Need to Know: Watch for bitcoin to move ‘explosively higher’ when this market signal flashes

If the Lambo-lovin’ faithful across the internet are any indication, bitcoin “hodlers” have been surprisingly patient during this nightmarish year. As you can see from this Reddit post, they’ve also kept their sense of humor:

Maybe it’s because they’re confident in the long-term story. Or perhaps they got in early enough that the latest batch of weakness doesn't even matter.

Whatever the case may be, bitcoin investors are about to get paid in big way, according to Fundstrat’s Tom Lee, who told CNBC in a recent interview that the signal for an imminent rally will come from emerging markets. Specifically, when the iShares MSCI Emerging Markets Index ETF EEM, +1.86%  starts to rebound, he says, watch for bitcoin BTCUSD, +0.43%  to do the same.

A relationship between the two struggling investments — the emerging-markets ETF is off about 8% so far this year, while bitcoin has obviously been hit MUCH harder — has been forming of late. Lee says the correlation illustrated in this graphic could be key in predicting a reversal for bitcoin:

“Both really essentially peaked early this year, and they both have been in a downward trend,” Lee said. “Until emerging markets begin to turn, I think in some ways that correlation is going to hold and tell us that sort of the risk on mentality is those buyers aren’t buying bitcoin.”

He explained that hedge funds avoid buying risk when there’s trouble in emerging markets. And when they aren’t buying risk, they’re surely not buying bitcoin. But when that appetite for risk returns, Lee, in our call of the day, believes it’ll be enough to carry bitcoin to $25,000. This year.

If the dollar weakens and the Fed taps the brakes on its rate-hike policy, Lee predicts the firepower that’s been waiting on the sidelines will jump in.

“I still think it’s possible,” said Lee. “Bitcoin could end the year explosively higher.”

Watch the interview:

As for today’s market action, stocks are, again, looking up as we wind down August, which is normally a miserable month for equities. Clearly, that hasn’t been the case this time around.

The market

Futures on the Dow YMU8, +0.27% Nasdaq NQU8, +0.39%  and S&P 500 ESU8, +0.23%  are all pointing to a higher open following Friday’s strong finish and record closes for the S&P SPX, +0.62% and Nasdaq Composite COMP, +0.86% (The Dow DJIA, +0.52% is 3.1% off its record close, set in January.) Gold GCU8, -0.22%  is edging lower, as is crude oil CLV8, -0.41% Bitcoin is a long ways away from that bold $25,000 prediction but the crypto is up modestly to $6,693. Asia markets ADOW, +1.20%  gained, boosted by the People’s Bank of China’s move to shore up its currency in what could be an olive branch to President Trump, while much of Europe SXXP, +0.17%  is enjoying some upside in the early part of its session. The U.K. is enjoying the day off.

The buzz

Time to start guessing what new Apple AAPL, +0.31% products we’ll see in September. More iPhone Xs? A new high-end phone will have a display that measures about 6.5 inches diagonally, according to Bloomberg. And while Apple keeps finding ways to get customers to pay more, it’s also planning a new, lower-end device. No word yet on the price tag.

Meanwhile, Slate says Mac fans could finally get an update worth having.

The chart

Last week, the New York Times ran a piece entitled, “End stock buybacks, save the economy.” The idea being that the U.S. economy is on the ropes because of inequality, unstable employment and weak productivity. Eliminating stock buybacks would take care of all that, according to the article.

To all that, Cullen Roche of the Pragmatic Capitalism blog says, “So. Much. Hyperbole.” He said the authors are “misleading at best and very wrong at worst” and the “argument against buybacks is basically one big fallacy of composition.”

As the chart shows, companies that buy back their own shares tend to outperform those that don’t. And it follows, Roche explains, that companies buying back shares contribute more to aggregate household net worth than those that don’t.

Furthermore, does the economy really need saving at this point?

“As if the U.S. economy is on the brink of death with its record-setting GDP and low unemployment,” he wrote. “I fully admit that inequality is a big issue and I think that it makes our economy operate below its potential, but we don’t need to go overboard trying to stoke populist rage with these falsehoods about how healthy the U.S. economy.”

Roche acknowledges inequality is a problem and should be addressed before mounting public outrage turns into a populist nightmare. “It sure would be swell if corporations took all of their profits and just gave them over to their employees,” he wrote. “But that’s not how capitalism works.”

The stat

44% — That’s President Trump’s latest job approval rating, which barely budged after Paul Manafort was convicted on fraud charges and Michael Cohen pleaded guilty to tax fraud and campaign finance violations.

Getty Images These poll numbers are reason to smile.

Peter Hart, a Democratic pollster, said the results were a challenge to Trump adversaries who were hoping for more backlash from the legal blows. “For the 2018 Democratic strategy, the Manafort and Cohen convictions represent a fool’s gold opportunity rather than a silver bullet solution,” Hart said.

The quote

“There’s an enormous, massive misunderstanding: There are almost zero people who have pulled off substantial success without putting in real time or effort” — Entrepreneur Gary Vaynerchuk, in a video highlighted by Josh Brown of the Reformed Broker blog that goes into how the dream of sitting on the beach while making millions from passive investments on the internet is pure fantasy.

Watch the full video: