Tag: Baruch College

Long Cryptocurrencies

Hi, humans and some robots that will flood this website’s traffic. Are you the one that brought up Bitcoin in Thanksgiving dinner? I will keep this article brief. As I started writing, I got too excited and wrote even more than I initially intended. Writing is powerful.

About 5% of my capital is in Bitcoin ($BTCUSD), Ethereum ($ETHUSD), and Litecoin ($LTCUSD). I suggest you go long these with the amount of money you can afford to lose without pain.

Mind me with “BITCOIN IS IN A HUGE BUBBLE.” Don’t waste time valuing bitcoin as it were just another type of security. There is no clear way to value these. So why not put the money you can afford to lose? It will just continue rising for who knows how long. Or you will just lose the money and continue to live as usual. Buy and Hold Cryptocurrencies.

Cryptocurrencies are a new asset class that serves decentralized applications (which allows you to do something you do today, but without the middle-man). Like stocks serve companies. Municipal bonds serve states and cities. Etc.

How can I buy Bitcoin? The easiest way to use middle-man brokerages. The most popular one in the U.S. is Coinbase.

As bitcoin price surged, so too have the number of Coinbase accounts. In the past 12 months, the number of Coinbase users increased 167% to 13.1 million. Coinbase now has more accounts than Charles Schwab which has 10.2 million accounts.

Bitcoin Price vs. Coinbase Accounts: 2013-2017
Source: Bespoke

Just today, all three cryptocurrencies, brave people and I hold hit All-Time-Highs (ATH). ATH headlines literally every day when it comes to Bitcoin.

Humans of planet Earth have been calling Bitcoin a bubble since $2000. Yet, it keeps going up and up and up…. Crashes few times about 20-30% time to time. Within days, it will hit ATH again. Like I keep saying to a countless number of people who ask me about Bitcoin. I have no idea where Bitcoin price will be at tomorrow, next week, next month, next year, next decade. But, I’m absolutely willing to put the amount of money I can afford to lose without sadness.

From what I noticed there are two types of people calling Bitcoin a bubble;

  • Inexperienced people without knowledge of basic economics and finance. Some keep comparing “Bitcoin bubble” to Tulip Bulbs, when in fact they don’t know anything about tulips. They still might turn out to be right.
  • Those people who missed out the increase in Bitcoin’s value. They still have an opportunity to buy.

At Delivering Alpha last September (which I did not attend this time around), JPMorgan CEO Jamie Dimon called bitcoin a “fraud” that will eventually blow up. Eventually.

He also joked about his daughter buying some bitcoin, and now she thinks she’s a genius. He also called any JPMorgan trader who trades bitcoin stupid and should be fired in a second.

I love and respect Jamie Dimon. But, I have to disagree with him on bitcoin. I’m a big fan of him (in addition to all other CEOs of major financial institutions haha). All jokes aside, I do respect him, his passion, his curiosity, and his opinions.

On the same day of Jamie’s comments, I along with other Baruch College students went to Goldman Sachs headquarters for a fireside chat with GS CEO Lloyd Blankfein. One of the questions I wanted to ask him was his reaction to Dimon’s comments AKA his opinion on Bitcoin. Didn’t get that chance. But, great event! Not long afterward that day, news came out stating Goldman Sachs is exploring a new trading operation dedicated to cryptocurrencies.

The technology behind bitcoin, Blockchain, is the real winner here. How can I and you benefit from it? Find companies that are heavily investing in the blockchain.

Decentralized services have a lot of challenges compared to their centralized counterparts. For one, they are slower.

  • Visa processed over 42 billion transactions in the second quarter or around 5,500 transactions per second. Whereas Bitcoin’s Blockchain is limited to less than 10 transactions per second. To put this in perspective, Bitcoin can only handle about 5% of the transactions that Paypal processes a day.
    • If you have been following Bitcoin development, you would know there was a “fork” which gave birth to a new currency, Bitcoin Cash (Bitcoin holders got free Bitcoin Cash!!!). Bitcoin cash is capable of handling about 60 transactions per second, a significant improvement I’m not going into depth about those, but to learn more about Bitcoin forks and Bitcoin Cash, check this article, Bitcoin Cash is Bitcoin. A lot of innovation in this space.
    • Remember, Bitcoin forks gives you free cash…if you own Bitcoin. If you use third-party to buy/sell bitcoin, you might run into some issues which can be worked out with the help of other Bitcoin holders and threats.

