December 26, 2017

Dear Friends,

A cautionary tale for 2018. Sorry! We are in a world of “fake markets” built on “fake news” and “fake expectations.”

BITCOIN

December 26, 2017 – As those of you who have tried know you cannot efficiently spend Bitcoins. There is no protection against theft, fraud or other forms of destruction of one’s investment. Money laundering, not a favorite of government agencies, runs rampant as there are no reporting or other requirements. One would guess rogue nations, arms dealers, hackers and all types of fraudsters make use of the system. We rate the Bitcoin 🌷🌷🌷🌷🌷

July 11, 2018 – Bitcoin price $6,355. I have changed my rating for Bitcoin 🌷🌷🌷

As it had already declined more than 50% in the New Year. Not a buy sign, but one of cautionary bearishness.

NEW YORK REAL ESTATE

December 26, 2017 – Though statistics indicate a slight decline in prices from the high point in the market, anecdotal observation tells us the prices of middle to high priced categories of residential real estate have declined by as much as 20% prior to the recent tax bill. Now with interest and state taxes virtually non deductible the interest in owning multimillion dollar town houses, condominiums and coops is substantially reduced. Loans on private housing, after ranging as high as 80% of appraised value are quietly going underwater while Wall Street bonuses (bond traders at zero for 2017) shrink and disappear. Foreigners show less and less interest in buying in New York (U.S.A) for a myriad of reasons starting with privacy. 🌷🌷🌷🌷🌷

July 11, 2018 – The decline in the New York real estate continues reinforced by the resistance of foreigners, bond traders, bankers et al to purchase New York real estate. Non deductibility of state and city taxes and limitations on interest deductions are not pluses. 80% loan to value in many instances is a killer. 🌷🌷🌷🌷🌷

CONSUMER GOODS

December 26, 2017 – The new tax plan will reduce disposable income available to the poor, middle and upper middle classes – especially homeowners in highly taxed states. It will deprive eight million poor children of medical care. Eventually it will affect social security, Medicare, Medicaid, education, all benefits that are now available to the lower income through the upper middle class income levels. In the initial stages of the tax plan incomes from $50,000 to $200,000 will be reduced according to the housing, interest and state tax situation of the families. These families, though low on the wealth scale, account for 95% of wages earned in the United States. This broad category of earners spends 100% or close to 100% of all income received. Though Trump/Munchin/Cohen statistics contemplate a 2.9% growth in 2018 consumer spending, more analytical, less political estimates contemplate little or no growth with an increase in inflation and interest rates not a great consumer product scenario. 🌷🌷

July 11, 2018 – Add to the mix the Trump tariffs and those reciprocal to his tariffs, the cut off of major portions of world trade and we need to move to five Tulips. 🌷🌷🌷🌷🌷

MANUFACTURED GOODS

December 26, 2017 – The U.S. is likely to be cut back on exports and on the imports of inexpensive raw materials – 2018 will be the start of serious isolation from world trade. 🌷🌷

July 11, 2018 – The new tariff war and the break down of world trade (insulation) brings me to a five Tulips rating. 🌷🌷🌷🌷🌷

STOCK MARKET

December 26, 2017 – Supported through the Trump first year by government intervention, “The Plunge Protection Plan”, the market will continue to depend on government intervention. Underlying economic and financial fundamentals are unlikely to feed the bull. Should Pence replace Trump the market ego trip and government support are likely to stop. 🌷🌷

July 11, 2018 – As Trumps popularity declines and a new House of Representatives sits with the continued threat of impeachment it is likely the Plunge Protection plan (entirely controlled by the Executive (President) will be used less and less to prop up the stock market. I am moving to five Tulips. 🌷🌷🌷🌷🌷

BOND MARKET

December 26, 2017 – Not a chance 🌷🌷🌷🌷🌷

July 11, 2018 – Same call. 🌷🌷🌷🌷🌷

SAUDI ARAMCO IPO

December 26, 2017 – The highest risk low return vehicle offered in years. 🌷🌷🌷🌷🌷

July 11, 2018 – Seems to have faded into the desert. 🌷🌷🌷🌷🌷

ART MARKET

December 26, 2017 – Fake Renoir favored by our lustful leader. Over the last couple of years the top of the market has been frothy while the rest has been lackluster. How will coming transparency, regulation and taxation affect the prices and liquidity of art? More about that in a forthcoming column which will be published regularly in an exciting magazine beginning in March.

July 11, 2018 – See my Avenue Magazine column of the past month. (LINK)

For your bubble exposure in 2018 drink Champagne, stay liquid, avoid all other bubbles.

Sincerely,

Asher Edelman