essential, it’s prolific.</p>\n<p class=\"c7\">Until the 20th century nickel was used for making one thing: Nickels. </p>\n<p></p>\n<p class=\"c7\">However, this all changed when it was discovered that steel made with nickel was extremely hard and durable. This discovery coincided neatly with the assassination of a certain Archduke which thereby resulted in an unprecedented global demand for very hard steel &#8211; primarily for armored plating (tanks, warships, etc.).</p>\n<p class=\"c7\">When international disarmament began in 1921 the price of nickel was decimated.</p>\n<p class=\"c7\">No one was harder hit by this than the International Nickel Company, more commonly known as INCO. INCO controlled North American nickel production most of which came from the famous Sudbury Basin. With dwindling demand for its product INCO suffered an existential crisis and the mines of Sudbury were silenced, allowing stockpiles to dwindle.</p>\n<p class=\"c7\">INCO drew two conclusions from the experience:</p>\n<ol class=\"c17 lst-kix_list_1-0 start\" start=\"1\">\n<li class=\"c20\">If INCO was going to succeed they would need to control the supply to the market;</li>\n</ol>\n<ol class=\"c17 lst-kix_list_1-0\" start=\"2\">\n<li class=\"c7 c25\">They were going to need to find something else to do with nickel.</li>\n</ol>\n<p class=\"c7\">Enter Robert Crooks Stanley.</p>\n<p class=\"c7\">During his 30 years as CEO and Chairman of INCO Stanley literally created the nickel market. Driving millions into R&amp;D he found uses for a product no one knew they needed.</p>\n<p class=\"c7\">Why do we have nickel in your stainless steel? <strong>Stanley.</strong></p>\n<p class=\"c7\">How about home appliances? Jet engines? Power plants? <strong>Stanley.</strong></p>\n<p class=\"c7\">Essentially every innovation in the nickel industry for 50 years was developed by INCO engineers.  They shared their innovations with customer and competitor alike – if it drove demand for nickel they didn’t care.  </p>\n<p class=\"c7\">They did something else as well: They controlled supply.</p>\n<p class=\"c7\">INCO controlled the stockpiles and the prices. If a competitor attempted to enter the space they flooded the market, dropped the price and crushed them. By the 1930’s the demand for Nickel had returned to prewar levels and INCO dominated the market &#8211; Controlling 90% of the non-communist world&#8217;s production.  </p>\n<p class=\"c7\">But as the Iron curtain fell unleashing massive competitors, and the demands of a growing Asia drove prices, INCO was unable to control the market.  After 50 years of reigning supreme their market share dropped to under 30% and in 2006 they were taken out by Brazilian mining giant Vale.</p>\n<p class=\"c7\">After the boom in the early 2000’s nickel sits at nearly a 20 year low:</p>\n<p></p>\n<p class=\"c7\">But, it’s starting to look like another would be visionary could be driving the nickel price for the next decade.</p>\n<blockquote>\n<p class=\"c18\">History does not repeat itself, but it often rhymes</p>\n<p class=\"c0\">&#8211; Mark Twain</p>\n</blockquote>\n<p class=\"c15\">Whether you believe Elon Musk is going to save the world, or has created one of the greatest short opportunities in history is irrelevant.  He’s begun an arms race in the electricity storage industry.  </p>\n<p class=\"c15\">As a secondary effect, he appears to be one of the greatest mining promoters in history, having almost single handedly ignited the boom in the lithium and cobalt space in recent years.    </p>\n<p class=\"c15\"></p>\n<p></p>\n<p class=\"c3\">But here’s the thing: <strong>Tesla’s lithium-ion NCA battery is composed of 80% nickel.</strong></p>\n<blockquote>\n<p class=\"c18\">Our cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide… [there’s] a little bit of lithium in there, but it’s like the salt on the salad.</p>\n<p class=\"c1\">&#8211; Elon Musk</p>\n</blockquote>\n<p class=\"c3\">Similarly, both Chevrolet and Nissan utilize substantive quantities of nickel in their EV cathodes.</p>\n<p class=\"c3\">Nickel price is driven by three factors: <strong>War, Development, &amp; Innovation</strong><strong> </strong>  </p>\n<p class=\"c3\">Today the nickel market is worth an estimated $20B, this is primarily driven by the manufacture of stainless steel. The price boom of the early 2000’s was catalyzed by development in China &#8211; the next will be driven by EV innovation.</p>\n<p class=\"c3\">Today electric vehicles comprise about 1% of cars on the road &#8211; their batteries demand 70,000 tonnes of nickel per annum, a mere 3% of the global market.  </p>\n<p class=\"c3\">Countries throughout Europe and Asia (UK, France, India) have made plans to ban or limit the use of fossil fuel burning vehicles over the coming two decades. Even China has made grumblings about banning gas fueled vehicles.</p>\n<p class=\"c3\">Major mining companies are starting to move to secure their place in the market. In August BHP Billiton announced it would be spending $43.2m to build the world’s biggest nickel sulfate plant.</p>\n<p class=\"c3\">Ivan Glasenburg, CEO of mining and trading giant Glencore stated that:  </p>\n<blockquote>\n<p class=\"c3\"><em>A shift of just 10% of the global car fleet to EVs would create demand for 400,000 tonnes of nickel, in a 2 million tonne market. Glencore sees nickel shortage as EV demand burgeons.</em></p>\n</blockquote>\n<p class=\"c3\">The banks are starting to take note with CIBC’s, Wood Mackenzie stating:</p>\n<blockquote>\n<p class=\"c3\"><em>Although the capacity to produce nickel sulfate is expanding rapidly, we cannot yet identify enough nickel sulfate capacity to feed the projected battery forecasts.</em></p>\n</blockquote>\n<p class=\"c3\">The junior explorer and small cap investors are just beginning to wake up to this trend. In Canada Garibaldi Resource has been on a run the past 6 months on the back of some decent drill results from their aptly named Nickel Mountain Project.</p>\n<p></p>\n<p class=\"c3\">With little evidence to date Garibaldi is being heralded as the next Voisey’s Bay, the nickel discovery that made infamous mining promoter Robert Friedland his (first) fortune.</p>\n<p class=\"c3\">I read these movements as a shift in investor confidence on nickel and believe it indicative of more to come. Recall that it was the discovery of Voisey’s Bay in the 1990’s and its subsequent $4.5B sale to INCO that has largely been credited with igniting the mining/metals mania of the early 2000’s.</p>\n<p class=\"c3\">Tesla entered the EV market in 2003, but it wasn’t until 2015 that the lithium price took off; the assumed future demand for lithium sending every junior mining promoter first to Nevada, than Argentina, and now anywhere with the faintest whiff of lithium brines. This process is repeating itself with cobalt.</p>\n<p class=\"c3\">So why lithium, or cobalt, when a lithium-ion battery is 80% nickel?</p>\n<p class=\"c3\">My guess is twofold.</p>\n<p id=\"h.gjdgxs\" class=\"c3\">First, both metals are produced in such small quantities that the idea of crises level shortages on the horizon is easy to swallow. With cobalt produced primarily as a byproduct of Congolese copper mines, and the U.S.’s entire lithium production coming from a single operation in Nevada it is easy to wrap one’s mind around the concept of scarcity.</p>\n<p class=\"c3\">Second, no one has managed to lose money on lithium. Although you certainly couldn’t accuse mining promoters of having a long memory there is something unique about a metal that almost no one has managed to go broke on (yet). Nickel, like most metals, has a long and sordid history; and carries with it the emotional baggage of going through a century of metal cycles.</p>\n<p class=\"c3\">Lithium and Cobalt on the other hand hold the unusual position of being “new”, or better put: exotic. Almost no one knows anything about them so they can believe whatever they want, or rather, whatever they’re told.</p>\n<p class=\"c3\">Not so with nickel (or copper, or zinc, or gold, for that matter).</p>\n<p class=\"c3\">Investors have had many opportunities to lose money on nickel; and no doubt many have taken those opportunities. But there have been just as many opportunities to make money.</p>\n<p class=\"c3\">The key to successful speculation in the mining space in timing cycles. The nickel price is driven by war, development and innovation. With the global EV industry approaching a tipping point, continued growth in China and no apparent shortage of war on the horizon investors looking to capitalize on these events should remain watchful of nickel.  </p>\n<p>&#8211; Jamie Keech</p>\n<p><em>&#8220;A nickel ain&#8217;t worth a dime anymore.&#8221;</em> — Yogi Berra</p>",