Other challenges include the cost of transactions (which Bitcoin Cash also addresses), volatile and uncertain governance, etc.

CME Group recently announced to launch Bitcoin futures at the end of the year. It could lead to more institutional investors entering the market….and more power to bears. But don’t let that stop you from buying bitcoin. Even Dimon at the same Delivering Alpha said,

“I am not saying go short. Bitcoin could touch $100,000 before it goes down. So this is not (what you) advise somebody to do.”

It is true Bitcoin could touch $100,000 before it collapses 99.99%. Or it could touch $1,000,000 before dying.

So, take 5-10% of your money which you can afford to lose and buy bitcoin and some other digital currencies with big market capitalizations.

Warning: Be careful. Some people had their cryptocurrencies stolen. Coinbase posted useful post on how to protect your digital currencies.

People who got hacked seems to be the people that announced to the public (via Twitter, blogs, etc) they are invested in the new asset class. While back, I tweeted I’m invested. And now this blog. I’m scared!!!

Twitter account: @Khojinur30

Take some precautions.

I wrote this article right after my parents asked about Bitcoin and expressed an interest to buy it. I was shocked to hear my parents say it. So now I will interview them, get access to their finances, and decide whatever they should invest in it or not. If so, by how much? #HelpPeopleAchieveTheirFinancialGoals

Disclaimer: The views expressed and any forward-looking statements are as of the date indicated and are those of the author. Discussions of individual securities, or the markets generally, are not intended as individual recommendations. Future events or results may vary significantly from those expressed in any forward-looking statements; the views expressed are subject to change at any time in response to changing circumstances in the market. Khojinur Usmonov disclaims any obligation to publicly update or revise any views expressed or forward-looking statements.

Couple of Announcements

1st Announcement

On the morning of Wednesday, May 10, I decided to check the Facebook notifications. Before I can check it, the first thing I see on the timeline is an article from Wall Street Journal (WSJ) that a friend shared a couple of minutes before. The article was titled “Sorry, Harvard and Yale, the Trading Whiz Kids Are at Baruch College.”

Baruch College, a city college that I attend, got mentioned on WSJ. Big deal. And it has to do with trading. Big deal.

Minutes after I finished reading the article that morning, the article started spreading around like a wildfire. It was the talk of the town.

The next day, I decided to stop by the trading floor at my college quickly to export important statistics to PDF. What I didn’t know was that CNBC was about to go live.

So I’m sitting on Bloomberg Terminal desk with a trader discussing the current events and S&P 500. We were in a deep conversation and CNBC decided to live stream a portion of our passionate conversation…on mute, unfortunately.

Khojinur Usmonov discussing the current events and S&P 500 Index with another trader
Source: CNBC, “Nation’s top trading club comes from New York public college“

First I was interview by Bloomberg. Now, I was on CNBC live, but not interviewed. In other words, millions of people watching CNBC did not know my name. Say my name.

Interviewed By Bloomberg

I’m proud of Baruch College.

2nd Announcement

Read this thread:

As to blogging, I’m not 100% sure if I will be able to write articles. If I can, I plan to write it and publish it here on Out of WACC. If not, you won’t see new articles until the end of August/early September.

Biggest Failure of My Career: Hedge Fund Club

 

Do not train a child to learn by force or harshness; but direct them to it by what amuses their minds, so that you may be better able to discover with accuracy the peculiar bent of the genius of each. ― Plato

It is Wednesday, February 27, 2013. I’m giving a speech in front of 50-70 people on why they should elect me as their treasurer for Key Club at Edward R. Murrow high school.

During my junior year in high school, I became a member of Key Club, an organization which provides its members with opportunities to provide service, build character and develop leadership. This was the first club I ever joined, after avoiding all clubs and school events for 2 years.

After the speeches for all positions, members were to vote a person of their choice for each position. Unfortunately, I became in 2nd place for the treasury role. Well actually, I was in the last place since there were only two people running for the position. It was not a big deal for me anyway.

Several months later, I was sitting in my room staring at the news and currency charts. I was thinking about my future; college and career.

