Crypto As the Foundation Of A New Or Improved Financial System

Bitcoin and other cryptocurrencies are the epitome of financial technology or fin-tech.

The free, distributed, mutually independent nature of Bitcoin creation and mining could be the foundation of a more efficient and yes less prone to conflicts of interest financial system

Cryptocurrencies have already taken a market share from the leading Wall Street banks in the financing go young technology startups.

Bitcoin is slowly moving into payments and money transfers, which are the cash cows of corporate banks, so called Main Street banks.

Bitcoin and cryptocurrencies is a financial revolution, but with evolutionary speed.

A Russian analyst once expressed the opinion that Bitcoin is USD 2.0. Well, this remains to be ascertained...😉

If governments do not meddle with crypto, Bitcoin and cryptocurrencies could change everything.

Commodities Stocks Analysis

In my personal opinion, the following commodity producing corporations stocks are undervalued - Occidental Petroleum, Marathon Oil Corp, Exxon Mobil, Chevron, Devon Energy, British Petroleum, Vale, Eldorado Gold Corporation, Wheaton Precious Metals Group, Royal Dutch Shell, Pan American Silver.

The oil producing companies mentioned above are more overvalued in the short-term, while the precious metals and base metals mining companies stated above are undervalued long-term, I think

In short, I believe we are in a commodities bull cycle, which could be the largest in history ever.

But it will take 5-12 years to unfold.

Intel Corporation Valuation

 

Intel Corporation, the world's largest semiconductor chip manufacturer by revenue has a market capitalisation of 118.48 billion USD on Nasdaq.

According to my estimates, Intel's intrinsic value is 320 billion USD. 

Intel is now a classic case of stock market blue chip company undervaluation.

Intel, via its computer processing units is at the bedrock of information technology and thus almost all those cloud computing companies and other SaaS software companies are just a leverage play on the economic performance of Intel.

And now that the Federal Reserve is raising rates and making funding much more expensive, the whole information technology sector is in difficult times and Intel, as one of tech's main pillar foundations has seen its market capitalisation fall approximately 70 % from its most recent peak.

Intel is worth 320 billion USD, I think. Intel's current dividend yield is 5.10 %

Intel corporation for me looks like like a classic Benjamin Graham, Warren Buffett value stock with a technology nuance.

Bitcoin As A Way to Transfer Risk

 

Bitcoin's price is currently more volatile/risky than the stock market prices of the largest listed blue chip corporations part of the main indices in the USA, more risky than middle capitalisation stocks' prices.

Bitcoin's price volatility can be most directly compared/most akin to small capitalisation technology stocks.

In view of the above, investment banks, asset managers, hedge funds and slowly, but surely pension funds  and endowments can transfer risk by investing in Bitcoin and other cryptocurrencies, which are even more volatile than the flagship Bitcoin cryptocurrency's price.

Thus institutional investors can package, 'can', repackage risk and even sell it down the curve via Bitcoin and crypto.

In short, Bitcoin and crypto enable investors to move along the risk curve, which is extremely valuable.

Palantir Valuation 14th February 2023

Palantir's market capitalisation, taking into account yesterday's circa 17 % stock price jump after the fourth quarter earning report is around 18.4 billion USD.

Palantir's 2022 full year revenue is 1.9 billion USD. And for the fourth quarter of 2022 Palantir Inc, for the first time in its history as a public company reported net quarterly profit of 30.9 million USD.

Actually, I would say that Palantir is fairly valued.

If Palantir Inc goes on reporting net quarterly profits and its net profit margins increase I can see upside of 30 % to 40 % in Palantir's intrinsic value.

The technology stocks' market environment with the increasing interest rates levels, however, is not conductive of the usual previous Price/Sales valuation metrics of 20 +. 

Only 3 to 4 years ago Palantir's Price/Sales was circa 30 or even more.

In addition, there have been news about come corporate governance issues regarding Palantir, as reported by many news outlets.

All in all, I believe Palantir is fairly valued taking into account the post earnings stock price jump from yesterday  and Palantir's market capitalisation reflects more or less its intrinsic value.

Bitcoin And Cryptocurrencies Could Flourish During Tumultuous Times

Bitcoin and cryptocurrencies could possibly flourish during difficult economic and political times, like currently, I think.

Bitcoin and crypto transactions are much more difficult to trace, distributed in nature and independently confirmed. 

A look at the countries where Bitcoin and cryptocurrencies are most widely used confirms the possible viability of Bitcoin in times of stress, as far as I am concerned.

Bitcoin's agility is key to its long term vitality. The blockchain algorithm ensures precisely that, for now.

Is Gold Undervalued?

 

Yes. I think the price of one troy ounce of gold should be around 3 000 USD, not the circa 2000 USD it is trading for now.

The main reason for the price of gold not exploding is according to many research analysts the Federal Reserve and the European Central Bank withdrawing liquidity from the global financial system.

The liquidity drawdown drives up the global interest rate levels up, of course which is another factor suppressing the price of gold.

However, other factors like the 10 trillion USD of excess liquidity or money created by global leading central banks and the global risky situation we are currently finding ourselves in, apply huge upward pressure on the price of gold.

As far as I am concerned, this is a typical chaos theory set up. The initial elements are in place for the price of gold to start rising exponentially. The only thing missing is the proverbial butterfly clapping its wings in Brazil and creating a tornado in Texas.

The pressure is in the system. It is interesting when, not if it will be released.

Naturally, the aforementioned arguments substantiate my personal opinion and estimation that most of the precious metals miners, gold, silver, platinum and palladium producers are trading substantially below their intrinsic value.

Most listed precious metals corporations look like classic Benjamin Graham value stocks, to me, at least.

Bitcoin Is Undervalued On Blockchain

 

One Bitcoin could be worth more Thant 200 000 USD in 7 tears, I think.

Bitcoin's blockchain algorithm is financial democracy epitomised and finally a reality.

Yes, there is risk/volatility, but that is the price of freedom. And the freedom is priceless.

The blockchain algorithm is a way to model chaos.

Modelling chaos or uncertainty may sound like an oxymoron, but its isn't.

Like a famous economist one said "All models are wrong, but some are useful".

Box Valuation

Box Inc, the cloud-based content management, collaboration and file sharing firm, which caters to corporations has a market capitalisation of 4.82 billion USD on the New York Stock Exchange.

In my view, the intrinsic value of Box Inc stands at 22 billion USD. 

Four factors form my opinion why Box is significantly undervalued.

 1)  Cloud computing is the future

 2)  Corporations do tend more frequently to pay for internet services such as Box's cloud storage and content management product, while consumers are often reluctant to pay as evidenced by the less stellar stock price peroformance of Dropbox Inc, which essentially offers a similar product to Box Inc's, but aims at the consumer market 

3)  Box's revenue is still growing with double digit numbers for quarter on quarter for the last reported quarter and

 4)  Box showed that it could be profitable in the last reported quarter

Combined all these factors and market perception help explain why for one rolling year back period Box's stock price has increased by 27.12 % while the Nasdaq Composite has shed 15.03 % of its point value. Box Inc's stock price performance is even more remarkable, now that we have rising rates environment, which makes business as usual for your technology companies, also for more mature, but still mid capitalisation technology companies like Box Inc extremely difficult, since most young tech businesses are not profitable, burning cash and depend on raising capital to survive ant ultimately prosper in the future.

In short, my thesis is the following: cloud computing is the present and future of computing and thus the future of global business and the global economy. Cloud security is vital for large businesses, especially. And Box Inc seems well positioned, at least currently to profit from these two mega trends in information technology.

Cryptocurrencies As a Funding Tool

 

In 2015 and 2016 many new emerging information technology companies issued their own cryptocurrencies to finance their own projects.

These cryptocurrencies tokens essentially transferred a stake, but not on paper in the company's project.

Own crypto issuance is a way for tech startups and more mature technology corporations to circumvent Wall Street investment banks and their deeply rooted conflicts of interest and their tendency to take too much of the Initial Public Offerings and capital raising money surplus away from the technology companies actually building the service or hardware IT product.

Partly due to the influence and clout of Wall Street investment banks cryptocurrencies issuance slowed down as of late also due to the fact that Bitcoin and cryptocurrencies's prices fell more than 70 % from their recent peaks in the last 3 years.

However, I forecast that cryptocurrencies issuance will again become huge and gain ever more speedy traction among both tech startups and investors. Many of the largest venture capital funds like Andreessen Horowitz applied for brokerage licenses so they can invest in startups' newly issued cryptocurrencies like Russian Pavel Durov's Telegram messaging application for example.

Is Inflation Going to Rise Again?

Inflation could be on the rise again.

The East - West tensions currently are forcing large scale oil and gas producers like Russia to cut supply.

What is more, the huge amount of extra money around 10 trillion USD that leading central banks like the Federal Reserve, The European Central Bank, Bank of Japan and Bank of England printed out are just looking for catalyst to basically explode.

And the military operation or war in Ukraine, anyway you call it 😀 is a huge catalyst, which decreased or increased the velocity of money, it depends on how you look at it and created an inflation spike.

Now the cutback in oil supply that Russia is currently doing could make inflation explode again.

In some Eastern European countries inflation is already on the rise again.

In addition, commercial banks are giving out retail credits and mortgage credits like there is no tomorrow. And the deposit multiplication these credits create increases further the quantity of money in the economy.

In short, if global central banks lead by the Federal Reserve do not withdraw 5 trillion USD of excess money from the global financial system in the next 5 to 7 years, humanity could be in for a catastrophe -> World War III, which could even go nuclear, to put it mildly.