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      "body": "<p>Hi there,</p>\n<p>Before we get started.</p>\n<p><img class=\"aligncenter wp-image-18764\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-14-at-10.13.29-AM-1-1024x163.png\" alt=\"\" width=\"600\" height=\"95\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-14-at-10.13.29-AM-1-1024x163.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-14-at-10.13.29-AM-1-125x20.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-14-at-10.13.29-AM-1-300x48.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-14-at-10.13.29-AM-1-768x122.png 768w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-14-at-10.13.29-AM-1.png 1096w\" sizes=\"(max-width: 600px) 100vw, 600px\" /></p>\n<p>Soooo&#8230; if you&#8217;re looking for seed capital let me know. I&#8217;ll put you in touch.</p>\n<h3><strong>Silent Wednesday?</strong></h3>\n<p>I&#8217;ve a friend who never works Wednesdays. It&#8217;s the middle of the week, he tells me. Why work when everyone else is?</p>\n<p>Fair point. And so this past Wednesday I did just that. Well, for some of the day, anyway. And I received complaints for not writing a pithy, intelligent, mind-blowing blog for you.</p>\n<p>I&#8217;m sorry. I was seeing a man about a horse. No, really!</p>\n<p><img class=\"aligncenter wp-image-18753\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/pony-1.png\" alt=\"\" width=\"350\" height=\"323\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/pony-1.png 571w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/pony-1-125x115.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/pony-1-300x277.png 300w\" sizes=\"(max-width: 350px) 100vw, 350px\" /></p>\n<p>Finicky bloody beasts &#8211; horses. I thought they were like hydrogen molecules, all exactly the same.</p>\n<p>But I&#8217;m assured this isn&#8217;t the case. I can guarantee you this, though: It&#8217;s easier to figure out parabolic curve theory or quantum mechanics than it is to understand all the complexities of these beasts.</p>\n<p>And then there&#8217;s the little issue of cost.</p>\n<p>You think cars are expensive until you buy a horse, which actually means that you&#8217;ve got to upgrade your car because pulling a half ton nag about can&#8217;t be done with just any car.</p>\n<p>No, no, no. You need something that Schwarzenegger would drive when heading into battle with aliens. And once you&#8217;ve got one of those, you&#8217;ve got to spend even more money on the carriage to cart your nag around in. You&#8217;d be forgiven for looking at these &#8220;floats&#8221; as they&#8217;re called, and coming to the conclusion that they&#8217;re simply glorified tin cans on wheels and as such would be as cheap as chips.</p>\n<p>Your former evaluation would be correct (boxes on wheels), but your latter conclusion (cheap as chips) would be as wrong as Miley Cyrus swinging naked on a wrecking ball. So, of course, they&#8217;re ludicrously expensive, which means you&#8217;ll need to sell your Porsche and your boat to get one.</p>\n<p>That&#8217;s just for starters.</p>\n<p>And don&#8217;t get me going on &#8220;horse people.&#8221; They&#8217;re all collectively off their rocker. I mean a horse can kick a child&#8217;s head clean off and it&#8217;ll get all the sympathy of an old lady tottering across a pedestrian crossing. The poor darling got &#8220;<em>spooked</em>&#8220;. The now headless child and parents for their part will be scolded for upsetting the poor thing. Crazy. I&#8217;ve never seen anything like it. Horse people are completely mad.</p>\n<p>And this got me thinking how similar horse <del>crazies</del> people are to fanatics of all stripes.</p>\n<p>Now, I know I&#8217;ll get hate mail for this but hear me out.</p>\n<p>It&#8217; like a religion. I mean you can explain to the Zulu&#8217;s that their belief in the <a href=\"https://en.wikipedia.org/wiki/Tikoloshe\" target=\"_blank\" rel=\"noopener\">Tikoloshe</a>, an evil little creature that can become invisible by drinking water and can cause illnesses and even death, is up there with the tooth fairy.</p>\n<p><img class=\"aligncenter wp-image-18754\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/TikolosheNewspaperHeadline-1024x683.jpg\" alt=\"\" width=\"450\" height=\"300\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/TikolosheNewspaperHeadline-1024x683.jpg 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/TikolosheNewspaperHeadline-125x83.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/TikolosheNewspaperHeadline-300x200.jpg 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/TikolosheNewspaperHeadline-768x512.jpg 768w\" sizes=\"(max-width: 450px) 100vw, 450px\" /></p>\n<p>And it wont matter a jot. This is their belief, and it&#8217;s as unshakeable as our <a href=\"https://capitalistexploits.at/2017/04/world-whack-5-head-scratchers/\" target=\"_blank\" rel=\"noopener\">W</a><a href=\"https://capitalistexploits.at/2017/04/world-whack-5-head-scratchers/\" target=\"_blank\" rel=\"noopener\">ahhabi Saudis&#8217;</a> belief in their own gods or indeed ISIS, who&#8217;ve been on a murderous rampage due to their beliefs in some medieval superstitious nonsense that was supposedly handed down to an illiterate peasant in the desert.</p>\n<p>In fact, history is littered with beliefs and religions which have since disappeared, though we have evidence that folks killed each other over those beliefs. Powerful stuff, beliefs.</p>\n<p><img class=\"aligncenter wp-image-18751\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/544c8d81cac14d09a74c1f03aefd2d23-food-for-thought-funny-memes.jpg\" alt=\"\" width=\"450\" height=\"450\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/544c8d81cac14d09a74c1f03aefd2d23-food-for-thought-funny-memes.jpg 736w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/544c8d81cac14d09a74c1f03aefd2d23-food-for-thought-funny-memes-125x125.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/544c8d81cac14d09a74c1f03aefd2d23-food-for-thought-funny-memes-300x300.jpg 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/544c8d81cac14d09a74c1f03aefd2d23-food-for-thought-funny-memes-100x100.jpg 100w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/544c8d81cac14d09a74c1f03aefd2d23-food-for-thought-funny-memes-150x150.jpg 150w\" sizes=\"(max-width: 450px) 100vw, 450px\" /></p>\n<p>Every investor thinks they&#8217;re immune, but the evidence proves they&#8217;re not.</p>\n<p>Show a gold bug that gold will get cut in half, and they&#8217;ll nod their head, furrow their brow, and mutter away. But there is NO WAY they&#8217;re selling. No, Sirreee!</p>\n<p>You see, gold has that magical attribute to convert people to believers. And as such, it&#8217;s really excellent for manias.