Welcome to this week’s mailbag edition of The Daily Cut.
If you’re joining us for the first time, it’s great to have you as a reader.
Our mission is to plug you into the best research, ideas, and recommendations from Jeff Brown, Teeka Tiwari, Dave Forest, Jason Bodner, and the rest of the Legacy Research team.
On Fridays, we spotlight questions your fellow readers send in… and responses from the team. (You can write us, as always, at [email protected].)
Today, we’re doing something a little different…
We’re dedicating today’s dispatch to your questions for our tech and digital assets expert, Jeff Brown.
Next Wednesday, August 25, at 8 p.m. ET, Jeff is hosting a one-off online event. He’ll reveal his first major move into blockchain and crypto.
If you haven’t already, you can sign up for that, for free, here.
Now, if you don’t already know him, Jeff is one of the most widely read analysts at Legacy.
And he gets more popular by the day…
Jeff launched his free daily tech-investing newsletter, The Bleeding Edge, in April 2019.
Today, he has a loyal following of over a million readers. That’s insane growth for a free investment newsletter.
It’s easy to see why Jeff’s research is so popular. His readers love that he’s on the road so much learning about the tech megatrends he tracks.
In 2019, for instance, he attended two conferences at MIT… completed an executive leadership program at Yale’s School of Management… advised a group of U.S. senators on a new digital dollar… and traveled to Israel on a U.S. Certified Trade Mission on blockchain and digital payments.
And he kept traveling through most of the COVID-19 pandemic.
Jeff behind the podium at the U.S. Department of Defense
Jeff is best known for his tech stock recommendations.
At his flagship tech-investing advisory, The Near Future Report, he’s given his readers the chance to bag triple-digit gains on blue-chip tech stocks.
For example, chipmaker Taiwan Semiconductor (TSM) is up 195% since he recommended it in March 2019.
Online payment processor Square (SQ) is up 240% since he recommended it in April 2019.
And electronic agreements company DocuSign (DOCU) is up 441% since he recommended it in June 2019.
Jeff has also been involved in blockchain, the technology that powers cryptocurrencies.
As an angel investor, he’s backed global payment business Ripple (XRP) as well as one of the world’s largest crypto exchanges, Coinbase (COIN).
And one Jeff reader wants to know the difference between truly decentralized digital currencies, such as bitcoin (BTC)… and crypto copycat currencies governments and corporations are rolling out.
Reader question: My understanding is cryptos such as bitcoin reward the keepers of the blockchain with coins that are “mined” by solving complex computational problems or by “proof of stake.”
Now, I’m hearing that companies and governments are looking to blockchain as well. They want to create their own digital currency versions or facilitate business transactions. How are these institutions able to encourage enough people to keep their own versions of these government or company blockchains?
What’s in it for people? What happens if the rewards are not big enough, and the blockchain does not have enough nodes to guarantee a decentralized network? Is there opportunity for people to “rent out” computer power to corporations to maintain a part of their blockchain networks?
– David D.
Jeff’s response: Decentralized blockchains, like the bitcoin blockchain, reward “miners” for maintaining those blockchains.
Miners confirm transactions and write them into a ledger. This is called consensus. Once consensus is reached, and a new transaction is written into a blockchain, it can’t change unless one person or group of people controls more than 50% of the network (what’s known as a “fork”).
The miners are rewarded with newly issued cryptocurrency associated with the blockchain they’re maintaining.
You’re right. Governments and large companies are also planning to launch their own digital-only currencies. But there’s a key difference between bitcoin and a digital-only currency from Facebook (FB) or Uncle Sam.
These crypto copycats will not be decentralized. They’ll be built on centralized, or “permissioned,” blockchains. Corporations and central banks will have complete control.
There will be no mining on these blockchains. And there will be no rewards for miners. The goal of these permissioned blockchains is to act as digital ledgers the issuing entities can control.
Next, Jeff goes into more detail on what’s coming down the pike with government-issued crypto copycats…
Reader question: Hi Jeff, I keep hearing things about shifts in the market and in our banking system, which could be bad for “most Americans with money in the bank.”
