• Why do we even need a new “Fed Coin” currency?
  • Greetings from Sydney, Australia…
  • “I did shed a few tears of joy”

Dear Reader,

Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.

If you have a question you’d like answered next week, be sure you submit it right here.

Yesterday, we had a look at the latest research about school-aged children and how they are not effective spreaders of COVID-19. We also discussed how these kids and teenagers are more at risk of becoming severely ill from influenza than COVID-19.

Yet school administrators across the country continue to shut down schools for “the safety of the children.” Readers of The Bleeding Edge know that isn’t the case at all. Unlike the press, we have reviewed the scientific research.

And last week, I wrote about an incredible statistic that only 2.5% of universities in the U.S. are opening fully to five days a week on campus. What I forgot to mention was that my undergraduate alma mater, Purdue University, is one of those schools.

I earned my Bachelor of Science in aeronautical and astronautical engineering back in 1991. Those four years were some of the best in my life, and I worked extremely hard to get that degree.

Purdue’s program is one of the very best in the world. And I’ve got nothing but pride for Purdue right now. It is being rational and logical and is acting in best interests of their customers (the students) and their well-being.

The reason that I raise this point today is that The Washington Post just put out a terrible article doing its best to show Purdue in a bad light – a “national poster school for the push to bring students to campus and teach in person despite the public health crisis – a push that in many other places has failed or is in deep jeopardy.”

I wonder how long the Post had to search for a couple of professors to make some comments that the new systems put in place for distancing and wireless network access weren’t perfect? The article didn’t include a single positive perspective from faculty, and embarrassingly, it did not include comments from a single student on campus. This is not journalism.

Mitch Daniels, the 12th president of Purdue and former governor of Indiana, summed it up perfectly: “To tell [our students], ‘Sorry, we are too incompetent or too fearful to figure out how to protect your elders, so you have to disrupt your education,’ would be a gross disservice to them and a default of our responsibility.”

Well put, Mitch. Go Purdue! Go Boilermakers! You certainly have my full support.

What makes a “Fed Coin” special…

Let’s begin with a couple of readers who want to know how a “Fed Coin” will differ from our current system and why it matters…

I get the differentiation of bitcoin and other limited-supply cryptocurrencies, but I don’t get how a Fed Coin differs from what we have today. Admittedly, the Fed prints actual cash, but that is a small fraction of the total U.S. currency. How does a Fed Coin differ from today’s mostly digital currency?

– Dan S.

Hi, Jeff. I’m not understanding the need for a digital dollar. Doesn’t any type of currency have to have some type of physical backing? If this is true, why create something new? Why not continue to use what we have?

Or is the need for a digital dollar because of the perceived security that blockchain may provide?… So I ask, why a new currency? What does it get you?

– Rudy G.

Thank you both for the questions. This is certainly a hot topic of interest.

And as I shared recently, the U.S. Federal Reserve (the Fed) and MIT have been partnering to develop a central bank digital currency (CBDC) over the past several years. We should expect to see tangible progress and testing over the course of the next few years…

Dan, you are correct. A centrally controlled digital currency using blockchain technology wouldn’t functionally be much different than what happens today.

The M0 – the actual amount of physical money in circulation – is a small fraction of the actual money supply. The difference between the physical money (paper notes and coins) and the money supply in bank accounts is that bank accounts are all zeros and ones… completely digital.

Functionally, a Fed Coin and the current digital dollar system in our bank accounts is very similar.

When we send a wire transfer from our bank account to a business to pay an invoice, physical money is never sent. Digital information is used to settle accounts.

Here’s where the technology differs…

When a blockchain-enabled digital dollar is used for all transactions and all physical money is removed from the system, the Fed Coin actually becomes a cryptographically secured digital ledger of every transaction made using the Fed Coin.

This is why governments like the idea so much. Every single transaction can be tracked and taxed appropriately.

And the technology is getting a lot of attention now because a Fed Coin can enable a completely contactless payment system. No one will need to touch and physically pass paper notes and coins, which reduces the possibility that a virus would spread.

And, Rudy, sadly, a currency doesn’t have to have any kind of physical backing.

Up until 1971, the U.S. government backed the U.S. dollar with gold. Anyone with dollars could exchange $35 for one ounce of gold at a bank. But the gold standard was abandoned in August of that year.

Today, the U.S. dollar is only backed by the “full faith and credit” of the U.S. government. But so far, the “credit” of the U.S. government has proven to be darn good.

