2018 will very likely be a volatile year with a fragile geopolitical backdrop. From an investment perspective, I see tremendous risk but also opportunities. I’m looking forward to coming back to grade my predictions in 2019.
“Clean crypto” will be a hot space as money moves upstream into U.S. Securities and Exchange Commission (SEC)-compliant and less ambiguous segments of the market. Startups will raise capital with SEC-compliant tokens for accredited investors and regulation crowdfunding (Reg CF).
Platforms to watch: tZERO, Coinlist and StartEngine.
If I were to be bearish on a segment of the crypto market, it is the utlility tokens that are security tokens in disguise — at least most of them are, not all. The SEC will issue legal guidance that crushes the hopes and dreams of most of the utility token entrepreneurs and investors. Increasing fraud and pump-and-dump schemes will accelerate a call to crack down on security tokens dressed up as utility tokens. Micha Benoliel wrote a Medium article in August that spells out the difference between, coins, utility tokens and security tokens.
The private tech investment paper/shares of unprofitable companies that are out there are mostly worthless without a strategic buyer. Venture capital-backed companies will see their valuations cut by at least 30 percent in aggregate. Uber’s massive down round is a sign of things to come. Investors may want to exploit this trend, and could look at shorting SVB Financial Group — the parent of Silicon Valley Bank — with put options. One of the many problems with current private tech paper is a developing competition with a liquid crypto market that is delivering extraordinary returns. Investors would be wise to sniff out mark-to-mystery valuation tricks by the inclusion of dirty terms that mask a lower valuation or down round.
I see gold making a bullish run to more than $1500 by the end of the year.
I see a performance range of minus-20 percent-to-flat. The 19 percent S&P performance for 2017 was extraordinary but I see the historic bull run losing steam in 2018. Geopolitical risks will be normalized back into the market again, increasing volatility.
Atlanta already checks many of the boxes Amazon is looking for including a large population base, strong academic institutions (Georgia Tech, Emory), relatively lower costs, mass transit, and affordable housing. If Jeff Bezos wants to buy some time with regulators in Washington, D.C., setting up shop in Atlanta could go a long way.
Both Democrats and Republicans will find common ground this year in pushing back against Silicon Valley and big tech as the net negative social, economic, and political impact on America becomes clear. More Americans and progressive politicians will realize that the excesses, greed and exploitation from Wall Street have just been shifted to liberal Silicon Valley and big tech.
Facebook founder Mark Zuckerberg’s vision has created one big political, regulatory and reputational mess. Working within Facebook’s hell chambers will have diminishing returns for COO Sheryl Sandberg as her reputation continues to fall with her boss’s. Although I expect Sandberg to depart Facebook this year, I see Facebook’s reputation following her wherever she may go. Recode executive editor Kara Swisher defended Sandberg to me on Twitter saying the choice to keep Peter Thiel on the Facebook board was not hers. It won’t matter in terms of the reputational hit Sandberg will be taking.
I won’t predict how Bitcoin will perform in 2018 but if you index the top 10 coins by market cap and assign a 10-percent share of the index to each, this theoretical index will end up at least 50 percent year on year. The bold and innovative technology is dressed up as a speculative bubble but the foundation of the blockchain revolution is rock solid. Crypto markets will become more transparent, more regulated, and better understood, opening up big institutional investment flows in 2020. Investors are better off from a risk/reward perspective to play the theme with an index approach rather than betting on Bitcoin or any single coin. Ether, Ripple, and Stellar Lumens should continue to do well.
Judging by the equity market in Argentina, new President Mauricio Macri and his market-friendly regime are on a roll. Argentina is transitioning from a slow, inefficient socialist economy to an open one with increased competition and less government regulation and ownership. If you are looking for a big political change somewhere to ride, Argentina is on the top of my list. You can get exposure to Argentina with the exchange-traded fund, ARGT Global X MSCI Argentina.
Although most analysts have assigned low risk to a military event in North Korea — 10-to-30 percent — I see the risk being higher — within a range of 70-to-80 percent. I do not see North Korean leader Kim Jong Un or U.S. President Donald Trump backing down. Nor do I see a diplomatic out from rising tensions. The ongoing Russia collusion investigations will likely increase the risk of Trump being more aggressive. Of course, a military strike against targets in North Korea or the shooting down of a missile won’t necessarily mean nuclear war, but it is certainly possible.