As I was thinking, I promised myself I would open my own club in college. What kind of club? I don’t know. But, I will open a club. Only time will tell.

A year later, I’m sitting in the same room staring at the news and currency/equity charts. I was weighting the costs and benefits of attending certain colleges. After being rejected from my number one choice, Columbia University, I had to choice between Binghamton University and Baruch College.

Why not Binghamton? Tuition was over $24,000, $14K had to come out of my own pocket (unless I got scholarships; not guaranteed). In others words, I would had to take out a student loan, which I promised I would never take. Lastly, the campus was four hours away from the financial capital of the world; New York City.

On the other hand, one major reason I wanted Binghamton was that I would move out from my parent’s house and be independent. But, the benefits were heavier on Baruch’s side. To this day, I still live with my parents; rent-free with……um……no……um……..no responsibilities.

During my first semester at the city university, I started going to Finance & Economics Society (FES) club. At the end of the semester, they were few positions open, one of them: Sales & Trading. I applied for it, got interviewed, and got accepted into the program. I got accepted not because I stood out from the crowd, but because there was no competition at all.

Joining a club with some smart people that conducted themselves professionally, was uncomfortable for me. A confront zone is a beautiful place, nothing ever grows there.

Over the next three semesters at FES, I learned incredibly so much both career-wise and personal-wise. Two important skills I gained were debating and leadership, thanks to Kenneth Tjonasam and the team. As the director of the S&T program, Kenneth challenged me and others to give our own ideas and asked us tough questions when we gave it. And he did much more than that.

Charles Schwab got paid a million dollars a year in 1920s, because of his leadership skills;

Why did Andrew Carnegie pay a million dollars a year, or more than three thousand dollars a day, to Charles Schwab? Why? Because Schwab was a genius? No. Because he knew more about the manufacture of steel than other people? Nonsense. Charles Schwab told me (Dale Carnegie) himself that he had many men working for him who know more about the manufacture of steel than he did.
Schwab says that he was paid this salary largely because of his ability to deal with people.

That’s how good Kenneth was. Except in this part, he is also a genius.

In the middle of sophomore year, I had a flashback; sitting in my room and promising myself I would open a club. At the time of the flashback, I was sitting in my room staring at the news and currency/equity/commodity charts. Without contemplating, I planned to start Hedge Fund Club (HFC).

I wanted to share my passion with others and give back to the Baruch community. The purpose of HFC was;

Hedge Fund Club’s purpose is to trade financial instruments actively while allocating different asset classes effectively. To maximize capital and minimize risks, the club will use top-down approach and technical analysis to find the best investment opportunities. The club will offer opportunities for the Baruch Community to get know the hedge fund industry and network with the people in the industry, developing Baruch College’s exposure to the hedge fund industry.

Over the next several months, I filled out the papers the student government wanted, in addition to finding a club adviser. My team and I chose Bruce Kamich, well respected and highly talented technical analyst professor at Baruch College. Professor Kamich was the best fit for the HFC’s mission and I’m thankful for his advice. I have yet to take his class.

And finally, the student government asked my team to hold three HFC meetings before an interview with them to get the club chartered.

My team (Vice-President – Thomas Jing, Secretary – Jamal Moody, and Treasurer – Jinay Shah) and I held the meetings in April and May, attaining 14 members. For the undisclosed reasons, the interview was forwarded to early September. Over the summer, I along with my team worked on most of the PT presentations and outlined the meetings for the fall semester. September came and there still was no interview. To sum up, there’s no HFC anymore (unless someone else starts it).

I take full responsibility for the failure of Hedge Fund Club. This is the biggest failure of my career. And this will definitely go into my book.

The reasons for the failure is classified. It will be declassified in my book, or when I’m on the cover of Forbes. (Few people know at this time).

I will continue to guide people who might be interested in markets/trading/technical analysis/investing/blogging. I will continue to meet with them during my own time.  I will continue to have conversations with them. I will continue to debate with them. I will continue to ask “why” if the reasons are not clarified.

While the vision and the goals for HFC will not see a light anymore, I will let it shine after college. I plan to create my own program and/or join a mentorship program.