</p>\n<p>Show a Japanese bond fund manager, who&#8217;s known nothing but positive returns for 25 years why the risks to owning JGBs may not really be as peachy as commonly thought and you&#8217;re an heretic. And yet <a href=\"https://capitalistexploits.at/2017/11/side-asymmetry-never-hear/\" target=\"_blank\" rel=\"noopener\">there&#8217;s the other side of asymmetry you never hear about.</a></p>\n<p>And this is what&#8217;s to love about any setup where folks can have an ideological, religious-like belief.</p>\n<p>Without them it&#8217;s literally impossible to have truly epic, tell-your-grandkids-one-day manias.</p>\n\n<p>The dot-com era was one such epic mania.</p>\n<p>Believers could never be told that even though the Internet was revolutionary there is no such a thing as &#8220;no price is too high,&#8221; which is basically the tenet of every mania.</p>\n<p>Sure, the Internet completely changed our world. In fact, it&#8217;s why I suggested <a href=\"https://capitalistexploits.at/2017/10/jamie-dimon-learn-lemons/\" target=\"_blank\" rel=\"noopener\">Jamie Dimon should learn about lemons,</a><strong> </strong>but remember we&#8217;ve got that odd old curmudgeon from Omaha to remind us that&#8230;</p>\n<p><img class=\"aligncenter wp-image-18755\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/investment-management-3-638.jpg\" alt=\"\" width=\"450\" height=\"338\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/investment-management-3-638.jpg 638w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/investment-management-3-638-125x94.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/investment-management-3-638-300x225.jpg 300w\" sizes=\"(max-width: 450px) 100vw, 450px\" /></p>\n<p>Believers are absolutely necessary. Or should I say, the ingredients to allow for the formation of believers are necessary for truly epic manias. And this is something we should all love. Why?</p>\n<p>Who doesn&#8217;t want to ride a mania, provided you know it&#8217;s a mania? Or indeed bet against one as market saturation becomes evident.</p>\n<p>We&#8217;re doing ourselves a disservice if we&#8217;re not on the lookout for these attributes all the time. They&#8217;re quite easy to spot. Especially if we&#8217;re lucky enough to have a <a href=\"https://capitalistexploits.at/2017/11/elon-musk-pulls-ico/\" target=\"_blank\" rel=\"noopener\">cult leader</a> as they&#8217;re more evident that way.</p>\n<p><img class=\"aligncenter wp-image-18756\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/tesla-trucks-1024x576.jpg\" alt=\"\" width=\"600\" height=\"338\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/tesla-trucks-1024x576.jpg 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/tesla-trucks-125x70.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/tesla-trucks-300x169.jpg 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/tesla-trucks-768x432.jpg 768w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/tesla-trucks.jpg 1280w\" sizes=\"(max-width: 600px) 100vw, 600px\" /></p>\n<p>And this is one reason to love Bitcoin.</p>\n<p>For the believers there is no price too high for it&#8230; or too low. They&#8217;ll never sell.</p>\n<p><em>Side note: If someone wants to launch &#8220;The Church of Bitcoin&#8221; right now, hit me up. I&#8217;ll structure the deal for you, we&#8217;ll run an ICO, and then take the sucker public. Call me!</em></p>\n<p>Speaking of true believers&#8230;</p>\n<p><img class=\"aligncenter wp-image-18761\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/U5duC3A3qvaL6hoG8c17dDRDkSBKzFf_1680x8400.png\" alt=\"\" width=\"500\" height=\"279\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/U5duC3A3qvaL6hoG8c17dDRDkSBKzFf_1680x8400.png 478w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/U5duC3A3qvaL6hoG8c17dDRDkSBKzFf_1680x8400-125x70.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/U5duC3A3qvaL6hoG8c17dDRDkSBKzFf_1680x8400-300x168.png 300w\" sizes=\"(max-width: 500px) 100vw, 500px\" /></p>\n<p>Let&#8217;s all hope that we see it at US$490,000 in 3 years.</p>\n<p><em>&#8220;So we need to be afraid and get out, Chris?&#8221;</em></p>\n<p>Let me put it this way:<em> &#8220;Buckle up, you ain&#8217;t seen nothing yet.&#8221;</em></p>\n<p><img class=\"aligncenter wp-image-18760\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1-1-1024x577.jpg\" alt=\"\" width=\"500\" height=\"282\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1-1-1024x577.jpg 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1-1-125x70.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1-1-300x169.jpg 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1-1-768x432.jpg 768w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1-1.jpg 1181w\" sizes=\"(max-width: 500px) 100vw, 500px\" /></p>\n<p>And if ever you needed evidence that the bubble in Bitcoin has a way to go yet, I present to you the WSJ:</p>\n<p><a href=\"https://blogs.wsj.com/economics/2017/12/13/is-bitcoin-a-bubble-96-of-economists-say-yes/\" target=\"_blank\" rel=\"noopener\"><img class=\"aligncenter wp-image-18757\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-4.19.57-PM-1024x119.png\" alt=\"\" width=\"650\" height=\"75\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-4.19.57-PM-1024x119.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-4.19.57-PM-125x14.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-4.19.57-PM-300x35.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-4.19.57-PM-768x89.png 768w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-4.19.57-PM.png 1552w\" sizes=\"(max-width: 650px) 100vw, 650px\" /></a></p>\n<p>Well, the one thing I have learned over the years is that economists, who, let me remind you, never manage money, will be more wrong than central bankers, which is saying something.</p>\n<p>Right now, they think we all ought to be losing sleep over Bitcoin. The simple fact that they believe this makes me sleep like a rock.</p>\n<p>I&#8217;ll go on record here and now, and you, readers, can hold my feet to the fire. I&#8217;m going to say that these economists are going to be spectacularly wrong, and when they&#8217;re justifying some truly insane prices my rock-like sleeping habits will be severely disrupted.</p>\n<p>Yes, Bitcoin returns have been insane. To show you how insane, here is a Bitcoin chart.</p>\n<p><img class=\"aligncenter wp-image-18758\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/paLD75sPD9te5eZqdeUwHkV7XXpZ4QmPsa60DyKdSg.jpg\" alt=\"\" width=\"700\" height=\"420\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/paLD75sPD9te5eZqdeUwHkV7XXpZ4QmPsa60DyKdSg.jpg 630w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/paLD75sPD9te5eZqdeUwHkV7XXpZ4QmPsa60DyKdSg-125x75.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/paLD75sPD9te5eZqdeUwHkV7XXpZ4QmPsa60DyKdSg-300x180.jpg 300w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>Shoot, I&#8217;m sorry. Wrong chart. What was I thinking?</p>\n<h3>Something Else to Remember</h3>\n<p>And this is important to understand context of where we&#8217;re likely at.</p>\n<p>Here&#8217;s Amazon at the peak of the Nasdaq bubble and the subsequent bust.</p>\n<p><img class=\"aligncenter wp-image-18762\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.24-PM-1024x519.png\" alt=\"\" width=\"700\" height=\"355\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.24-PM-1024x519.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.24-PM-125x63.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.24-PM-300x152.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.24-PM-768x389.png 768w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>But in hindsight we now all know that the underlying technology and way of doing business was fundamentally changed forever, and Amazon managed to gobble up market share in the same way that a pack of lions would gobble a herd of one-legged antelope.</p>\n<p><img class=\"aligncenter wp-image-18763\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.48-PM-1024x515.png\" alt=\"\" width=\"700\" height=\"352\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.48-PM-1024x515.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.48-PM-125x63.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.48-PM-300x151.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-15-at-5.27.48-PM-768x386.png 768w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>The parallels with Bitcoin and blockchains of many flavours are striking.</p>\n<p>The jury&#8217;s still out on whether the Bitcoin blockchain (remember Bitcoin the currency is the mechanism by which the bitcoin blockchain operates and provides security) captures that market share in the long run or not. But back to manias, right now we&#8217;ve <strong>the ingredients:</strong></p>\n<ol>\n<li>Revolutionary technology,</li>\n<li>A completely screwed massively over leveraged financial system,</li>\n<li>Fiat currency that by any metric and in any other circumstance would be completely 100% worthless</li>\n<li>Eroding faith in political and corporate establishments</li>\n<li>A fanatical religious following, and</li>\n<li>An entire (Wall Street) sector who&#8217;ve not even begun to have their fun yet.</li>\n</ol>\n<p>You wanna short that?</p>\n<p>Have yourself a wonderful weekend!</p>\n<p>&#8211; <a href=\"https://twitter.com/capitalistexp/\" target=\"_blank\" rel=\"noopener\">Chris</a></p>\n<p><em>&#8220;Stock market bubbles don&#8217;t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.&#8221;</em> — George Soros</p>",
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      "author": "davemanchester",
      "body": "And try this as a prediction https://steemit.com/news/@davemanchester/havoc-in-2018",
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      "author": "cheetah",
      "body": "Hi! I am a robot. I just upvoted you! I found similar content that readers might be interested in:\nhttp://www.valuewalk.com/2017/12/demographics-pensions-gift-oldies/",
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      "body": "<p><img class=\"aligncenter wp-image-18693\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/funny-hot-girl-old-man-bike.jpg\" alt=\"\" width=\"500\" height=\"376\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/funny-hot-girl-old-man-bike.jpg 540w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/funny-hot-girl-old-man-bike-125x94.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/funny-hot-girl-old-man-bike-300x226.jpg 300w\" sizes=\"(max-width: 500px) 100vw, 500px\" /></p>\n<p>I bumped into a friendly bloke at my local gym last week. Jim is his name.</p>\n<p>Jim tells me he just started because, and I quote, <strong><em>&#8220;my doctor says I&#8217;m going to die unless I do something&#8221;</em></strong>.</p>\n<p>Now, I assure you it doesn&#8217;t take a doctor to figure this out.</p>\n<p>One glance in Jim&#8217;s direction and you can tell that underneath all that weight there&#8217;s a big struggling heart in there&#8230; just ready to explode. He was surprisingly frank and tells me it&#8217;s so bad that he can only do little bits of exercise because if he pushes it too hard, there is a very serious risk that his ticker just says, <em>&#8220;You know what&#8230; f*ck it,&#8221;</em> and gives up.</p>\n<p>Jim&#8217;s 52, which is really a ripe old age and about normal life expectancy — if we lived in the 1700&#8217;s. But we don&#8217;t.</p>\n<p>I feel for Jim, told him so, and naturally we all hope that he can bring himself back from the brink. But the fact is many people aren&#8217;t like Jim. As mentioned in a <a href=\"https://capitalistexploits.at/2016/08/pensions-oy-vey/\" target=\"_blank\" rel=\"noopener\">previous article on pensions,</a> they&#8217;re living longer and stronger.</p>\n<blockquote><p><em>Years ago it seemed that when you hit 65 you’d retire, receive a gold watch, and proceed to spend your pension money on a rocking chair and pot plants. Ten years later you’d be in a box and, since pot plants are cheap, the cost of keeping you alive wasn’t prohibitive.</em></p>\n<p><em>Not anymore. Today things are different. My wife belongs to a running club and there are a bunch of octogenarians there who put us both to shame. Nope, today you retire and spend your pension on kickboxing classes and second wives, with no plan of dying anytime soon.</em></p></blockquote>\n<p>Now, this second group (our kickboxing oldies) pose a grave problem.</p>\n<p>You see, unlike Jim, these folks, who’ve spent their life exercising, go on and on and on.</p>\n<p>70 is spring chicken young for them, and many make it well into their 80&#8217;s and 90&#8217;s when inevitably they need nappies, nursing care, accommodation, and mushy food to eat. And then finally machines on wheels need to be wheeled in and they end up with tubes in their noses. Don&#8217;t laugh. We&#8217;re all going to get there, unless we&#8217;re fortunate enough to just drop dead quick and fast. The point is this all costs a boatload of money.</p>\n<p>Now, I&#8217;m aware that this topic isn&#8217;t rosy Friday red or shampoo advert fresh and clean, but there are some serious implications that I think you&#8217;ll thank me for so hear me out.</p>\n<h3><strong>Demographics and Pensions</strong></h3>\n<p><a href=\"https://capitalistexploits.at/2016/08/demographic-shock/\" target=\"_blank\" rel=\"noopener\">Demographics is an elephant in the room</a> we shouldn&#8217;t ignore. It&#8217;s stomped around, defecated in the corner, and is now proceeding to knock over all the furniture. Ignore it at your peril. Rather, there are a number of ways to invest.</p>\n<p>Let&#8217;s explore a few&#8230;</p>\n<p>Old people (Mabel and Bob) pay for their retirements with pensions, and those pensions are held in pooled accounts at the <a href=\"https://capitalistexploits.at/2017/12/systemic-risk-pffft-friends-systemic-risk/\" target=\"_blank\" rel=\"noopener\">DTC</a> and managed by folks with pointy shoes and Tom Ford suits.</p>\n<p>And because old <a href=\"https://capitalistexploits.at/2016/08/pensions-oy-vey/\" target=\"_blank\" rel=\"noopener\">Mabel and Bob</a> are closer to the box than younger folks, the pointy shoed gents are extremely risk averse (as they should be), and this is where it gets exciting because you know what?</p>\n<p>They&#8217;re <strong>presently engaged in the worst possible leveraged speculation</strong> you can think of.</p>\n<p><a href=\"https://capitalistexploits.at/2017/11/candle-problem-bitcoin-misunderstood/\" target=\"_blank\" rel=\"noopener\">Nope, it&#8217;s not Bitcoin.</a></p>\n\n<p>First, to understand the insanity we have to take a step back and examine how these pointy shoed gents think.</p>\n<p>They like fixed income because it&#8217;s far less volatile and ostensibly less risky than equities.</p>\n<p>They hate small caps and frankly can&#8217;t invest in them due to their size, and they have a disdain for commodity markets. That volatility thing again&#8230;</p>\n<p>In fact, volatility is like a barometer in their world by which everything else is measured.</p>\n<p>The problem is with central banks shatbit crazy interest rate policies none of them have been able to make any money in a yield starved world and so they&#8217;re, wait for it, selling volatility.</p>\n<p>Either through tailor made products from the investment banks or by buying any number of the <a href=\"https://capitalistexploits.at/2016/10/world-whack-short-squeeze-coming/\" target=\"_blank\" rel=\"noopener\">low volatility ETPs out there.</a></p>\n<p><img class=\"aligncenter wp-image-18692\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-08-at-2.43.11-PM-1024x541.png\" alt=\"\" width=\"700\" height=\"370\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-08-at-2.43.11-PM-1024x541.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-08-at-2.43.11-PM-125x66.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-08-at-2.43.11-PM-300x159.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/Screen-Shot-2017-12-08-at-2.43.11-PM-768x406.png 768w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>Volatility isn&#8217;t even an asset.</p>\n<p>In fact, the VIX is an index of volatility on 1 month to expiry ATM puts and calls on stocks in the S&amp;P 500.</p>\n<p>But now the geniuses on Wall Street have figured that they can actually package this animal, which as you can see, is a derivative of a derivative, and treat it like a bond. Fun, heh?</p>\n<p>In all fairness, hats off to the asset managers who&#8217;ve had the balls to do this. They believed in the central banks&#8217; liquidity machine, and they backed their belief and for that they deserve to be paid. I sure wouldn&#8217;t have been able to do it.</p>\n<p>Now, I&#8217;m not some miserable jealous git here to tell you that armageddon is coming and I&#8217;ve the answers.</p>\n<p>God knows there&#8217;s enough of that nonsense in the financial publishing blogosphere for you to get your fill elsewhere. What we do know, however, is that this entire game: the selling of vol, the passive indexing — all of it is predicated on one thing. The central banks keeping rates low and pumping liquidity into the market. It&#8217;s why BTFD has become a meme.</p>\n<p>The problem that I have with it, other than the distortions made, is that when so many are on one side of the boat like right now and that boat has many moving pieces, then I begin to wonder.</p>\n<p>I&#8217;m reminded that <a href=\"https://capitalistexploits.at/2013/02/changes-at-the-margin-how-to-prepare-for-a-disorderly-move/\" target=\"_blank\" rel=\"noopener\">markets change at the margin,</a> where the slightest hiccup can act like a spark to light the fire of volatility, and these poor suckers who&#8217;ve managed to earn steady incomes selling puts find out what &#8220;unlimited risk&#8221; actually looks like as they&#8217;re forced to cover in a market that&#8217;s gapping the other way.</p>\n<p>I&#8217;ve thought about this a lot and, in fact, we recently published how we are going &#8220;long vol&#8221; for <a href=\"https://capitalistexploits.at/become-an-insider/\" target=\"_blank\" rel=\"noopener\">members.</a> And no, it&#8217;s not buying puts on VIX because that is, in my humble opinion&#8230; how do I say this politely, like begging to be stabbed in the eyes. repeatedly.</p>\n<p>In any event that&#8217;s just one angle to this market. Here&#8217;s another.</p>\n<h3>Redemptions</h3>\n<p>I would be remiss in mentioning that as retirees retire, these pension funds will be drawn down.</p>\n<p>It&#8217;s what Mabel and Bob do to pay for their mushy food, viagra, and bingo nights.</p>\n<p>Now, I&#8217;m sure you&#8217;re all sharp enough to figure out what can happen to the assets these guys have been buying when they have to go from flat out full throttle, to stall, to reverse.</p>\n<p>How big is this problem?</p>\n<p>Well, for some context global institutional pension fund assets in 22 major markets stood at US$36.4 trillion at year end 2016, amounting to 62% of global GDP.</p>\n<p>That is a staggeringly large amount of money.</p>\n<p>Pension funds are big cumbersome dumb money. And they&#8217;re all allocated in equally dumb indexes, passive strategies, and bonds. So what happens when pensioners draw down on their funds?</p>\n<p>You tell me&#8230;</p>\n<p>Talking of staggeringly large amounts of money, the passive bubble grows bigger as I write this because this beast is fuelled not just by our pointy shoed friends but by Joe Sixpack himself.</p>\n<p>Bloomberg just ran a piece:</p>\n<p class=\"full-width-image-lede-text-above__hed\"><a href=\"https://www.bloomberg.com/news/features/2017-12-04/blackrock-and-vanguard-s-20-trillion-future-is-closer-than-you-think\" target=\"_blank\" rel=\"noopener\"><strong>BlackRock and Vanguard Are Less Than a Decade Away From Managing $20 Trillion</strong></a></p>\n<div class=\"full-width-image-lede-text-above__dek\"><strong>Two towers of power are dominating the future of investing.</strong></div>\n<div></div>\n<div>Dominating indeed. Here&#8217;s how come the pointy shoed crowd can afford Tom Ford suits.</div>\n<div><img class=\"aligncenter wp-image-18694\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1600x-1-1024x531.png\" alt=\"\" width=\"550\" height=\"285\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1600x-1-1024x531.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1600x-1-125x65.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1600x-1-300x155.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1600x-1-768x398.png 768w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/1600x-1.png 1600w\" sizes=\"(max-width: 550px) 100vw, 550px\" />The article goes on to say:</div>\n<blockquote>\n<div><em>Investors from individuals to large institutions such as pension and hedge funds have flocked to this duo, won over in part by their low-cost funds and breadth of offerings. The proliferation of exchange-traded funds is also supercharging these firms and will likely continue to do so.</em></div>\n</blockquote>\n<p>Sometimes when everyone is zigging and you zag, you just get run over. But think about it&#8230;</p>\n<p>We don&#8217;t need to go the other way. All we need to do is look where others are no longer.</p>\n<p>These behemoths don&#8217;t do battle in the little unloved sectors or with stocks that don&#8217;t make it into an index. They can&#8217;t because they&#8217;re too big.</p>\n<p>This means that there are a lot of orphans out there and here&#8217;s the good news. If it&#8217;s not in an index, passives aren&#8217;t buying it. And if passives aren&#8217;t buying it, it&#8217;s only active money that&#8217;s even looking at it.</p>\n<p>Which brings me to the double helping of good news.</p>\n<p>Here&#8217;s your competition in active with the accompanying passive.</p>\n<p><img class=\"aligncenter wp-image-18695\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/exhibit-1.png\" alt=\"\" width=\"550\" height=\"312\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/exhibit-1.png 566w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/exhibit-1-125x71.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/exhibit-1-300x170.png 300w\" sizes=\"(max-width: 550px) 100vw, 550px\" /></p>\n<p>Right now, it&#8217;s a mosh pit food fight to grab and create the next index or ETF so that more capital can be attracted, earning more fees, buying more suits.</p>\n<p>This is all well and good.</p>\n<p>Markets do what markets do, and I&#8217;m not here to grumble about it. I&#8217;m here to make money. And indeed if I was in the passive business, I&#8217;d be enjoying the steady stream of fees and hoping like hell the market keeps going up.</p>\n<p>QE more? Yes, please.</p>\n<p>But I&#8217;m not.</p>\n<p>I&#8217;m a humble squirrel searching for nuts in the forest. And gosh, with all this moshing going on it&#8217;s wonderful how few other squirrels there are about. The same Bloomberg article makes a good point on this.</p>\n<blockquote><p><em>While bigger may be better for the fund giants, passive funds may be blurring the inherent value of securities, implied in a company’s earnings or cash flow.</em></p></blockquote>\n<p>Nah. You think?</p>\n<p>Stocks in the index funds no longer trade on fundamentals but rather on asset flows, which sucks the oxygen out of the small guys who don&#8217;t make it into the indexes where <del>brain dead</del> passive money is playing.</p>\n<p>It means we can gladly play in a sandpit with all the toys and there are very few we have to share them with.</p>\n<h3>The Cracks Have Already Appeared</h3>\n<p>Nothing lasts forever, and as I argued when discussing <a href=\"https://capitalistexploits.at/2016/09/incoming-strong-men-mean-global-economy/\" target=\"_blank\" rel=\"noopener\">the impact of the incoming strong men on the global economy,</a> there are 3 critical points worth thinking about:</p>\n<ol>\n<li><strong>Political cohesion and stability</strong> can no longer be relied upon as politics becomes inward looking with everything from trade deals to central bank swap lines being renegotiated or cancelled altogether.</li>\n<li><strong>Global coordinated central bank action.</strong> The era of global coordinated monetary policy which we’ve been experiencing since the GFC, especially with the three largest players (ECB, FED and BOJ), will be looked back upon with nostalgia by the current clutch of central bankers who muddy the halls of power. Policy will increasingly be driven with greater sensitivity to nationalist rather than international concerns, which brings me to…</li>\n<li><strong>Liquidity in the financial system</strong> which has stemmed from easing monetary policy is already contracting. In a world where derivatives traverse borders, connecting financial systems like never before, a liquidity crisis presents enormous tail risk in a leveraged world.</li>\n</ol>\n<p>Invest accordingly, and thank you for reading.</p>\n<p>&#8211; <a href=\"https://twitter.com/capitalistexp/\" target=\"_blank\" rel=\"noopener\">Chris</a></p>\n<p><em>“If you can’t take a small loss, sooner or later you will take the mother of all losses.”</em> — Ed Seykota</p>",
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      "body": "<p>Have you ever asked yourself what happens when you place a trade?</p>\n<p>I hadn&#8217;t given it much thought until about 10 years ago when something happened which opened my eyes to a single company that holds what is probably the most concentrated risk position in the US market.</p>\n<p>Here&#8217;s what happened&#8230;</p>\n<p>So, I took a position in a private placement. The shares came free trading after a 6-month lockup, and the stock had been running like the cops were after it.</p>\n<p>It had a half warrant attached, which was deep deep in the money, and I wanted to scoop a healthy chunk of money off the table. Heck, this was a bloody drill play which, as you probably know, are more often than not burning matches. Bright and brilliant until they burn your fingers.</p>\n<p>So, I&#8217;m busy scrambling to get the stock placed with a broker so that I can trade it.</p>\n<p>First up was a very well known broker whose name I&#8217;ll keep out of the spotlight (I like the guys and gals there and it&#8217;s not that important). I&#8217;ll call them broker X.</p>\n<p>I have an account with them and they said, <em>&#8220;Sure, no problem.&#8221;</em> A week later, <em>&#8220;Ah sorry Sir, we&#8217;re having some questions from compliance.&#8221;</em> And then another week passes and <em>&#8220;No, so sorry, we can&#8217;t take that one.&#8221;</em></p>\n<p>I can&#8217;t remember the reason now but at this point I&#8217;m two weeks down, the stock&#8217;s &#8220;en fuego,&#8221; and I&#8217;m getting antsy. I quickly call my broker at Sprott and they took the stock. This took only a couple of days.</p>\n<p>Now, with the stock placed I&#8217;m free to trade it. And I do. The same day, I pull up my account at broker X and looky here. There is the original stock sitting in my account. Wait! What?! That can&#8217;t be. So I pull up my online account at Sprott thinking someone slipped my something in my drink but no&#8230;there she is. This is voodoo, or magic, or a cock up. It&#8217;s in two places at once.</p>\n<p>I&#8217;m sure if I hit the sell button at broker X their back office will spasm, and before the bean counters can have a heart attack the system will vomit up the true position. Plus, I&#8217;m not an ass and knowing the truth I can&#8217;t in good conscience do that. I only own a certain position, not double it as much as I might wish that was the case.</p>\n<h3>Down the Rabbit Hole</h3>\n<p>And so this is what led me down the rabbit hole of actually looking at what takes place when you place a trade.</p>\n<p>I contacted broker X and we finally sorted out the problem. They performed their accounting magic and the position disappeared from my account but this is where it scared the isht out of me.</p>\n<p>When I asked my broker how did they typically account for client positions I was told that the Depository<b> </b>Trust &amp; Clearing Corporation (DTC) holds the securities.</p>\n<p>All securities I asked?</p>\n<p>Yes, all. Or at least 99.99% of all outstanding securities. So broker X (and indeed all brokers) have an account with the DTC, and the two accounting systems need to match, showing &#8220;brokers&#8217; clients'&#8221; securities, which need to reflect the securities held at the DTC on a netted basis.</p>\n<p>Ok, I got it. It&#8217;s a central clearing house. Duh. I&#8217;d just never really given it any thought until that day&#8230; and it was then that I instantly realised the truly massive concentrated risk.</p>\n<h3>Massive Concentrated Risk</h3>\n<p>When you buy a stock, you think you own it. But you don&#8217;t. <strong>What you own is an IOU to your broker dealer.</strong> Much like your bank deposit isn&#8217;t yours because that, too, is an IOU from your bank. Anyone who&#8217;s ever been caught in a bank run gets this. And anyone who&#8217;s even read about one gets it.</p>\n<p>So like a traditional bank the DTC acts in a similar way. By the way, in Europe Euroclear and Clearstream perform exactly the same function as the DTC does in the land of apple pie.</p>\n<p>The DTC was actually formed back in the 70&#8217;s after the back-office scandals at that time. It was a solution for the increased trading volume on Wall Street, which had become too much to handle, with brokerage firms falling behind with mountains of paperwork, and trades taking forever to clear, and counter-parties not knowing when, where, or who.</p>\n<p>The result was that the Wall Street firms could more easily track shares by having to deal only with themselves and the DTC. Companies were and still are eliminated from the process.</p>\n<p id=\"story-continues-3\" class=\"story-body-text story-content\" data-para-count=\"352\" data-total-count=\"1799\">So now when a listed company you own look at their share registry, they don&#8217;t see your name in there. They only see the DTC. And when brokers trade stock, all that happens is a ledger entry at the DTC with a netting taking place. You just own a derivative. Lucky you.</p>\n<p class=\"story-body-text story-content\" data-para-count=\"352\" data-total-count=\"1799\">In fact, if you own an option contract, or a warrant, or any sort of derivative, you own a derivative of a derivate. Fun heh!</p>\n<h3>But That&#8217;s Not All</h3>\n<p class=\"story-body-text story-content\" data-para-count=\"230\" data-total-count=\"2307\">Lots of crazy isht can take place here. For example, instead of executing a trade in the market (where it&#8217;s transparent) brokers can transfer shares between clients and book the trade as a sale.</p>\n<p class=\"story-body-text story-content\" data-para-count=\"230\" data-total-count=\"2307\">Transparent? Not so much. Sure, they&#8217;ve an obligation to get you the &#8220;best&#8221; price in the market, but how&#8217;s that possible without actually putting it up for sale in the market?</p>\n<p class=\"story-body-text story-content\" data-para-count=\"230\" data-total-count=\"2307\">Brokers can and do also lend out your shares to someone who wants a borrow in order to sell short the stock. Often you don&#8217;t even know about it&#8230;.small print, being&#8230;well small.