Is there anything on your radar you feel we should be worried about?
– Stephanie S.
Jeff’s response: Hi, Stephanie. Thanks for writing in. We’re on the cusp of changes to our financial system. These changes will have profound impacts on the economy and how we earn and save. So you’re correct that we need to be prepared.
One major change to be aware of is the development of central bank digital currencies (CBDCs). I’ve written often about how 80 countries – including China – have been working on rolling out these digital-only versions of cash.
And the Fed has been working hard to make sure it isn’t left behind.
As a result, there’s a lot more discussion in the mainstream financial media about this topic. In June, The Wall Street Journal reported on “Why the Fed Is Considering a Digital Dollar.”
The answer is easy. The prospect of a digital-only dollar – or FedCoin, as Casey Research founder Doug Casey calls it – is too tempting for Washington to pass up. It would allow the feds to track and automatically tax every transaction we make. It could also “airdrop” stimulus checks immediately in our accounts.
Following the adoption of FedCoin, physical cash would disappear. The feds won’t want us to use bills or coins for any transaction. Because this would evade their tracking.
I foresee a multiyear window where people can exchange their dollar bills for FedCoins. But eventually, paper money and coins will no longer count as legal tender.
You may have been hearing doomsayers sounding the alarm on this transition because FedCoin also makes negative interest rates possible. The Fed could deduct interest from our digital wallets each month to stimulate spending.
This is the most likely scenario for the government taking our money using a CBDC. It’s a real concern.
Finally, a question for Jeff about how to protect yourself from digital snooping. It came after Jeff wrote about the new “home robot” from Amazon.com (AMZN)…
Reader question: Why are you so excited about the new Amazon robot technology that you want to place in your house?
On one end, you are worried about security and don’t recommend using Google (GOOG), Microsoft (MSFT), or Amazon. On the other, you’re inviting this technology into your house.
– Kathryn W.
Jeff’s response: Hi, Kathryn. Thanks for sending in this question.
Back in March, I wrote about Amazon’s planned home robot, codenamed Vesta. With the help of Amazon’s AI (artificial intelligence) assistant, Alexa, Vesta will carry objects, play audio, and integrate with other devices such as Ring security systems and Echo home speakers.
This is a natural extension of Amazon’s smart home product line. It’s exciting to watch home robots develop beyond the popular Roomba vacuum cleaners. I’m eager to see the ways home robot technology will add convenience to our lives going forward.
But you bring up a valid concern. We don’t want to bring into our homes technology that will monitor us to sell our data… or worse.
But there’s a difference between Amazon… and Facebook and Google.
As I’ve written before, Facebook, Google, and others like them aren’t good stewards of our data. Their business model revolves around advertising. They earn money by giving advertisers access to profiles built from our data.
I deleted my Facebook account more than eight years ago when I grasped how it was monetizing my personal data at my expense – and great risk.
When I tested out Google’s Nest Hub smart home system after its launch, I could see the impact of its data-focused business. Before I’d be able to use it, Nest wanted me to give Google complete access to all of my data. The software blocked me at every turn when I tried to do something as simple as join a Google Meet call.
Amazon and Apple (AAPL) are much better custodians of our data because their businesses are not primarily based on advertising.
Apple’s business is not based on advertising at all. It sells products and services unrelated to advertising. The company isn’t perfect. But I would choose it over Google and Facebook any day.
Amazon is similar. Its smart home products are seamless and deliver great value. They set up quickly. And most critically, they don’t require us to share all our contact information, the contents of our file folders, our photos, and our email inboxes.
Rather than demanding access to all our data, Amazon conveniently delivers the products people want.
That’s why I’m more comfortable bringing Amazon and Apple devices into my home. And I’m excited to see these more trustworthy companies developing their home robot product lines.
That’s it for this week’s mailbag…
Remember, if you haven’t yet secured your place for Jeff’s Click for Crypto event next Wednesday, August 25, at 8 p.m. ET, there’s still time. You can sign up, for free, here.
And if you have a question for anyone on the Legacy team, be sure to send it to [email protected].
Have a great weekend.
August 20, 2021