I have seen extremely talented students. I want to make sure they use their brain for something they love. I have seen students with a strong curiosity in a subject (mostly finance related). I want to make sure they continue to build their knowledge foundation and guide them, but it’s up to them to choose which road to take. I have seen students with no clue what they want to do when they grow up. I want to make sure they go out of their confront zone and try out new things.

Wander around the unknown and you might just discover your passion. – Khojinur Usmonov

Pressure Builds Up In EU Following Italy’s Shocking Referendum Loss

This article was initially posted on The Ticker, Baruch College’s (the college I currently attend) independent, student-run newspaper.

After a defeat in a constitutional reform referendum, Italian Prime Minster Matteo Renzi has resigned as he previously promised in case of a “no” vote to the constitutional revision plan. This referendum was meant to strengthen Renzi’s hand by stripping the Senate of its many legislative powers and speeding up the decision-making process.

With 59.1 percent of the votes being “no,” an anti-establishment political force took control once again, following the example of the Brexit referendum and Donald Trump’s election. Renzi, a centrist, was accused of failing to restart the country’s flagging economy, which has barely grown since adopting the euro in 1999.

The referendum raises questions about Italy’s ability to work efficiently. Since 1946, Italy has had 41 different prime ministers and has gone through repeated political turmoils.

In response to the referendum, Brexit campaign leader Nigel Farage, who is also a vocal supporter of Donald Trump, tweeted, “This vote looks to me to be more about the euro than constitutional change.”

Parallel to Brexit and Trump’s victory, the Italian referendum showed voters the rhetoric of populist parties like the Five Star Movement, which campaigned against the constitutional reforms.

Renzi’s collapse comes after the defeat of a far-right candidate in Austria. It is a blow to the wave of anti-establishment anger across the western countries. Norbert Hofer, a far-right candidate from the Freedom Party of Austria, lost by seven points to independent candidate Alexander Van der Bellen. While the far-right may have lost this election, the rise of populism is gaining the support of the Freedom Party for the next national election in Austria, set to be held before spring 2018.

Matteo Salvini, the leader of Italy’s far-right Northern League, tweeted, “Viva Trump, viva Putin, viva la Le Pen e viva la Lega!” which translates to “Long live Trump, long live Putin, long live Le Pen and long live the Northern League!”

In addition to supporting the Trump presidency, the Five Star Movement and the Northern League favor rougher immigration policies. Both parties have promised to hold a referendum on Italy’s membership in the eurozone and renegotiate Italy’s public debt.

Markets have mostly cooled off from the aftershocks of the Brexit and the Italian referendum results, but elections in several key European countries next year’s might not make recovery easy for investors. Renzi’s departure could lead to an early election.

Italy is now another country on the list of European Union members that are likely to hold a general election in 2017, joining France, Germany, Netherlands and the United Kingdom.

Italy’s election would be held in early 2017. The potential victory of the populist party will create uncertainty about the economic prospects of the eurozone’s third biggest member state.

Italy’s banking sector, currently with $4 trillion in assets, is suffering from low profitability, lack of economic growth, ultra-low interest rates and a surplus of bad loans. The FTSE Italia All-Share Banks Sector Index is also down 51 percent over the past year. A change in the government could mean further delays in solutions to the banks’ problems.

Banca Monte dei Paschi di Siena — the world’s oldest and Italy’s third largest bank — recently failed the EU bank stress test.

The bank’s stock is down 83 percent since 2007 as bad loans progressively increase. The bank is now desperately looking to raise capital and sell 28 billion euros in bad loans.

The only solution Italy has at this moment is to “rely on the EU to provide more fiscal rescue packages, to prevent Monte Dei Paschi from becoming insolvent,” said Kenneth Tjonasam, the director of portfolio management at Baruch’s student-run fund, Investment Management Group.

Italy’s debt as a percentage of its gross domestic product stands at 133 percent, second only to Greece’s 183 percent. Unlike Greece, Italy is so-called “too big to fail,” as it is also the world’s third largest government bond market.

The French vote is also crucial. National Front Leader Marine Le Pen called Brexit a “victory for freedom,” and her party is leading strongly in the polls. The two-step election for Europe’s second largest economy is scheduled for April 23 and May 7, 2017.

Even if the Five Star Movement and the Northern League win the election, they still have to hold a referendum on Italy’s membership in the eurozone and actually win it. If they do, “Italexit” and “Frexit” could be enough to destroy the entire currency bloc.

