Editor’s Note: Today’s issue is a little different from usual…
In place of our regular daily market commentary, we’re going to tell you about a key development in the markets.
Although this trend is extremely important, most Americans don’t know about it yet. But soon, it will be on the front page of major papers like The Wall Street Journal and The New York Times.
E.B. Tucker, editor of The Casey Report, has been studying this trend for months. Below, you’ll read why it’s so important…and what it means for your stock market investments.
Casey Daily Dispatch will return to its regular format on Monday.
Delray Beach, Florida
January 29, 2016
As you read this, Wall Street CEOs are panicking.
They’re holding secret meetings about a new technology that’s going to change the financial world…and potentially make them obsolete.
Soon, you’ll be reading about this technology on the front page of The Wall Street Journal and The New York Times.
It’s going to radically change how people do business…just like the Internet changed how people share information.
I know these are big claims. Let me explain…
The new technology is called “blockchain.” You may know it as the engine behind bitcoin, the digital currency created in 2008.
You can think of blockchain as the plumbing that makes bitcoin work. But blockchain is not bitcoin.
Unlike bitcoin, blockchain is not a currency, and it’s not money. It’s a technology that’s going to change the way people buy and sell things.
It’s more secure, cheaper, and far more reliable than any system of payment that exists today – including cash, checks, and credit cards.
Soon, you’ll use blockchain to buy a TV, a car, or a stereo. You’ll also use it to buy things like stocks, bonds, and real estate.
Blockchain is an “open ledger.” It keeps track of transactions, just like an old-fashioned ledger on a store clerk’s counter.
But the store clerk’s ledger is only for him to see. You’ll need a warrant to see it even if you’re a paying customer. If you do get a warrant, he might change it before you see it.
An open ledger is different. It’s visible to everyone involved in a transaction. Buyers, sellers, regulators, and anyone granted access can see the ledger. Plus, everyone involved in the transaction has their own copy of the ledger on their computer, and all copies must agree. This prevents stealing or fraud.
Here’s an example. When you buy a pair of shoes using blockchain, both you and the seller “broadcast” the transaction over the Internet. Everyone updates their copy of the ledger for your transaction. Then everyone compares ledgers. When there’s disagreement about the content, the most common ledger is accepted as the “truth.”
Then the transaction becomes permanent. The record in the ledger can’t be changed unless all people in the transaction agree to it.
We call this “decentralization”…because it takes the power out of the hands of a single institution like a bank. And it puts the power in the hands of the people doing the transaction.
With blockchain, no central authority or group can manage or manipulate a transaction. And no one can steal things that are secured by blockchain. Not thieves, hackers, or even the U.S. government.
This incredible security is what makes blockchain so amazing.
In 2013, the U.S. government tried to seize over 600,000 bitcoins worth over $100 million. The Department of Justice claimed the owner of these bitcoins was breaking the law.
However, because bitcoins are built on blockchain technology, the bitcoins were worthless to the U.S. government. Only the owner could sell or spend them. If he didn’t agree to the transaction, they could not be sold or spent. Period.
A long time ago, people bought and sold things face-to-face. If you wanted a pair of shoes, you bought them from the town shoemaker.
This changed as technology advanced. Today, you can buy something from China without ever knowing the seller.
Companies like Amazon, the gigantic online retailer, make this possible. In exchange for connecting buyers and sellers and making sure the transactions run smoothly, Amazon generates tens of billions of dollars in sales per year. Amazon is the sixth-largest publicly traded company in the U.S., worth $317 billion.
Or think of it this way. You’re reading a financial newsletter, so you likely buy and sell stocks. When you buy a stock, how do you know the seller actually owns the stock? How do you know he won’t take your money and run? And how does he know you’ll actually pay for the stock?
You may never think about these things. But making sure stock transactions run smoothly is big business for Wall Street. It’s a full-time job for tens of thousands of highly paid lawyers, accountants, bankers, brokers, and custodians. In exchange, we pay them hundreds of billions of dollars in fees and commissions.
In 2008, we saw these “middlemen” collapse. Markets froze up. These pillars of our financial system are not as strong as we thought they were.
Blockchain can replace these middlemen. It’s faster, cheaper, and more secure than the middlemen.
For example, when you place an order with your broker to buy a share of stock, it takes three full business days to “settle” (for you to actually own the share of stock). This means it takes 72 hours to buy, pay for, and officially own a share of stock.
This same process would take less than a minute on a blockchain. It’s like the difference between mailing a letter and sending an email.
And stock ownership recorded on a blockchain isn’t some far-off dream. It’s about to happen right now. Online discount retailer Overstock.com (OSTK) just got clearance from the U.S. Securities and Exchange Commission (SEC) to issue up to $500 million worth of stock on a blockchain. Other companies will follow suit.
NASDAQ announced a blockchain-based stock-trading platform called Linq last year. Other exchanges will follow.
Credit card companies like American Express, Visa, and MasterCard have also invested millions in blockchain. They know the way we buy and sell things is about to radically change. And they don’t want to be left behind.
Editor’s Note: For months, E.B. Tucker has been studying how technologies like blockchain will change how we pay for things. Through his research, he learned that physical credit cards are becoming obsolete. So he told Casey Report readers to short (bet against) VeriFone (PAY), the company that makes the credit card terminals you see at most cash registers. Readers have already made 25% in 4 months.
In the latest Casey Report, E.B. recommends owning three key companies that “feed the masses” in America. You can get in on these picks by taking The Casey Report for a 100% risk-free trial. Click here to get started.