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A Clever Lady on Bitcoin & Other Stuff

April 8, 2024

Governments around the world have problems restraining the supply of money. Consumers increasingly feel this through rising prices. The world has gone digital and related transparency and efficiency (both good and bad) have risen. Many people are compelled by the digital underpinnings of Bitcoin (and its capped supply) and see it as a monetary debasement hedge — global crypto ownership could already be as high as 7pc, per Crypto.com.

As digital media consumption continues to rise with shifts to increasingly immersive form factors, we suspect usage of digital assets, items, and collectibles (via NFTs) will have its day.

The S&P 500 has risen dramatically, powered by America’s leading tech companies. Yes, this could be another bubble — and there are countless things to be worried about, including the potential for aggressive (and unfortunate) regulation at a time when AI-related competition is just kicking in. That said, markets climb a wall of worry. America’s innovation in AI, growing creativity, and momentum in defense (focused on deterrence) combined with our democratic, entrepreneurial, and capitalist system could surprise us on the upside.

For now, America remains the best house in an imperfect global neighborhood.

Dow Jones Newswires, tech guru, Mary Meeker, talks to Barrons, 30 March 2024

I am glad to see that her thoughts on what is happening in the world coincide closely with mine.

Still an amazing chart. The area around $70,000 has become an area of resistance; not surprisingly given that only months ago the price was around $40,000.

It is incredible what is going on in the world of AI.

Microsoft MSFT and OpenAI are working on plans for a data centre project that could cost as much as $100bn and include an artificial intelligence supercomputer called “Stargate” set to launch in 2028, The Information reported on Friday.

OpenAI did not immediately respond to Reuters’ requests for comment.

Rapid adoption of generative artificial intelligence technology has led to sky-rocketing demand for AI data centres capable of handling more advanced tasks than traditional data centres.

The Information reported that Microsoft would likely finance the project, which is expected to be 100 times more costly than some of the biggest existing data centres, citing people involved in private conversations about the proposal.

The proposed U.S.-based supercomputer would be the biggest in a series the companies are looking to build over the next six years, the report added.

The Information attributed the tentative cost of $100bn to a person who spoke to Altman about it and a person who has viewed some of Microsoft’s initial cost estimates. It did not identify those sources.

Altman and Microsoft have spread the supercomputers across five phases, with Stargate as the fifth phase. Microsoft is working on a smaller, fourth-phase supercomputer for OpenAI to be launched around 2026, according to the report.

Microsoft and OpenAI are in the middle of the third phase of the five-phase plan, with a significant portion of the cost for the next two phases involving acquiring the needed AI chips, the report said.

AI chips are often sold at high prices. Chip company Nvidia NVDA CEO Jensen Huang told CNBC earlier in March that the latest “Blackwell” B200 artificial intelligence chip will be priced between $30,000 and $40,000.

Microsoft had also announced a duo of custom-designed computing chips in November last year.

The report said the new project would be designed to work with chips from different suppliers.

“We are always planning for the next generation of infrastructure innovations needed to continue pushing the frontier of AI capability,” a Microsoft spokesperson said in an emailed statement to Reuters. The spokesperson did not comment directly on the report about the planned launch of the Stargate supercomputer.

Expenses for the plan could exceed $115bn, more than triple Microsoft’s expenditure last year on capital spending for servers, buildings and other equipment, the report stated.

Reuters, 29 March 2024

This remains a terrific chart suggesting that the latest leg of the long-running bull market in US shares has barely got going.

Strategy – Still a Moment for Investors to be Aggressive

Nvidia seems to be bouncing about below round-number resistance at $1,000, which, if surpassed, will lead to growing cries for a share split. Anyone can see that it is a fantastic chart. This company and its shares are having an epic day in the sun moment with no sign that the stellar rise is over.

My Total Wipeout on Microstrategy

Microstrategy shares suddenly plummeted last Thursday after a bear raid. This was annoying since I lost two-thirds of my holding. I subsequently lost my entire stake. Grrrgh! I will now have to rebuild my position. The short-seller said he was not a bear of Microstrategy but just thought the premium to Bitcoin was way too high so he was selling Microstrategy short and going long of Bitcoin in what is known as a pair trade.

** Kerrisdale Capital discloses short position in MSTR but says it is long bitcoin BTCUSD

** “Days when MicroStrategy shares represented a rare, unique way to gain access to bitcoin are long over,” Kerrisdale says

** Adds that bitcoin can now be accessed through brokerages, crypto exchanges and exchange-traded funds (ETFs)

Reuters, 28 March 2024

It makes sense in theory but I still suspect Kerrisdale is playing a dangerous game – rather like me, it turns out. I understand that the premium that Microstrategy stands at relative to its Bitcoin holdings looks odd but I suspect it may prove persistent as people wait to see what executive chairman, Michael Saylor, does next. I guess he has some tricks up his sleeve and that if Bitcoin goes crazy shares in Microstrategy will too.

The chart looks somewhere between very and incredibly positive, which works for me (at least it will do when I get my shares back).

A company I keep meaning to revisit is Deckers Outdoor with its exploding HOKA business. Below is a copy of an alert I wrote but never published in early February.

As a starting point, the chart is fabulous. I know you want to buy at the bottom, don’t we all but this is where we are. I call buying into shares like this ‘climbing aboard’. As you can see, when I last advised climbing aboard this share the price was much lower at $526.50 but still way ahead of prices obtained earlier in the millennium.