Around the same time, British Prime Minister Theresa May is expected to invoke Article 50, triggering a two-year countdown to Britain’s official exit from the European Union.

Even if the euro-skeptic parties fail to gain power, anti-establishment sentiments in the country will not go away.

“The Italy referendum ‘no’ vote is only a small speed bump to the ideal of a far-right movement that’s taking place across northern EU countries. The time frame to restore the Italians to path of stability, both politically and financially is uncertain,” Tjonasam added.

Strong Jobs Report Again – Time To Change?

My finals at Baruch College are over. I’m back now. In this post, I will write about November jobs report. On the next post, I will be writing about the European Central Bank (ECB), the Fed and the risks for a rate increase.

On December 4, the United States Department of Labor reported November payroll numbers, which was stronger than expected. There was 211K jobs added in November, stronger than expected and the second consecutive month increase above 200K. Additionally, September and October payrolls were revised higher  by 35K. September was revised higher from 137K to 145K (+8K) and November from 271K to 298K (+27K). Over the past 12 months, an average monthly job gain was 237K, little higher than the 224K average in the same period of 2014. Year-to-date, however, only 210K jobs were added every month on average, compared to 253K last year for the same period.

Total Non-Farm Payrolls – Monthly Net Change
Total Non-Farm Payrolls – Monthly Net Change

I believe this hiring pace is only temporary due to holidays. A lot of employers, especially large department retailers, are adding temporary or “seasonal”  workers. Retail trade payrolls rose 31K as retailers ramped up seasonal hiring.

The unemployment remained at a April-2008 low of 5%. The labor-force participation rate ticked up 0.1% higher from 38-year (1977) low of 62.4% to 62.5%. In a typical business cycle, the labor-force participation rate rises when the economy is growing reboustly. While this participation rate ticked higher, we should not get our hopes up. It has been in a long-term decline since the financial crisis of 2008. One month of data is not enough.

Unemployment Rate + Labor Force Participation Rate

One interesting thing to note is the U-6 unemployment rate, or the underemployment. It is a broader measure of unemployment, which includes people who aren’t looking for work and those who are working fewer hours than they wish. An individual with a master’s degree working as a bus driver is considered to be underemployed. U-6 ticked up to 9.9% in November from 9.8% in October, but down from 11.4% a year ago. If it increases again in December, I look that as a sign that the economy is about to get worse. If it continues to increase and increase, the economy is headed for a trouble.

Average hourly earnings rose by 4 cents, or 0.2% to $25.25, following a 9-cent gain in October. Half of the monthly gain in November compared to October, pulled down the annual rate down from 2.5% to 2.3%. Average weekly hours worked fell 0.1 hours from 34.6 to 34.5.

Average Hourly Earnings and Average Weekly Hours
Average Hourly Earnings and Average Weekly Hours

While increasing wages are good news, increases in minimum wages are dreadful for the economy in the long run. I previously stated in “October Jobs Report Strong: It is Just One Report” post,

“…wage growth might suggest that employers are having trouble finding new workers (should I say “skilled” workers) and they have to pay more to keep its workers and/or to get new skilled workers. This could draw more people back into the labor market, increasing the participation rate. Without the right skills, good luck.”

“Without the right skills, good luck.” Any escalation in minimum wages will cause more students to drop out to work at “no-skill needed” and/or “low-skill needed” places.

Unemployment rate for civilians by 16-19 years old, and 25 years and over by educational attainment
Unemployment rate for civilians by 16-19 years old, and 25 years and over by educational attainment

Young people should not drop out just to work at Mcdonald, Costco, etc, as a “minimum wage” employee. They need skills. Skills that will be very useful for their future. Not flipping burger skills.

You see the red line on a graph above? That’s the unemployment rate for 16-19 years old in the past two decades. The lower the education attainment, the higher the unemployment rate.

Don’t forget the threat of technology. Do not underestimate the power of technology. McDonald has already rolled out and are rolling out self-service kiosks in restaurants. In other words, replace the “minimum-wage” employees with technology.

While this is a strong jobs report again, it is time to change. Holiday season is nearing its end. Technology continues to destroy more jobs than it is creating. Back to “normal” jobs report and “poor” jobs report series, starting next month.