</p>\n<p class=\"story-body-text story-content\" data-para-count=\"230\" data-total-count=\"2307\">Imagine someone borrowed your car because the car park attendant lent it out to them. His job being the safe keeping of your car, and here he is making money by lending it out. If that doesn&#8217;t make you livid, you&#8217;re a weirdo. For the rest of us we&#8217;re none too happy.</p>\n<p class=\"story-body-text story-content\" data-para-count=\"203\" data-total-count=\"2510\">Now, this brings up another super crazy setup.</p>\n<p class=\"story-body-text story-content\" data-para-count=\"203\" data-total-count=\"2510\">Imagine this: You buy some Tesla stock (silly I know, but let&#8217;s play the game). You think you own it. You even report it to the tax man. Your broker reports it on his balance sheet, too.</p>\n<p class=\"story-body-text story-content\" data-para-count=\"203\" data-total-count=\"2510\">But then he lends it out to a short seller who goes through another broker who, too, reports it on his balance sheet. One security is being reported by multiple parties on their balance sheets. Fractional reserve banking in the securities market.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">In fact, there are 5 separate institutions in each trade. Your broker, who processes to the custodian, then from the custodian to the DTC, who then process to the next custodian, who then process to the broker on the other side. No wonder it takes 3 days to settle a trade.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\"><img class=\"aligncenter wp-image-18655\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/original-1024x814.png\" alt=\"\" width=\"600\" height=\"477\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/original-1024x814.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/original-125x99.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/original-300x238.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/original-768x610.png 768w\" sizes=\"(max-width: 600px) 100vw, 600px\" /></p>\n<p data-para-count=\"203\" data-total-count=\"2510\">Thank heavens these institutions in this daisy chain aren&#8217;t levered and at risk of failing. Imagine they were levered.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">Oh wait&#8230; What am I saying? I&#8217;m sorry, I&#8217;ve not had my medication.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">So we buy and sell with our fingers crossed that in the trade settlement process (either T+2 or T+3, which I dare say is horse and buggy slow) nothing goes wrong to screw up our trade, leaving us with an IOU from the next Bear Stearns, Lehman Brothers, or MF Global.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">Of course, once settled we&#8217;re still left with this queasy feeling in our stomach because we&#8217;ve got this entity that holds trillions of dollars of stocks, bonds, and derivatives. One single entity. Think about that.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">This entire fustercluck of a setup hasn&#8217;t really changed since the early 70&#8217;s. Think about what that actually means.  Here&#8217;s technology from that time.</p>\n<img class=\"wp-image-18659\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/9231aeb5c51fadef3316f8c5b97a9304326315d1.jpg\" alt=\"\" width=\"400\" height=\"225\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/9231aeb5c51fadef3316f8c5b97a9304326315d1.jpg 446w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/9231aeb5c51fadef3316f8c5b97a9304326315d1-125x70.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/9231aeb5c51fadef3316f8c5b97a9304326315d1-300x169.jpg 300w\" sizes=\"(max-width: 400px) 100vw, 400px\" />\n<p>70&#8217;s ground-breaking technology</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">There&#8217;s a reason we no longer use this stuff. It&#8217;s antiquated.</p>\n<p data-para-count=\"203\" data-total-count=\"2510\">And this brings me to something else I&#8217;ve been harping on about here: <a href=\"https://capitalistexploits.at/2017/04/cyber-security-better-musk/\" target=\"_blank\" rel=\"noopener\">Cyber security,</a> where I showed you this:</p>\n<blockquote><p><em>Consider <strong>recent data hacks in the corporate sector:</strong></em></p>\n<ul class=\"p p1\">\n<li><em>eBay (NASDAQ:<a class=\"ticker-link\" href=\"https://seekingalpha.com/symbol/EBAY\">EBAY</a>): 150 million passwords</em></li>\n<li><em>JPMorgan Chase (NYSE:<a class=\"ticker-link\" href=\"https://seekingalpha.com/symbol/JPM\">JPM</a>): 73 million emails</em></li>\n<li><em>Target (NYSE:<a class=\"ticker-link\" href=\"https://seekingalpha.com/symbol/TGT\">TGT</a>): 40 million credit card numbers</em></li>\n<li><em>Yahoo (NASDAQ:<a class=\"ticker-link\" href=\"https://seekingalpha.com/symbol/YHOO\">YHOO</a>): 1 billion accounts</em></li>\n</ul>\n</blockquote>\n<p>So would someone, anyone potentially, be hacking the DTC? Is the Pope Catholic?</p>\n<p><strong>When every security is held in one centralised location, is this not the epitome of concentrated risk?</strong></p>\n\n<p>There is, however, an answer to all of this mess&#8230;</p>\n\n<p>&#8211; <a href=\"https://twitter.com/capitalistexp/\" target=\"_blank\" rel=\"noopener\">Chris</a></p>\n\n<p><em>&#8220;Put all your eggs in one basket&#8230; the handle&#8217;s going to break. Then all you&#8217;ve got is scrambled eggs.&#8221;</em> — Nora Roberts</p>",
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      "body": "<p>Who would have guessed that US Patent No. 3,906,166, granted in 1975 to Martin Cooper of Motorola would completely change the world?</p>\n<p>My kids tell me that was a long time ago, which I suppose it was&#8230;.</p>\n<p>Here&#8217;s global cell phone penetration over the last decade. Not bad&#8230;</p>\n<p><img class=\"aligncenter wp-image-18641\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Screen-Shot-2017-12-01-at-2.43.44-PM-1024x751.png\" alt=\"\" width=\"700\" height=\"513\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Screen-Shot-2017-12-01-at-2.43.44-PM-1024x751.png 1024w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Screen-Shot-2017-12-01-at-2.43.44-PM-125x92.png 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Screen-Shot-2017-12-01-at-2.43.44-PM-300x220.png 300w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Screen-Shot-2017-12-01-at-2.43.44-PM-768x563.png 768w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Screen-Shot-2017-12-01-at-2.43.44-PM.png 1388w\" sizes=\"(max-width: 700px) 100vw, 700px\" /></p>\n<p>With hindsight we can look at this adoption phase and marvel, but let&#8217;s not miss some key points.</p>\n<p>Specifically, how radically phones have infiltrated so many aspects of our lives. And no, I&#8217;m not talking about Sally who&#8217;s addicted to the endorphin rush she gets from hitting refresh on Instagram to see how many &#8220;likes&#8221; her stupid photo of her chicken-avocado salad is getting. I&#8217;m talking about real isht. Life changing isht.</p>\n<p>Like the millions of Africans who now receive anti-malaria texts from <a href=\"http://analysis.openmobilemedia.com/mobile-health-lifestyle/mobile-first-non-profit-seeks-eradicate-malaria-using-mobile-technology\" target=\"_blank\" rel=\"noopener\">football hero Didier Drogba:</a></p>\n<blockquote><p><em>It’s 9pm, are you and your family safe under nets? This is Didier Drogba, sleep well.</em></p></blockquote>\n<p>Ah&#8230; the humble mobile phone — doing more to fight Malaria than the <a href=\"https://capitalistexploits.at/2013/04/mcdonalds-could-do-a-better-job/\" target=\"_blank\" rel=\"noopener\">UN,</a> the WHO, or any government ever has. <strong>Power distributed and decentralised.</strong></p>\n<p>Or&#8230;</p>\n<p>The Indonesian midwives&#8217; mobile phone project, which has drastically reduced infant mortality rates as villagers place more trust with midwives who can now talk to obstetricians and gynaecologists in the cities and provide better care.</p>\n<p>Or&#8230;</p>\n<p>Farmers, who prior to the mobile phone used to walk in blazing heat for up to two weeks to get to market, where they&#8217;d sell their livestock&#8230;. and sometimes wouldn&#8217;t because demand wasn&#8217;t there.</p>\n<p>Those same farmers now use mobiles to determine ahead of time market prices for their goods before deciding where best to trade their livestock or crops. Not only that, but receiving live pricing of livestock and crops allowing them to more accurately plan and run their farming practices. <strong>Power distributed and decentralised.</strong></p>\n<p>And speaking of farmers in the third, world it was back in 2003 or 2004 — I can&#8217;t remember exactly — when my lovely lass (before she succumbed to my charms and became Mrs. Chris) and I were traveling in Kashmir, and I vividly remember realising then just how powerful the mobile phone really was.</p>\n<p>We were chatting to a peasant rice farmer, I&#8217;ll call him Ranjeet. Because his father had done it before him, and his fathers father before him, and he himself had been at it for over 30 years since, Ranjeet was doing the only thing he knew: He was growing rice.</p>\n<p>And like his forefathers before him, Ranjeet simply took whatever price was offered by the Delhi traders when they turned up at harvest time. Together with his fellow rice farmers in the village Ranjeet had no way of knowing whether the price he got from the traders from Delhi was fair or not.</p>\n<p>Enter the mobile phone.</p>\n<p>He, together with fellow farmers, had all clubbed together and bought a WAP phone. Remember those?</p>\n<p>It was man&#8217;s first crack and connecting a mobile phone to the internet.</p>\n<p>Ranjeet and his buddies would huddle around the phone, getting live pricing from the rice market in Delhi. And whoo&#8230; boy, had it made them mad. Ignorance, they say, is bliss.</p>\n<p>Try telling that to Ranjeet, and he&#8217;d have punched you in the face. So when those slimy rice traders from Delhi rolled into town to buy Ranjeet and his buddies&#8217; rice, these dirt poor peasant farmers could no longer be hoodwinked into selling it at deeply discounted, &#8220;kill my family, make me starve&#8221; prices any longer. <strong>Power distributed and decentralised.</strong></p>\n<p>For most of us, we&#8217;re lucky enough to live in a developed country where we don&#8217;t think about this stuff.</p>\n<p>The mobile phone helps us do many of the things we were already doing, but now we just do it without getting off the sofa.</p>\n<p>But for those in emerging and submerging markets mobile phones help people do things they <strong>could never do before.</strong> They are, in other words, not a luxury but a necessity.</p>\n<p>Ask folks today, and I&#8217;ll bet they&#8217;d sooner leave home without their underpants on than leave home without their phone.</p>\n<p>What else?</p>\n<p>Education. The mobile phone has revolutionised that, too. I was reading that in Vietnam 75% of the kids use their phones for educational purposes. This is good news because it means that Brangelina and Brangelina wannabes won&#8217;t have to adopt starving illiterate Vietnamese orphans any longer.</p>\n<p>It was Malcolm Gladwell, the author, journalist, and speaker, who said:</p>\n<blockquote><p><em>Poverty is not deprivation. It is isolation.</em></p></blockquote>\n<p>I&#8217;m going to put my neck out and say that the mobile phone has probably done more to break isolation and reduce poverty than almost anything else in the last 50 years.</p>\n<h3>So What?</h3>\n<p>Well, the mobile phone is similar to how to think about blockchain, and of course the most powerful (to date) blockchain is <a href=\"https://capitalistexploits.at/2017/11/candle-problem-bitcoin-misunderstood/\" target=\"_blank\" rel=\"noopener\">Bitcoin, which I spoke about last week.</a> One changed the world. The other <del>will</del><del> change</del> is changing our world.</p>\n<p>Like the impact of the mobile phone before it, it&#8217;s going to be HUUUGE!</p>\n<img class=\"wp-image-18637\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/ae8a2a20bed94879d2979e5b0fd040f6.jpg\" alt=\"\" width=\"450\" height=\"496\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/ae8a2a20bed94879d2979e5b0fd040f6.jpg 620w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/ae8a2a20bed94879d2979e5b0fd040f6-113x125.jpg 113w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/ae8a2a20bed94879d2979e5b0fd040f6-272x300.jpg 272w\" sizes=\"(max-width: 450px) 100vw, 450px\" />\n<p>HUUUGE! I tell you!</p>\n<p>Now, I&#8217;m going to suggest that Martin Cooper was an amateur, compared with Satoshi Nakamoto, whoever the hell she is. This is because blockchain technology has the potential to do what the mobile phone has already done but on steroids.</p>\n<p>Applications are already being built in: Asset management (trade and processing settlement), insurance (claims processing), payments, title registry, deed registries, personal identification, distributed cloud storage, and an entire squadron of other applications far too long to mention here.</p>\n<p>Many will scoff and laugh at it&#8230; and many do. This is how it must be, but I warn you. <strong>To ignore this is like ignoring the impact mobile phones were going to have on society when the first mobile handset went on sale in 1973.</strong> Completely revolutionary and disruptive technology would be neither revolutionary nor disruptive if it didn&#8217;t&#8230; how do I say this&#8230; disrupt.</p>\n<p>And it&#8217;ll be fought hammer and tongs, especially by those who see it as a threat to their own business models. <a href=\"https://capitalistexploits.at/2017/10/jamie-dimon-learn-lemons/\" target=\"_blank\" rel=\"noopener\">Hello Jamie 🙂</a></p>\n<p>But ultimately new technologies become overwhelming, and even those who poo poo it will be dragged kicking and screaming into its clutches because the utility function is too powerful.</p>\n<p><img class=\"aligncenter wp-image-18643\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/DK0cY7fUMAEbBBC-1.jpg\" alt=\"\" width=\"450\" height=\"431\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/DK0cY7fUMAEbBBC-1.jpg 664w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/DK0cY7fUMAEbBBC-1-125x120.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/12/DK0cY7fUMAEbBBC-1-300x287.jpg 300w\" sizes=\"(max-width: 450px) 100vw, 450px\" /></p>\n<p>And we should all be as happy about this as these guys.</p>\n<p><img class=\"aligncenter wp-image-18639\" src=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Funny-African-1-570x507-1.jpg\" alt=\"\" width=\"450\" height=\"400\" srcset=\"https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Funny-African-1-570x507-1.jpg 570w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Funny-African-1-570x507-1-125x111.jpg 125w, https://3lrofj3556kl9zu0p27yma51-wpengine.netdna-ssl.com/wp-content/uploads/2017/11/Funny-African-1-570x507-1-300x267.jpg 300w\" sizes=\"(max-width: 450px) 100vw, 450px\" /></p>\n<p>Because power in the hands of many is always everywhere better than power in the hands of the few.</p>\n\n<p>To the future&#8230; and a jolly fine weekend. Thanks as always for reading!</p>\n<p>&#8211; <a href=\"https://twitter.com/capitalistexp\" target=\"_blank\" rel=\"noopener\">Chris</a></p>\n<p><em>&#8220;Disruption is a process, not an event, and innovations can only be disruptive relative to something else.&#8221;</em> — Clayton M. Christensen</p>",
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