Deckers is on a Roll

I’m glad to be here today discussing another record-breaking quarter for Deckers brands as our two leading brands continued bucking industry trends to deliver high-quality growth via full-price consumer demand. Key highlights of our record-breaking third quarter results include total company revenue increasing 16pc to $1.56bn, DTC revenue increasing 23pc, representing a quarterly record 55pc of total company revenue, total UGG revenue increasing 15pc to achieve its first-ever billion dollar quarter, total HOKA revenue increasing 22pc to $429m, total company gross margins increasing over 500 basis points to an all-time quarterly high of 58.7pc, and diluted earnings per share increasing 44pc to $15.11.

Highlights from the first nine months include global HOKA revenue growing 25pc versus last year, led by a near 50pc increase in DTC [direct to consumer]; global UGG revenue increasing 16pc versus last year, led by international regions growing close to 30pc, and global DTC increasing more than 20pc; and total portfolio DTC revenue increasing 28pc with robust growth in both consumer acquisition and retention. I am extremely proud of the collaboration across the Deckers organization to deliver these exceptional results through the first nine months of fiscal year 2024.

We are creating remarkably distinct, relevant, and breakthrough product concepts that are deeply rooted in consumer insights and brand DNA. This is distinguishing our brands from the competition. Our strategic execution of brand and marketplace management, combined with our financial discipline, preserves Deckers’ position of strength as we focus on closing out fiscal year 2024 and plan for the significant opportunity in the years ahead.

With the momentum and brand heat UGG has created among international markets, we are even more excited about the global opportunities ahead.

As we continue building HOKA for the long-term, our focus is to remain a top brand in road running, expanding with innovative performance footwear, become a dominant off-road player with disruptive trail and hike products, and bring the HOKA experience to the lifestyle consumer while keeping the brand rooted in performance.

While we are at different stages of this journey across domestic and international markets, we see significant global opportunities ahead with this powerful brand. We are proud of the consistent momentum HOKA is achieving around the world. Our efforts to build brand awareness and drive high full price sell-through continue to bear fruit and have set the stage for a strong finish to the year with another record quarter.

As we look beyond fiscal year 2024, I believe we have an incredibly strong innovation pipeline for the UGG and HOKA brands, giving us further confidence in our ability to build upon this year’s exceptional growth.

Thinking into the next few years, we believe HOKA remains our primary growth vehicle with considerable opportunity for both region and category expansion as awareness of the brand’s innovative performance product increases further, and continue to position UGG for growth through the development of category hybrids that celebrate heritage brand codes to resonate with target consumers across global markets.

Deckers strategic focus on marketplace management, omnichannel strategy and flexible operating model continues to be the driving force behind our sustained success. We remain focused on executing against our long-term objectives while continuing to deliver high levels of profitability and driving shareholder value.

Dave Powers, CEO, Deckers Outdoor, Q3 2024, 1 February 2024

Share Recommendations

Bitcoin. BTC. Buy @ $71,349

Microsoft. MSFT. Buy @ $424.47

Nvidia. NVDA. Buy @ $ 881

Microstrategy. MSTR. Buy @ $1578

Deckers Outdoor. DECK. Buy @ $880

More on Bitcoin Halving

Bitcoin traders have enjoyed the first quarter of 2024 with the largest cryptocurrency by market capitalization buoyed by the SEC approval of a raft of spot Bitcoin ETFs in early January. Bitcoin hit a fresh all-time high in March and volatility returned, boosting trading volumes and liquidity.

BITCOIN DEMAND VS. SUPPLY

With the demand for Bitcoin increasing sharply, via heavy purchases by the eleven different spot ETF providers, the upcoming reduction in new BTC supply – the Halving expected in mid-April – could provide another positive dynamic. Continued demand and reduced supply will likely see the price of Bitcoin move higher still, albeit with periods of sharp price swings and heightened volatility.

WHAT IS THE BITCOIN ‘HALVING’?

Bitcoin Halving is a recurring event hardwired into Bitcoin’s code that reduces the reward for mining new blocks by half every 4 years. This systematic reduction in the supply of new bitcoins entering circulation aims to increase scarcity over time. With Bitcoin’s maximum supply capped at 21 million coins, Halving helps regulate supply. Historically, as these supply shocks hit the market, the reduced issuance of new coins coupled with constant or rising demand has exerted upward price pressure on Bitcoin. Halvings are therefore viewed as bullish events by market participants who anticipate price appreciation in their wake as the asset becomes incrementally scarcer over time.

Past Halvings occurred in 2012 (reducing block rewards from 50 to 25 BTC), 2016 (25 to 12.5 BTC), and 2020 (12.5 to 6.25 BTC). The next Halving is expected around mid-April 2024 and will see block rewards drop from 6.25 to 3.125 BTC.

Historical Bitcoin Halving Price Action

November 28th, 2012

Halving Price – $13 — 2013 Peak Price – $1,125

July 16th, 2016

Halving Price – $664 — 2017 Peak Price – $19,798

May 11th, 2020

Halving Price – $9,168 — 2021 Peak Price – $69,000

ETHEREUM SPOT ETFS – SITTING ON THE SEC’S DESK

While the Bitcoin spot ETF provided a wide range of investors an opportunity to own the asset, it also gave the SEC and ETF providers with a rough template for a range of new cryptocurrency ETFS. As we write, there are eight Ethereum ETF applications sitting with the SEC, with one by VanEck expected to hear on May 23rd if it has been finally approved or not. It may well be that these Ethereum ETFs are not even fully decided upon this year, or if they will cause the same demand shock that the Bitcoin ETFs produced, but they need to be followed in the months ahead.

Daily FX, 29 March 2024, Nick Cawley, Senior Strategist

As can be seen from the table above past halving events have had a dramatic impact on the subsequent price of Bitcoin. If anything remotely similar happens this time there could be fireworks ahead.

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