How You Know a Banker Is Lying

What’s the best investment you could have made in the last 10 years? Apple?

Well, Apple started 2007 around $12 a share. Steve Jobs had already brought Apple back from the dead (and a $1 stock price) with the release of the iPod in 2001. But that January in 2007, he dropped the bomb that would eventually make Apple the biggest and most profitable company the world has ever seen.

By the time people finally got their hands on an iPhone, the shares were over $17. They briefly dipped below that level during the worst of the financial crisis. But they’ve mostly just gone up in price. Yesterday Apple closed at $160. That’s a 1,233% gain, enough to turn $10,000 into over $120K. Not bad…

But not the best. 

Tesla’s been running pretty well, right? Well, in 2007, Tesla was still just a twinkle in Elon Musk’s eye. Tesla went public on June 6, 2010. It closed at $23.83 a share that day. At yesterday’s closing price, your $10,000 would have been up to $139,286. Surprisingly (at least to me), Tesla would have been better for your money than Apple. But it still isn’t the best investment you could have made.

Here’s a hint: The company reported earnings on Monday night, October 16. It beat the forecast for new subscriber numbers. But it also forecast spending on content will run $7–$8 billion over the next couple of years. That’s a couple more billion than investors were expecting, which is probably why the stock closed lower yesterday…

Yep, it’s Netflix. You could have easily bought Netflix around $3 in 2007. At yesterday’s closing price of $199.48, your $10,000 would be worth over $650,000. 

Netflix itself is now worth about $85 billion. It now has something like 52 million U.S. subscribers. That’s more than the two biggest cable TV companies, Comcast and Charter, combined. Not bad for a company that started off as a goofy little mail-order DVD operation.

Is a 75 Million Percent Return Goofy?

OK, there actually is a mainstream investment that’s done better than Netflix. A lot better. And in a shorter time frame, too. It’s feels almost silly to write the gains out: 75,000,000%. There just aren’t many times you can turn $100 into $75 million.

But that’s exactly what has happened with Bitcoin since 2010. The market cap for Bitcoin is approaching $100 billion. Yeah, it’s worth more than Netflix. Bitcoin rallied 45% in just the last few weeks…

I guess it was about a month ago that JP Morgan’s celebrity CEO Jamie Dimon called Bitcoin a “fraud.” More recently, his remarks have gotten even more colorful. He said Bitcoin “is a great product, if you are a criminal” and “Bitcoin is an index to launder money.”

Then there’s this little gem: “If you’re stupid enough to buy it, you’ll pay the price someday…”

So, I guess in Dimon’s world, you’re stupid if you made a bunch of money on Bitcoin or one of the other cryptocurrencies. And I’m not even going to get into the ultimate irony here: a Wall Street bank CEO calling anything a “fraud.” Does he really want to get taken to task for the billions of dollars’ worth of mortgage-backed securities his company was running? You know, those designed-to-fail bonds that nearly brought the global economy to a complete standstill? 

If I were him, I’d be careful about shooting my mouth off. 

Dimon does have a point about money laundering. I’m quite sure Bitcoin and other digital currencies are being used by black marketeers to launder money. Of course, you can’t really tell because Bitcoin is not “owned” by any government or central bank. Transactions are totally anonymous. I bet wealthy Chinese are using it to move money past their government’s restrictions on cash leaving the country…

And you know what I say? So what?

Like JP Morgan’s never had money laundered through its system. This is one of the big dirty secrets of the banking industry. Dimon and his boys turn a blind eye when there’s money to be made.  

So of course JP Morgan traders were helping their clients buy Bitcoin after the price dropped on Dimon’s fraud accusation. Would you expect anything different? And, to my knowledge, Dimon has not followed through on his pledge to fire any JP Morgan trader who buys Bitcoin. How do you know when a banker is lying? Yeah, his lips are moving…

There’s Money to Be Made

Now, I will admit, I have been dismissive of Bitcoin and cryptocurrencies. I guess I’m old, and my inner “get off my lawn” was coming out. But I’ll tell you, you just can’t be dismissive of an asset that’s coming into the mainstream consciousness the way Bitcoin is.

Bitcoin has all the hallmarks of a legitimate currency. It has utility. It is easy to acquire. It is widely circulated. There’s even an IRA for Bitcoin now. 

People in the know are saying Bitcoin itself is likely to rally from current prices around $6,000 to $10,000 or even $20,000. OK. It really is still in the early stages of finding its proper value. It’s still being bought, so it’s likely to move higher. But the days of a 75 million percent gain for Bitcoin are gone.

However, Bitcoin isn’t the only digital currency game in town. I don’t want to completely spill the beans, but my colleague Jason Stutman of Technology and Opportunity has spent the last six months digging into the cryptocurrency market. We barely see him at the office anymore. I understand he’ll be sharing his findings with us tomorrow. You might want to pay attention to what he has to say…

Until next time,

Briton Ryle

@BritonRyle on Twitter

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.