In such an environment commodities stocks look undervalued, because you need base metals to produce tanks, artillery, machine guns, ammunition and oil to drive tanks, armoured vehicles and supply chain vehicles, gas to warm up tents and finally precious metals to store and move wealth in difficult times like now.

On the positive side, peace should prevail in the end. And humanity would have (hopefully) learned its lesson. Because this could really be the last time where a global mistake could be left unpunished, in capital terms.

Humanity, though has proven remarkably resilient!

Bitcoin's Blockchain As Chaos

 

The blockchain algorithm underlying Bitcoin is a hashing tree algorithm, akin to random forests.

It models the outcome like the branches of a tree develop. If on step n you just move a bit away you can end up with a totally different outcome.

Actually, this nonlinear modelling of jump processes is a random tree model, which is used for decades in financial options valuation.

Jumps ensure dynamic systems modelling or even chaos modelling.

In short, Bitcoin has remarkable agility, flexibility, durability and anti-fragility built in. 

Quite remarkable.

Crypto In Difficult Times, Like Currently

Bitcoin and other cryptocurrencies are a very young asset class, less than 10 years old.

Crypto has never been tested in war times or create recession.

I personally think Bitcoin and cryptocurrencies could flourish in war times or during severe economic hardship.

I doubt that the internet will stop functioning during a war. The internet actually is one of the main conduits of war in contemporary times.

If the internet stays alive, people can transfer wealth via Bitcoin and cryptocurrencies. Bitcoin in times of crises could actually come to epitomise to a large extent the financial system as we know it.

Stocks That Could Benefit In Precarious Times. Like Now.

The stocks of companies, which could benefit from economic difficulty and God forbid war are the equities of commodities companies like oil and gas producers, base metals miners and ultimately also precious metals miners.

The stocks of healthcare companies also would most probably hold their value in precarious times like now.

Consumer staples sector stocks are another candidate that could see their value hold in war times.

Industrial companies could see production increases because their plants could quickly be redesigned to produce war machinery and ammunition.

An unlikely beneficiary are tobacco, cigarettes manufacturing companies, because in times of stress people do tend to smoke more.

Naturally, the stocks of defence companies should see their prices outperform the general market.

A list of stocks that could see their value outperform the general market, according to my opinion follows:

British Petroleum, Altria Group, Pfizer, Exxon Mobil, Royal Dutch Shell, Walmart, Costco, General Electric, Raytheon, Northrop Grumman, Eli Lilly, Moderna, Philip Morris, Vale, SID, Novartis, Volkswagen, BMW, Merck.

Amazon Is Unprofitable. Amazon's Intrinsic Value

Amazon Inc is unprofitable for 2022.

Yet, Amazon's market capitalisation is 1.05 trillion USD on the Nasdaq bourse.

According to my estimations and calculations, Amazon's intrinsic value is 630 billion USD.

This compares to Amazon's market cap of almost 2 trillion USD just one year ago.

Amazon's international merchandising business was and is unprofitable as it is, the US merchandise delivery business produces net income.

Amazon's recent high Price/Earnings ratio of 100 + was mainly due to the high profitability and expected high growth rates of its cloud computing business service AWS.

AWS cloud's growth is slowing down significantly as evidenced by the numbers reported by Amazon Inc for the fourth quarter of 2022 only days ago and this naturally crashes Amazon Inc's worth and its market capitalisation.

Cloud computing is the future though, I think.

The Current Dot Com Bubble. Driven By AI And Cloud Computing

As far as I am concerned, we are undoubtedly living in another dot com bubble.

The current dot com bubble is driven by Artificial Intelligence, AI and cloud computing.

Only in the last trailing 7 days both Microsoft and Amazon reported significant slowdown in their cloud computing businesses, which are largely driven by AI.

Yesterday Apple Inc announced its first quarter with falling revenue in years, driven predominantly by falling iPhone sales. And iPhones and smartphone in general are the ubiquitous vehicle of cloud computing and artificial intelligence.

Anyway one looks it, both information technology services and IT physical products are luxury goods, not food, water and may be gas, without which corporations and people will face great difficulties living their day to day lives.

I estimate technology stocks are still overvalued by 45 % + on average, also taking into account the recent bull market rally of the Nasdaq Composite.

Both Artificial intelligence and cloud computing feed on large amounts of data, big data in the current IT slang to do their magic. And in difficult and war times like today, information is more scarce than ever.

Positively viewed, after the current tumult, most probably the next Google owned by Alphabet, Amazon or Facebook owned by Meta will be born.

For the next couple of years though, volatility seems assured.

Can Bitcoin Thrive In Uncertainty?

 

Yes. I think Bitcoin, cryptocurrencies could survive a global calamity, a nuclear war for example.

The information network called Internet is deeply intertwined, but also distributed much like Bitcoin.

In short the internet, the exchange of information will survive and so will Bitcoin/crypto.

Actually, uncertainty is the main building block for Bitcoin. Bitcoin's creation resembles chaos theory, I think.

Independent, mobile, distributed, connected. Agile.