Looking for companies outside the U.S. to invest in…

Next, a reader has a question on quantum computing chips…

Gday guys, greetings from Sydney, Australia.

I was just wondering if you ever look beyond the U.S. for your next recommendation. Archer Materials Limited (AXE) is developing room-temperature quantum computer chips and graphene biosensors. They’re members of the IBM Q network. And they have access to state-of-the-art facilities at the University of Sydney, and the CEO was the first in the world to develop synthetic graphene.

Thanks again for access to your knowledge and experience. Your straightforward “layman’s” communications style has brought awareness and opened new thought corridors to this once-limited mind.

– Darren J.

Greetings, Darren! Thanks for writing in with your question.

I do occasionally look beyond the U.S. for investment opportunities, but I restrict my investment recommendations to international companies that trade on U.S. stock market exchanges under an American depositary receipt (ADR).

This is a bit frustrating for me because I spent almost my entire adult life living and working overseas.

I’ve been to Sydney and Melbourne for business more times than I can remember as well. And I’m familiar with so many tech companies in the Asia Pacific markets, Europe, South America, and even South Africa that I always want to put that knowledge to use.

But the reality is that the most liquid financial markets, the most accessible financial markets, and the markets that reflect the highest valuations for any given asset are all in the U.S.

My goal is to maximize profits for all of my subscribers and help them become financially independent, and the best place to do that is in the U.S.

I don’t usually do this, but let’s take AXE as an example.

This is an absolutely tiny company. As of March 31, it had only $2.2 million in the bank, and it has a negative free cash flow of $2.5 million in the last 12 months.

The company will be out of money before the end of the year, which means that it will have to raise money to stay alive and thus dilute existing shareholders.

I haven’t reviewed their technology in detail, but I am very skeptical about their approach to a room-temperature qubit processor.

And the company’s only agreement with IBM is to basically use IBM’s quantum computing software to control its own qubit processor. This isn’t a validation of what AXE is doing.

And as of its June 9 corporation presentation, the company’s strategic priorities are:

  • Building its 12CQ quantum computing chip

  • Patenting printable graphene biosensors

  • Integrating anode materials in lithium-ion batteries

  • Monetizing its mineral exploration tenements

When I see a tiny company like this with only $2.2 million in cash (less by now), pursing four different strategic objectives… it’s a red flag.

Is AXE a minerals exploration firm? Is it a biosensor firm? Is it quantum semiconductor firm? Or a Li-ion battery company?

And the answer is not “all of the above.”

For comparison, Rigetti has raised $174 million to date just to develop its semiconductor technology for quantum computers. Do I think that AXE will do it with a fraction of its $2.2 million, which is also spread across minerals exploration, batteries, and biosensors?

No, I don’t.

For comparison, a quick look at the annual report shows that AXE spent a mere AU$129,711 in 2019 on research and development.

AXE is a tiny minerals exploration company masquerading as a high-tech company. That’s the long and the short of it.

Why the right mentor matters…

Let’s conclude with some kind words from a reader…

Hey, Jeff: I have been a subscriber to your services since late last year. This is the first time that I have really MADE money in the market very dependably. Yeah, I have had success trading futures, equities, and options, but to be honest, I have lost more than I have made even with a few trades making over $5,000.00. I have had one loss that cost me $10,000.00 with the same strategies!

Since following your portfolios and now joining as a Brownstone investor, a few months ago, I had my biggest day with five trades netting me $16,000.00 in a single day! I almost cried that day! Actually, I did shed a few tears of joy and said a prayer of thanks for your services.

I have had some great mentors in the last few years investing, but you are singular in a class all your own! I don’t say this to boost your ego but to express my heartfelt admiration for your insights, honesty, and dedication. Keep up the great work and send the team some love from those of us who follow all your advice.

– Chris M.

Chris, thank you very much for the kind words. Hearing that I am helping readers like you makes all of the long days of work worth it.

And I respect your honesty about your experience trading. It is actually one of the hardest things to do. It is human nature to do our best to remember our good decisions and forget our bad ones. But to be a good investor, we have to openly acknowledge the mistakes that we make along the way.

And I always remind myself to leave the ego in the closet. It can only cloud judgement and turn objectivity into subjectivity. That’s never good when performing analysis. I appreciate your comments, nonetheless.

Congratulations on your success. There is more to come.

That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.

Have a good weekend.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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